5 ms·

Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe toll

by nayuki 4y ago

Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive.

dataflow 4y ago
> the capital cost of the car amortized over the years of ownership How many years will I own my car? How do you know? Maybe some folks buy a new car on a regular basis, but others will keep a car as long as they can. The denominator isn't known for everyone here. And then there's inflation, recession, etc. which can make the numerator unclear too.
- AnimalMuppet 4y ago
  All true. But if you're one of the folks who regularly buys a new car, you kind of know that. If you're one who keeps a car as long as you can, you know that too. So you can make, not totally accurate calculations, but calculations that are enough within the ballpark to show you whether transit is an economically interesting alternative.
  - dataflow 4y ago
    How accurate is "enough within the ballpark" though? This isn't something where an order-of-magnitude estimate or even a factor of (say) 2 error is negligible. Can you really predict the future to within like 10% accuracy? How accurate do you think you need to be? Let's do something resembling reality. Say your subway transportation costs around $13/weekday. (I just looked up a random round-trip BART ticket for the Bay Area, in case that makes it easier for people here to relate.) Probably more like $20/weekday if you add bus and parking. Now say the drive for that is around 30mi. At $4/gal gas (pre-2022) and 30 mi/gal the driving cost might cost you $4/day just for gas (probably optimistic). Say you buy a $35k car and plan to keep it 8 years, then sell it for $5k. That'd cost you roughly $14.50/weekday in depreciation. Add that to the gas price and it's around $19.50/day. I haven't even accounted for maintenance yet (on the car side), nor for non-work rides (on the public transportation side), but so now you have ~$20/day vs. ~$20/day. How in the world do you decide? Now consider gas prices shot up > 50% in a year. And we have a recession coming and you might lose your job (less gas usage, I guess?) and so decide to keep your car longer. And we have inflation. And your car might get totaled in between... or not. And you might have random stuff come up that increase costs on each side... or not. Exactly how do you do the math here to figure out which one is more beneficial?! I'm not saying you can't do the math, but as I see it, every factor adds in such a huge margin of error into both the numerator and the denominator that the result of the computation easily becomes pretty useless. And this is before even accounting for convenience/QoL improvements that you can't put into numbers... what's the value of being able to get your kids their favorite meal, or show your friends around town, or...
    - markvdb 4y ago
      > I'm not saying you can't do the math, but as I see it, every factor adds in such a huge margin of error into both the numerator and the denominator that the result of the computation easily becomes pretty useless. You just described TCO, unpredictability in TCO, capital intensivity and several kinds of risk. All super useful heuristics to guide a decison. Just don't try to squeeze them into one filter... Take us deciding on buying a car versus car sharing. We wanted low TCO, low cash flow risk, and low environmental impact. The signal from the low TCO filter was slightly ambiguous, but both other filters were super clear. Car sharing it was.
  - _carbyau_ 4y ago
    The problem is economically interesting is only part of the equation for getting people to make the jump. The sheer convenience of a car is priceless to many people.
- formerkrogemp 4y ago
  Nah, we start with market value when new, a representative rate or method of depreciation, and a residual value. You can take a straight line of depreciation, double declining, etc. Residual value is usually a ballpark figure with the actual closing disposal value representing a loss or gain upon disposal. You're overcomplicating it taking in too many parameters to be a useful rule of thumb or guideline for those concerned with the numbers. As you're pointing out however, the relevant parameters do vary from person to person. Anywho, personal finance isn't really bookkeeping for a business.
- tremon 4y ago
  How many years will I own my car? How do you know? You amortize the cost over the planned lifetime. If you keep the car for longer than planned, great, you get a free usage extension! If you need/want to replace the car sooner than planned, you need to factor the sunk cost of the previous purchase into the cost/benefit equation of your next.
thaumasiotes 4y ago
But people are well aware of the cost of carrying insurance and of buying a car in the first place. Those costs aren't incurred per-use; accounting for them per-use can only make car ownership look more attractive than otherwise, not less.
dsr_ 4y ago
In most of the US, not having a car at all places you in a severe hardship. Public transit is usually underfunded or scarce. Daily life needs extra planning, effort, and time. So a car may be purchased based on pure utility, or for uncommon but plausible capabilities, or for luxury or status.
jeffwilcox 4y ago
Some of us have calculated it... and it is frightening! I have an Excel sheet of all the cars I've ever purchased or leased, and the cost per mile of them, and it is staggering. Thankful to have enjoyed some fun cars, I cannot imagine just how much of this economy is powered solely by this car dependency we have in the US. I've also estimated my cost to commute to my tech job in the suburbs (thankfully full-time remote now), and it was staggering how much that was including insurance, maintenance, tolls, electricity, etc., compared to free options/transit/corporate bus/remote work/my daily mortgage cost.
