The costs of various vehicles - Part 1

In my previous post about using general aviation aircraft as a mode of personal transportation, I made a comparison between the cost of driving and the cost of flying over a certain route. The comparison, however, was a bit lacking in detail since all I did is compared the cost of fuel. The actual costs of getting around using any kind of vehicle will be higher than just the fuel burned, as there are other aspects of transportation and vehicle ownership which cost money. For any vehicle, be it an airplane, a car, a motorcycle, or even a bicycle, there will be costs which can be split up into two broad categories: fixed costs and variable costs (these are sometimes referred to as ownership costs and operating costs). The fixed costs are things you pay for on a regular basis which are independent of how much you use the vehicle, and may include insurance and registration, parking, loan payments, and some maintenance items. Variable costs are things that you pay for when you actually use the vehicle and can be broken down to a rate per distance traveled. Consumables such as fuel, oil, and tires fit in to this category, as do most maintenance items which are to be done at certain distance intervals such as tune-ups.


Cars

The Canadian Automobile Association publishes a "Driving Costs Brochure" which outlines the basic costs of owning and driving a typical car in Canada based on national average prices for fuel, insurance, etc. The two vehicles they use for their comparison in the 2008 edition (found here) are the Chevrolet Cobalt LT and Dodge Grand Caravan. Their Fixed costs come out to $6462.00 annually for the Chevy, and $8599.00 for the Dodge, including a fairly high depreciation value and comprehensive insurance. Their variable costs, based on a national average gas price of $1.40 per litre, come out to 16.5 cents per km for the Chevy, and 21.25 cents for the Dodge. The total operating costs per km, based on 18000 km driven annually, adds up to 52.4 cents and 69.0 cents respectively. This is much higher than most people would expect they are paying to drive their cars.

It should be pointed out that the CAA brochure outlines what they consider to be typical car used in Canada, but is far from the best case scenario. First off, a lot of people drive more than 18000 km per year. While your total amount spent on driving the vehicle goes up with more km driven, the cost per km goes down since the fixed costs are a smaller percentage of your overall cost. Driving the same Chevrolet Cobalt 32000 km per year, for example, would bring the overall rate down to about 37.8 cents per km. Secondly, the brochure outlines the cost of owning a brand new car which obviously costs a lot more than driving something that is a few years old. The cost of interest on both vehicles in the brochure ate up about 15% of the annual fixed cost, and the depreciation was over 55%. That means that fixed costs drop significantly when driving a car that is a few years old (and therefore already somewhat depreciated in value) and is entirely paid for.

To give an example of how much cheaper driving can be made, I will provide an approximation of my operating costs of my daily commuter vehicle, a 1993 Ford Escort. I bought this car for $900 at the start of winter after I had sold my previous car, and had been using my motorcycle as my main means of transportation. Since the car is unlikely to depreciate a significant amount (I can probably get a little bit of money for it at a junkyard after it completely gives up its ghost), and since I paid cash for it and therefore have no loan payments, the fixed costs for this car are the registration and insurance. Another advantage of having a car this cheap is there is no need for full (comprehensive) insurance coverage because I can afford to replace the whole car quite easily, lowering the fixed cost even further. In total, liability insurance and annual registration ends up costing me less than $1000 per year. The car is fairly fuel efficient even by todays standards, with the 1.9 L engine burning an average of about 7L per 100 km (this is with a 5 speed manual transmission, no A/C, and fairly light footed driving). At a fuel price of $1.40 per litre, the fuel cost is about 9.8 cents per km. I'll use the same tire costs as listed in the CAA brochure for the Chevy, at 1.49 cents per km. Maintenance costs on an old car can be highly variable since they are dependent more on the car's history rather than its age, but we can make a rough estimate. A $50 oil change every 5000 km adds only 1 cent per km. Replacement of worn parts such as suspension and brake components can probably be covered by a $1000 annual reserve (in fact this is a lot of money for parts if you do your own work). When we add all of these things up and turn them into a per km rate based on 25000 km driven annually, we end up with a figure of 19.3 cents per km, or about half of what the Chevy Cobalt was estimated at in the CAA brochure.

It is clear from the examples above that the cost of driving is very much dependent on the type of vehicle you choose to own and how much you drive it. Many people avoid buying an older car for fear that the maintenance costs will be prohibitively expensive, but even setting aside $1000 per year for maintenance is a fraction of what depreciation on a new vehicle costs. Driving a large luxury car or SUV can be quite a bit more expensive than a smaller/cheaper vehicle when you look at the overall picture. In the search for cheaper transportation, a lot of people revert to other methods of transport, such as motorcycles, bicycles, electric or hybrid vehicles, etc. Let's take a look at how much some of these cost.

Motorcycles

In many places around the world, motorcycles are used as a cheaper transportation alternative to cars. Due to their small size and light weight, they offer advantages in fuel consumption, insurance rates, and generally purchase price. The compromises made by using a motorcycle for transportation include lack of weather protection, lack of storage space, and the inability to carry more than one passenger (typically). For a person who simply wants cheaper transportation for that part of the year when the weather permits it, a motorcycle can look like a good choice.

A convenient bike for me to use for calculations is again one that I own - a 2004 Honda 599 (Hornet). This is a pretty typical commuter bike in many European countries, though it has a much smaller following in Canada. When it was new, this bike could be purchased for around $8000. After riding 100000 km, it would probably be worth about $2000 in a used sale, if it were kept in good condition. This results in a depreciation rate of 6 cents per km. Fuel consumption is on average about 5.5L per 100km, resulting in a fuel cost of 7.7 cents per km at a fuel price of $1.40 per litre (Note: Since I took a long pause while writing this post, the gas prices have been almost halved in my area compared to when I started. I will continue using the original figure of $1.40 for comparison purposes).

Although motorcycles use a much smaller number of components than cars, their maintenance costs do not reflect this. The tires, drive chain and sprockets on my motorcycle require replacement every 25000 km at a cost of about $600. Add a $100 oil and filter change every 12000 km (as specified in the owner's manual), and you get a maintenance cost of 3.2 cents per km. Insurance and registration costs average about $400 per year, for minimum liability coverage only (comprehensive and theft insurance on motorcycles is quite high due to their high accident and theft rates). Due to weather limitations and storage limitations there are numerous times where you cannot use your motorcycle, so I will use a figure of 15000 km per year. With the fixed costs prorated into a km cost, the overall price of riding a motorcycle comes out to approximately 19.6 cents per km.

While this figure is certainly lower than driving new car, it is not as low as many people expect. In fact, it is comparable to the old used car example above. One point that should be noted is that the fixed costs of motorcycle ownership are considerably lower than the direct operating costs, so the cost does not change a significant amount based on the distance ridden per year. There are, however, a number of areas where one can save by using a motorcycle instead of a car. One of them is parking. If you live in a fairly congested city, downtown parking can carry a hefty premium for a car, whereas motorcycles are often times exempt from parking fees (or if not, a single car spot can be shared between several motorcycles reducing the cost).

The ability to lane split is another advantage for motorcycles. Although it is illegal in Canada and most of the United States (unlike more logical European nations), and therefore should be used with caution, lane splitting can save a lot of time on a congested commute (it also reduces fuel consumption, pollution, and traffic congestion). With these benefits in mind, motorcycles can make for a more efficient means of transportation than conventional cars.