Recently NPR did a very interesting special series on “Millennials and The Changing Car Culture” and I would encourage anyone to go through and read or listen to the pieces and specifically the following two:
Both of which give some very keen insight into how Generation Y is approaching car ownership as well as what I believe is likely to be a longer term trend of the younger generations altering the way the view cars. Arguably this also applies to the older generations as well and I believe that the trends the past couple years for the annual vehicle miles driven showing a downturn supports this argument. In fact, the Frontier Group released a report in 2012 that noted,
The trend toward reduced driving, however, has occurred even among young people who are employed and/or are doing well financially.
Policy-makers and the public need to be aware that America’s current transportation policy – dominated by road building – is fundamentally out-of-step with the transportation patterns and expressed preferences of growing numbers of Americans.
Which in some ways is bad for those whose livelihoods depend upon the jobs generated by road building and maintenance, but I digress. When reading through the comments on the NPR series I noticed that a very curious line of reasoning appeared that is best summarized by the following quote,
so freedom means being dependent on public transportation? Freedom to you means being dependent on others?
Which is a comment that was made in response to the following,
Part of Freedom is defined for me by in having a good public transportation system and bike paths. I haven’t owned a car in ten years, but I have travelled to more than twenty countries. I’m glad to here US Millennials are deciding that their worth is not defined by what they own.
Which is another very interesting line of thought that I have observed tends to occur more with people that I know that live in urban areas as opposed to rural areas. To return to the original quote though, the commenter who made it also makes a number of other comments, that are echoed by others, that effectively equates car ownership with personal freedom. While this is an interesting line of thought, as you might conclude from the title, it is a line of thought that I disagree with.
Now, I should start by saying that there is something to be said for the ability to just get in a car and go where ever you need to, when you need to. However, I commuted to work by train for a number of years before having to return to taking the car to work and quite frankly, as annoying as having to keep an eye on the train schedule should be at times, sitting in rush hour traffic going 10 miles per hour is even more so! Plus, for people that live in urban areas, programs such as zipcar mean that you can rent a car on a short term basis for chores that require a car for hauling goods or if you want to do a shorter road trip.
So what do I mean when I say that a car is a “vacuum in the driveway?” Quite simply, it’s about the cost of ownership involved with owning a car and it is not light by any means. AAA released a brochure that discusses how to calculate your driving costs per mile and they summarize their averages as follows:
These numbers seem fairly reasonable but they take their own assumptions into account and I’m not entirely sure that I agree with them. But since these are in the context of cost per mile, we need to look at things from the standpoint of the pure cost of ownership. In other-words, what would you save by not owning the car in the first place? Some costs that come to mind are vehicle excise taxes, inspections, and auto insurance.
With regards to vehicle excise taxes, they tend to be all of the place and are state specific, but the local excise tax of $25 per $1,000 of assessed value seems to at least be a reasonable metric given the limited estimation I did of the tax in other states. Thus, if your car has an assessed value of $10,000 you can expect to pay $250 a year just to continue to own it1. Factor in an annual state inspection if you live someplace that requires them, in some places the costs are fixed by law, but in others they can be variable. Still figure, somewhere between $25 and $75 for an annual inspection and we will disregards the gas associated with driving to the inspection facility.
Car insurance is one of the big ones and as near as I can tell, you need to carry insurance even if you don’t plan on actually driving the car and Massachusetts actually provides a very interesting little spreadsheet for comparing the insurance costs. For some very basic assumptions I was told to expect to pay between $379 and $1,321.34 with the average being $698.39. So there you are looking at another $379 at a minimum and since the amount you drive plays a role, the costs can go up if you drive more each year.
That brings us to a very, very rough estimate of $654 on the low end of things just to have a car sitting in your driveway and not even driving. Once you start driving it you need gas and since driving also causes wear and tear, you are going to need maintenance at some point. You can use tools such as the edmunds.com True Cost to Own calculator to give you a rough estimate2 but it appears that anywhere from $6,000 to $9,000 a year gets thrown around on a fairly regular basis. My own costs appear to be somewhere around $5,000 a year once I take into account the cost of parking and maintenance and I keep the costs down by trying to avoid driving a lot and getting decent fuel economy.
So the question we must ask ourselves, and the one that I’m seeing members of Generation Y asking a lot, is if spending upwards of around $9,000 a year to own a car is really worth it? For those living in urban areas with decent to good public transport you might be able to avoid needing a car in order to commute too and from work which just leaves chores and pleasure driving. In those cases a number of people have told me that they use the aforementioned zipcars and find ways to minimize the time they actually need a car. Plus, in urban areas, walking or biking to various places can be a viable option. The biking option being especially popular with some bloggers like Mr. Money Mustache.
In some ways, a bike might actually represent more freedom than a vacuum in the driveway since bike generally have a fairly low initial fixed cost up front (say $100 to $500) followed by the occasional need for repairs which you can learn to do yourself by picking up a book and learning the relevant skills. I’ve heard many people from the Baby Boomer generation decry the fact that most people can’t or wouldn’t work on modern cars and just take them to the mechanic.
So bringing things around, a car may represent freedom to some, but at the end of the day it is also a money vacuum that is sitting in the driveway and the more you use it the more it is going to cost. Also, since just owning it requires a certain amount of money, it ensures that you are paying money out of your monthly budget to its up keep that can be significantly above and beyond the costs of using alternatives such as public transportation, bikes, and just walking where you need to go if it is close enough. Cultural attitudes are changing with regards to cars and they are being seen as less of a representation of personal freedom and more of a monthly expense to be minimized or done away with if possible.
- As an aside, I tried to find the average value of car but turned up short, although apparently a new car is going to cost on average $30,000. Ouch.
- Amusingly, my car is so “old” that it doesn’t even appear as an option.