In a moment of idleness last week I started working out how much my car was costing me per month. I’m thinking of trading up next year; hopefully get something more fuel efficient.
For the most part I drive about 750 miles a month, which is made up for trips from my home in Drumcondra to Cherrywood. Some months I drive about 600 miles (when I travel abroad) and when I have to work in Limerick the number can go up to 900 miles. My car gets about 6.5 miles to the litre, or 390 miles to a full tank, which hardly makes it a green-mobile. At €1.50 a litre I’m spending about €173 a month on petrol. The drive to and from Cherrywood is about 25 miles round trip.
Fuel is not the only cost I incur though. My insurance is about €600 euro a year. My car tax is €324 a year and I also have the AA at €210 a year. I expect to spend around €300 on maintenance and repair over the year as well.
There is one more cost that is less straight forward. Strictly speaking the cash isn’t going out every month. In fact the cash has already been paid out. Its an opportunity cost; what I could have done with the money if I hadn’t tied it up in the car. I know this sounds like a fuzzy concept; I’ve already paid the money right? But here’s the thing, If I sell the car right now I might get €4000, but If I hold on to the car till next year like I plan to it might be worth €3000. In a way I am renting the car or slowly surrendering value day by day. I figure that the car is worth about €1000 a year. If I had a more expensive car then it would be worth more.
So having worked out all these costs I can look at the three scenarios and work out how much money I’m spending a month. I can also calculate a proxy for “convenience” i.e. The value I am paying to have the car for average use. I can then compare this to my utility value – How much I am willing to pay for this privilege. If my utility is greater than that of convenience then I should keep using the car but if its less then I should use substitutes I.e. The DART, where they exist.
The easiest way to summarise the options is with a table.
As you can see the more miles I do the lower the total cost, but it also shows that the cost of having the car under each scenario is way over the cost for the same trip to Cherrywood on the train.
In reality I'm paying an average of a 61% premium or €7.67 to use the car on my round trip to and from Cherrywood.
I know I said I'd calculate my utility value but I actually haven't a clue how to (If anyone wants to suggest how to do this I'm happy to try it) I just know that a 61% premium feels too high for me though. I suspect that if it was raining when I got up I'd prefer to take the car but with the summer coming up hopefully I'll think of my pocket and take the train!
Great post dude, intriguing stuff to see the breakdown like that!
ReplyDeleteHey Damien, I didn't go through all the calculations, but it seems to me that you are including the fixed costs to your total journey costs and comparing that to the train ticket cost. That would be ok if you planned on selling the car and taking the train to work everyday. But I understand your idea is to leave the car at home every once in a while and ride the train to work. In that case, you only save on variable costs. The fixed costs are still incurring, even with the car in the garage. Anyway... I suggest you sell the car, work from home and save that small fortune. :)
ReplyDeleteThanks Mystery Reader, you're my first Anonymous Poster!
ReplyDeleteI take your point. To my mind including the fixed cost is an attempt to identify an "opportunity cost" of having the car in the first place.
In reality I cannot save that cost by taking the train as i cannot get that money back (well A little, I could figure out the loss in value of the car in terms of mileage, but this seems like nit picking!)
The reality is that since that post I have only taken the train once, though my personal situation makes the opportunity to take the train limited.
Thanks for Reading!