The car internal costs are all the costs consumers pay to afford owning and running a car. Normally these private expenditures are divided by fixed or standing costs and variable or running costs. Fixed costs are those ones which do not depend on the distance travelled by the vehicle and which the owner must pay to keep the vehicle ready for use on the road, like insurance or road taxes. Variable or running costs are those which depend on the use of the car, like fuel or tolls.
Compared to other popular modes of passenger transportation, especially buses or trains, the car has a relatively high cost per passenger-distance travelled. Motorists in the United Kingdom seem to spend on the car an average of roughly 1/3 of their average net income, while motorists in Portugal seem to spend 1/2 of their net income. This situation is reflected in most other Western nations. For the average car owner, depreciation constitutes about half the cost of running a car. The typical motorist underestimates this fixed cost by big margin, or even ignores it altogether. The IRS considers, for tax deduction calculations, that the automobile has a total cost for drivers in the USA, of 0.55 USD/mile, around 0.26 EUR/km.
- 1 Standing costs
- 2 Running costs
- 3 Kinetic speed vs. Virtual speed
- 4 See also
- 5 External links
- 6 References
The yearly depreciation of a car, is the amount of a financial quantity, the car value decreases every year. Normally this value is correlated with the price a certain car has on the market, but on average a car has a depreciation around 15% to 20% per year.
Car taxes, road taxes, vehicle taxes or Vehicle Excise Duty are the amount of money car owners pay to the state or to certain regional government within a country, normally yearly, to allow the car to circulate within that region or state. These taxes serve, either to maintain the roads and all the correspondent infrastructures or to compensate the negative externalities caused by the motor vehicles. These taxes normally depend on CO2 emissions, the engine displacement of the vehicle motor, the vehicle weight or on some percentage of the car value.
The Insurance serves to provide financial protection against physical damage and/or bodily injury resulting from traffic collisions and against liability that could also arise there-from. The prices may largely vary depending on the coverage levels and in the UK, the payment frequency normally is made by trimester, semester or by year. In USA, payments are normally made monthly.
Vehicle inspection is a procedure mandated by national or subnational governments in many countries, in which a vehicle is inspected to ensure that it conforms to regulations governing safety, emissions, or both. Normally these inspections are made annually and the price varies depending on the region.
The subject of car finance comprises the different financial products which allows someone to acquire a car with any arrangement other than a single lump payment. When used, and for the purpose of assessing the private financial costs, one must consider only the interests paid by the car owner, as some part of the amount the owner pays each month for the finance is already embedded in the depreciations costs.
Cost of capital
The cost of capital, applied to a purchase of a car, is the amount of money the car owner could have obtained, if they, instead of buying the car, applied that amount of money to other worthy investment. For an investment to be worthwhile, the expected return on capital must be greater than the cost of capital. The cost of capital is the rate of return that capital could be expected to earn in an alternative investment of equivalent risk. Considering by default the car has depreciation, and that such depreciation is already considered at a certain cost item, the cost of capital of owning a car, is then the income that the car owner could have obtained with the money spent on such car. One example could be 2.4% per year, which refers to a standard interest in a deposit account.
The fuel costs depend basically on four factors, namely the distance travelled by the car, the price paid for the fuel, the energy efficiency of the car and the type of driving. In Western countries, this cost normally is the second highest after depreciation.
The maintenance of a car can have the purpose to be a long term or a short term maintenance. This cost might be very irregular and somewhat unpredictable but tends to increase with the age of the car. On this item are included car parts that need to be replaced after a certain period of time (for example every two years) or with a specific number of travelled kilometres/miles, like tires or filters.
Consumers continue to look for value in today's economy, but more often than not, "value," when purchasing automotive parts, is determined by quality rather than low price.
Repairs and Improvements
Repairs costs are completely unpredictable because they depend on the number and severity of car collisions, like dents repairing for example. These costs also refer to spare parts substitution due to malfunctioning. On this cost item it might be included also the parts bought to improve the performance or the aesthetic of the vehicle.
The costs of parking include all the money the user needs to pay to park their car. This applies normally to car parking lots, like in offices, public buildings, shopping centres or in the downtown; but also on the public space (normally in the inner part of some city) using parking meters. This cost might be relatively predictable, if the user for example has a monthly contract with some parking lot company, or if they rent a private parking space.
A toll road, also known as a turnpike or tollway, is a public or private roadway for which a fee (or toll) is assessed for passage. Normally this applies to motorways, bridges and tunnels but it might also apply, like in some cities such as London or Stockholm, to gain access to the city-centre. This cost might be predictable if the user passes the tolled roadway, a defined number of times per month.