hinkley 4y ago
And then if you have the 'nice car' and the 'old car', you may end up favoring the old car for a bunch of activities, reducing the total use you get out of the nice car. Also vehicles aren't lumps of gold. They rot while sitting still, even in a garage - which fewer and fewer of us do.
robocat 4y ago
> not many people correctly calculate the cost-per-use of their car Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a Craigslist chair. Other transport options usually have severe limitations on availability, flexibility, cost, destination, load, etcetera. Optionality and peace-of-mind has huge value too (i.e. availability if urgently required, even if it happens that nothing urgent comes up). Last time I mentioned on HN how useful a car is, someone suggested hiring a car instead, which is ridiculously more expensive and extremely inconvenient (at least where I live). Disclaimer: I am carless at present. The non-financial costs are extremely high.
- OJFord 4y ago
  > Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. That implies the only alternative is not doing things? You can just order a taxi? I think for many car users the total 'cost per use' of their car exceeds the average taxi fare they'd pay for those journeys. Nevermind considering public transportation.
  - robocat 4y ago
    > You can just order a taxi? A trip to my parents and back is ~$180 by Uber - I go more than once a week so that would be way more than $10k per year. And an Uber doesn’t come with a tow ball: I often use a trailer out there or back (I mentioned firewood, but also dump runs and moving stuff from/to storage). The Uber has a variable wait-time, and is not useful if I have to go anywhere urgently, and an Uber often values my wasted time at $0. Note when I live in large cities I do choose to use either Uber or car, depending on costs versus gains. An Uber is no use to take my disabled Mum anywhere. I think it is condescending to suggest whacky alternatives to most people (public transport, taxis, bikes, etcetera). Most people have weighed up the alternatives and made an expensive choice because of the value provided. The majority of people are not wasting money and buying status symbols. > Nevermind considering public transportation. Bloody hell, that is a moronically inane comment. I can catch a bus to my parents. There is one bus a day - it arrives there in the evening at 5:30PM, at it leaves from my parents at 7:30AM, and there is a nice long walk at the end, which is fun in a storm. Oh, the bus only runs on weekdays, not the weekends. I don’t get to choose where my parents live. Public transport is never urgent, good luck if my parents need my help suddenly. I can’t transport anything I can’t carry, and it wastes hours of time each way (indirect, slow, annoying). Public transport has its uses (I do use Christchurch buses), but it simply doesn’t support many uses (a load of firewood), and it takes a lot of time, plus extra risks (the bus at my parents didn’t turn up the other day - I don’t know why). Did I mention a car has plenty of other uses? My parents are just one of many similarly valuable uses. I do own a very cheap small-engine second-hand car, not a status symbol. Did I mention a car is available at night, when public transport has stopped running? Edit: PS: this weekend there are 100km/h winds, and driving cold rain. Walking and waiting at busstops can be very very unpleasant in many cities. Perhaps you have access to a metro, but most people don’t. Edit 2: I hope you are not an engineer. I feel that in my comment that you answered, I said why I use a laptop with Illustrator, and you replied telling me I could use an etch-a-sketch and my mobile phone camera.
Ekaros 4y ago
I'm thinking of negative costs of alternatives too. Cars are expensive, but on other hand how would the alternatives make me feel in both time and use... How much would I actually pay for not doing something...
BeetleB 4y ago
I find people making the opposite mistake: They take the total cost of ownership, and say that paying an extra $8K for the car is a small fraction of the total cost, and over 10 years that's just paying an additional $2.20 a day, so it's no big deal. $8K is $8K - it doesn't matter if it's all paid in one day, or spread over 10 years.[1] I always notice how they like to look at the cost per day and not, say, the cost per year. I suppose if the daily cost still looks high they'll calculate the cost per hour. Or as in this case, the cost per use just because it makes the number even smaller. [1] If you exclude opportunity cost. If you include it, investing $8K up front will likely give you better returns than investing $2.20 a day.
- alwayslikethis 4y ago
  At current rates of inflation, it is actually quite a bit cheaper to pay over 10 years if you can finance it without much interest. However, your point stands -- this should not be used to justify purchases and to view things as cheaper than they really are.
incone123 4y ago
I consider maintenance, insurance etc. But I weigh that against it takes twice as long to get to work by bus. I work 13 hour shifts so travel time is important to me.
lelanthran 4y ago
> Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive. They do think about this, which is why the second-hand market for cars is so healthy. To be accurate, you should restrict your assertion to those people who only buy brand new cars, which is necessarily a far small population of people who buy second-hand. There are more people who think about this (they buy second-hand) than people who don't.

by nayuki 4y ago

dataflow 4y ago

> the capital cost of the car amortized over the years of ownership How many years will I own my car? How do you know? Maybe some folks buy a new car on a regular basis, but others will keep a car as long as they can. The denominator isn't known for everyone here. And then there's inflation, recession, etc. which can make the numerator unclear too.

AnimalMuppet 4y ago
All true. But if you're one of the folks who regularly buys a new car, you kind of know that. If you're one who keeps a car as long as you can, you know that too. So you can make, not totally accurate calculations, but calculations that are enough within the ballpark to show you whether transit is an economically interesting alternative.
- dataflow 4y ago
  How accurate is "enough within the ballpark" though? This isn't something where an order-of-magnitude estimate or even a factor of (say) 2 error is negligible. Can you really predict the future to within like 10% accuracy? How accurate do you think you need to be? Let's do something resembling reality. Say your subway transportation costs around $13/weekday. (I just looked up a random round-trip BART ticket for the Bay Area, in case that makes it easier for people here to relate.) Probably more like $20/weekday if you add bus and parking. Now say the drive for that is around 30mi. At $4/gal gas (pre-2022) and 30 mi/gal the driving cost might cost you $4/day just for gas (probably optimistic). Say you buy a $35k car and plan to keep it 8 years, then sell it for $5k. That'd cost you roughly $14.50/weekday in depreciation. Add that to the gas price and it's around $19.50/day. I haven't even accounted for maintenance yet (on the car side), nor for non-work rides (on the public transportation side), but so now you have ~$20/day vs. ~$20/day. How in the world do you decide? Now consider gas prices shot up > 50% in a year. And we have a recession coming and you might lose your job (less gas usage, I guess?) and so decide to keep your car longer. And we have inflation. And your car might get totaled in between... or not. And you might have random stuff come up that increase costs on each side... or not. Exactly how do you do the math here to figure out which one is more beneficial?! I'm not saying you can't do the math, but as I see it, every factor adds in such a huge margin of error into both the numerator and the denominator that the result of the computation easily becomes pretty useless. And this is before even accounting for convenience/QoL improvements that you can't put into numbers... what's the value of being able to get your kids their favorite meal, or show your friends around town, or...
  - markvdb 4y ago
    > I'm not saying you can't do the math, but as I see it, every factor adds in such a huge margin of error into both the numerator and the denominator that the result of the computation easily becomes pretty useless. You just described TCO, unpredictability in TCO, capital intensivity and several kinds of risk. All super useful heuristics to guide a decison. Just don't try to squeeze them into one filter... Take us deciding on buying a car versus car sharing. We wanted low TCO, low cash flow risk, and low environmental impact. The signal from the low TCO filter was slightly ambiguous, but both other filters were super clear. Car sharing it was.
- _carbyau_ 4y ago
  The problem is economically interesting is only part of the equation for getting people to make the jump. The sheer convenience of a car is priceless to many people.
formerkrogemp 4y ago
Nah, we start with market value when new, a representative rate or method of depreciation, and a residual value. You can take a straight line of depreciation, double declining, etc. Residual value is usually a ballpark figure with the actual closing disposal value representing a loss or gain upon disposal. You're overcomplicating it taking in too many parameters to be a useful rule of thumb or guideline for those concerned with the numbers. As you're pointing out however, the relevant parameters do vary from person to person. Anywho, personal finance isn't really bookkeeping for a business.
tremon 4y ago
How many years will I own my car? How do you know? You amortize the cost over the planned lifetime. If you keep the car for longer than planned, great, you get a free usage extension! If you need/want to replace the car sooner than planned, you need to factor the sunk cost of the previous purchase into the cost/benefit equation of your next.

thaumasiotes 4y ago

But people are well aware of the cost of carrying insurance and of buying a car in the first place. Those costs aren't incurred per-use; accounting for them per-use can only make car ownership look more attractive than otherwise, not less.

dsr_ 4y ago

In most of the US, not having a car at all places you in a severe hardship. Public transit is usually underfunded or scarce. Daily life needs extra planning, effort, and time. So a car may be purchased based on pure utility, or for uncommon but plausible capabilities, or for luxury or status.

jeffwilcox 4y ago

Some of us have calculated it... and it is frightening! I have an Excel sheet of all the cars I've ever purchased or leased, and the cost per mile of them, and it is staggering. Thankful to have enjoyed some fun cars, I cannot imagine just how much of this economy is powered solely by this car dependency we have in the US. I've also estimated my cost to commute to my tech job in the suburbs (thankfully full-time remote now), and it was staggering how much that was including insurance, maintenance, tolls, electricity, etc., compared to free options/transit/corporate bus/remote work/my daily mortgage cost.

hinkley 4y ago

And then if you have the 'nice car' and the 'old car', you may end up favoring the old car for a bunch of activities, reducing the total use you get out of the nice car. Also vehicles aren't lumps of gold. They rot while sitting still, even in a garage - which fewer and fewer of us do.

robocat 4y ago

> not many people correctly calculate the cost-per-use of their car Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. What is the worth of: a visit to my friends; taking a surfboard to the beach; taking a load of firewood to my parents; an emergency 2AM visit to a suicidal acquaintance; taking my nephew and his friends to the skatepark; helping a friend move; picking up a Craigslist chair. Other transport options usually have severe limitations on availability, flexibility, cost, destination, load, etcetera. Optionality and peace-of-mind has huge value too (i.e. availability if urgently required, even if it happens that nothing urgent comes up). Last time I mentioned on HN how useful a car is, someone suggested hiring a car instead, which is ridiculously more expensive and extremely inconvenient (at least where I live). Disclaimer: I am carless at present. The non-financial costs are extremely high.