A traffic fine or traffic ticket is a notice issued by a law enforcement official to a motorist accusing violation of traffic laws. Traffic tickets generally come in two forms, citing a moving violation, such as exceeding the speed limit, or a non-moving violation, such as a parking violation. These tickets almost always imply the payment of a certain quantity of money. This cost might be completely unpredictable, but one way for the user to assess it, is to calculate per year the total money spent in fines, in the last few years.
Kinetic speed vs. Virtual speed
The Austrian philosopher Ivan Illich, a critic of the modern society habits, was one of the first thinkers to establish the so-called virtual speed concept. He wrote in his book Energy and Habits published in 1974:
- The model American male devotes more than 1600 hours a year to his car. He sits in it while it goes and while it stands idling. He parks it and searches for it. He earns the money to put down on it and to meet the monthly installments. He works to pay for gasoline, tolls, insurance, taxes, and tickets. He spends four of his sixteen waking hours on the road or gathering his resources for it. And this figure does not take into account the time consumed by other activities dictated by transport: time spent in hospitals, traffic courts, and garages; time spent watching automobile commercials or attending consumer education meetings to improve the quality of the next buy. The model American puts in 1600 hours to get 7500 miles: less than five miles per hour [the virtual speed]. In countries deprived of a transportation industry, people manage to do the same, walking wherever they want to go, and they allocate only 3 to 8 percent of their society's time budget to traffic instead of 28 percent. What distinguishes the traffic in rich countries from the traffic in poor countries is not more mileage per hour of lifetime for the majority, but more hours of compulsory consumption of high doses of energy, packaged and unequally distributed by the transportation industry.
where is the distance travelled by the car and is the travelled time, i.e., the time elapsed during the travel.
Though, to access the virtual speed, we must sum the amount of time, the car owner strictly allocates to work to afford such travelled distance. Then the virtual speed is:
where is the time the driver needs to work, to afford doing that travelled distance using such car.
James (an example), a common car owner and driver who takes his car to get to work, spends totally (standing and running costs) on his car an average of €5000 per year. Considering James just uses his car to get to work and that one year has around 250 business days, James pays on average €20 per working day to afford his car. Consider the James' average net salary is €10 per hour; then James needs to work 2 hours per day just to afford his mean of transport to get to work, time strictly allocated to pay his car bills.
If he lives 20 km away from his workplace and he gets there in half an hour, then he makes 40 km per day during one hour (round trip). His kinetic average speed would then be:
Though, James needs on average 2 hours per day just to afford his car, working time budget strictly allocated for paying his car bills, so his virtual speed would be:
just 1/3 of his kinetic speed.
- Automobile costs calculator for USA
- Automobile costs calculator for the United Kingdom
- Automobile costs calculator for Australia
- Automobile costs calculator for Canada
- "Calculadora dos Custos do Automóvel" [Automobile Costs Calculator] (in Portuguese).
- Fernando J. Martins (June 2014). "Dados estatísticos do Custo Automóvel" [Car Costs Statistics in Portugal] (in Portuguese).
- The Automobile Association (2014). "Motoring Costs". http://theaa.com.
- The Automobile Association (2014). "Motoring Costs 2014". http://theaa.com (PDF file).
- The Automobile Association. "Car running costs 2013/14". http://theaa.com.
- Diesendorf, Mark, "The Effect of Land Costs on the Economics of Urban Transportation Systems" (PDF), Proceedings of Third International Conference on Traffic and Transportation Studies (ICTTS2002): 1422–1429, ISBN 978-0-7844-0630-4, retrieved 2008-04-15
- Osborne, Hilary (2006-10-20). "Cost of running a car 'exceeds £5,000'". The Guardian (London: Guardian Media Group).
- Meek, James (2004-12-20). "The slow and the furious". The Guardian (London: Guardian Media Group).
- IRS (June 23, 2011). "IRS Increases Mileage Rate to 55.5 Cents per Mile".
- Simon Donohue, Business reporter (BBC) (27 August 2013). "How to beat price depreciation when choosing a new car".
- John Fuller. "What is car depreciation?".
- CarsDirect (November 8, 2013). "What is the Average Car Depreciation Rate?".
- edmunds.com (September 24, 2010). "Depreciation Infographic: How Fast Does My New Car Lose Value?".
- "Car running costs, Your guide to how we calculate car running costs". The Automobile Association. 7 July 2014.
- "Aftermarket Consumer Outlook Study," November 2011 by The NPD Group: https://www.npd.com/wps/portal/npd/us/news/press-releases/pr_111101/
- Illich, Ivan (1974). Energy and Habits.
- Ivan Illich, excerpts from Energy and Equity; also collected in Toward a History of Needs. "The industrialization of traffic".