OJFord 4y ago
> Cost-per-use by itself is fairly meaningless, costs needs to be compared against value-per-use. That implies the only alternative is not doing things? You can just order a taxi? I think for many car users the total 'cost per use' of their car exceeds the average taxi fare they'd pay for those journeys. Nevermind considering public transportation.
- robocat 4y ago
  > You can just order a taxi? A trip to my parents and back is ~$180 by Uber - I go more than once a week so that would be way more than $10k per year. And an Uber doesn’t come with a tow ball: I often use a trailer out there or back (I mentioned firewood, but also dump runs and moving stuff from/to storage). The Uber has a variable wait-time, and is not useful if I have to go anywhere urgently, and an Uber often values my wasted time at $0. Note when I live in large cities I do choose to use either Uber or car, depending on costs versus gains. An Uber is no use to take my disabled Mum anywhere. I think it is condescending to suggest whacky alternatives to most people (public transport, taxis, bikes, etcetera). Most people have weighed up the alternatives and made an expensive choice because of the value provided. The majority of people are not wasting money and buying status symbols. > Nevermind considering public transportation. Bloody hell, that is a moronically inane comment. I can catch a bus to my parents. There is one bus a day - it arrives there in the evening at 5:30PM, at it leaves from my parents at 7:30AM, and there is a nice long walk at the end, which is fun in a storm. Oh, the bus only runs on weekdays, not the weekends. I don’t get to choose where my parents live. Public transport is never urgent, good luck if my parents need my help suddenly. I can’t transport anything I can’t carry, and it wastes hours of time each way (indirect, slow, annoying). Public transport has its uses (I do use Christchurch buses), but it simply doesn’t support many uses (a load of firewood), and it takes a lot of time, plus extra risks (the bus at my parents didn’t turn up the other day - I don’t know why). Did I mention a car has plenty of other uses? My parents are just one of many similarly valuable uses. I do own a very cheap small-engine second-hand car, not a status symbol. Did I mention a car is available at night, when public transport has stopped running? Edit: PS: this weekend there are 100km/h winds, and driving cold rain. Walking and waiting at busstops can be very very unpleasant in many cities. Perhaps you have access to a metro, but most people don’t. Edit 2: I hope you are not an engineer. I feel that in my comment that you answered, I said why I use a laptop with Illustrator, and you replied telling me I could use an etch-a-sketch and my mobile phone camera.

Ekaros 4y ago

I'm thinking of negative costs of alternatives too. Cars are expensive, but on other hand how would the alternatives make me feel in both time and use... How much would I actually pay for not doing something...

BeetleB 4y ago

I find people making the opposite mistake: They take the total cost of ownership, and say that paying an extra $8K for the car is a small fraction of the total cost, and over 10 years that's just paying an additional $2.20 a day, so it's no big deal. $8K is $8K - it doesn't matter if it's all paid in one day, or spread over 10 years.[1] I always notice how they like to look at the cost per day and not, say, the cost per year. I suppose if the daily cost still looks high they'll calculate the cost per hour. Or as in this case, the cost per use just because it makes the number even smaller. [1] If you exclude opportunity cost. If you include it, investing $8K up front will likely give you better returns than investing $2.20 a day.

alwayslikethis 4y ago
At current rates of inflation, it is actually quite a bit cheaper to pay over 10 years if you can finance it without much interest. However, your point stands -- this should not be used to justify purchases and to view things as cheaper than they really are.

incone123 4y ago

I consider maintenance, insurance etc. But I weigh that against it takes twice as long to get to work by bus. I work 13 hour shifts so travel time is important to me.

lelanthran 4y ago

> Along these lines, I find that not many people correctly calculate the cost-per-use of their car. They only think of the cost of gasoline burned, and maybe tolls and parking. They don't think about the cost of insurance divided by the number of trips, or the capital cost of the car amortized over the years of ownership. If people thought hard about the cost-per-use of driving, then other transportation options start to look more attractive. They do think about this, which is why the second-hand market for cars is so healthy. To be accurate, you should restrict your assertion to those people who only buy brand new cars, which is necessarily a far small population of people who buy second-hand. There are more people who think about this (they buy second-hand) than people who don't.