That Status Symbol might cost you one sweet million

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The automobile plays an important part in personal and professional mobility, no question about that. But doesn’t the impracticality of modern vehicles, their size, weight, form, and performance prove there is clearly a little more at play? In many countries, just owning a car is status symbol itself, but here in the U.S. it seems that owning the biggest, heaviest, most impractical and least efficient car possible seems to be a common way to increase self-esteem.

“This is why I drive a $70,000 car and you drive that!” she blurted out.
“This is why I own multiple properties and you still rent!”
[FinancialSamurai.com]

And if an automobile is such a mood-changing status symbol, isn’t owning two automobiles even better? How about three? 47 U.S. states have more registered cars than licensed drivers. It should be clear by now that many Americans love their cars a little too much these days and might even be addicted.

U.S. Car Ownership Statistics (2022):

47 states have more registered cars than licensed drivers
Montana has 2.6 cars per licensed driver and growing
92% of households had at least one vehicle
37% of households had two vehicles
22% of households own three or more vehicles

“A Mercedes GLC costs $1,000,000+ over an owner’s lifetime.”
[Forbes]

There are quite a number of studies now in different languages and different currencies about how much it costs to drive a car. Some are 20 years old, some are 10 years old, and some are newer. Just like carbon emission math, this can be complex and fuzzy and is often based on local circumstances. Local taxes, local gas prices, fees, size and fuel efficiency, length and safety of an Active Transportation network, and quality and price of Public Transportation can all play a role in this. But these studies still give credibility to thinkers and thought leaders to come up with better solutions.

When it comes to transportation, there are Direct Costs (or Internal Costs) – like buying fuel or insurance – and plenty of Indirect Costs (or External Costs) that are paid by society. Externalities would be the money spent on infrastructure, health issues caused by pollution, microplastics in the oceans, and adaptation to global warming. For this blog post, however, we are focusing mostly on the Internal Costs that arise from owning and operating an automobile.

2024 Cost of driving a mile according to AAA

AAA calculates the average cost to own and operate a new car at $0.72 per mile (at 15k per year). This direct cost to the owner includes depreciation, financing, fuel, insurance, license, registration, taxes, maintenance, repair, and tires. The average monthly cost would, therefore, hover around $1,000, and the yearly cost is set at over $12,000 for 2024.

AAA calculates maintenance and repair costs at 9.8 cents. The average fuel cost is $2,389 per year or 16 cents per mile, of which gas tax is only 4 cents. The “fuel cost” for EVs is around $711 per year, by the way. If a measly 4 cents per mile is still too much for you, switch to California’s Road Charge Pilot program, where one mile might cost you only 3 cents.

But one of the biggest cost factors is depreciation. Every new car loses around 50% of its value within just three years. This depreciation is built into resale values and also the leasing price. The average car loses $4,538 per year or 30 cents per mile. But more expensive cars with more expensive toys lose more value.

There are quite the savings when owning and operating a smaller car:

large pick-up truck: $16,000 per year
medium SUV: $12,000 per year
small sedan: $9,000 per year

“The car lobby resists measures that would restrict car use, using tactics similar to the tobacco industry.”
[Journal of Public Health]

The tobacco industry has restrictions on what and where they can advertise their goods, it might be time to do the same to reign in America’s addiction in regard to large cars.

2023 – Internal Revenue Service

If you ever wanted to know if your driven miles are productive in terms of their economic value to society, just ask the IRS. If you can use miles driven as a value to reduce your tax burden, congratulations:

The standard mileage rate has been 65.6 cents
Active-duty personnel of the Armed Forces can receive 22 cents per mile for certain qualifying miles
In service of charity, there might be a rate of 14 cents per mile available

However, all the miles the IRS does not accept are basically a cost burden to the owner (internal cost) and rather damaging for society as a whole (externality).

2012 – Earth Institute

Columbia University’s Earth Institute calculated the direct cost of an automotive mile by using 2010 AAA’s numbers, but also added factors like time and parking, which are often left out of the equation.

2011 AAA’s estimate: $0.60 per mile.
2011 U.S. parking costs: $0.05 per mile.
Time cost based on average worker salary: $0.85 per mile.
The average cost of owning and operating a car is, therefore, $1.50 for every mile driven.

It’s quite a few years later, and in California, with higher gas prices, parking costs and salaries, that number might be closer to $3 per mile these days.

2022 – ScienceDirect

“The car is one of the most expensive household consumer goods, yet there is a limited understanding of its private (internal) and social (external) cost per vehicle-km, year, or lifetime of driving.“

This study published at ScienceDirect and others went to great lengths to determine the Lifetime Cost of owning and operating a car. The researchers focused on 23 private or internal cost items and 10 external cost items, which are usually born by society.

Taking all these different cost items into account, the researchers came to the conclusion that owning a large car in Germany and driving 15,000 km (9,300 miles) per year would result in a lifetime cost (50 years) of over $1,000,000 or $20,000 per year. Of those $1m, society would be bearing 30% or $6,000.

These numbers would look somewhat different in the U.S. and for various reasons. With fuel or insurance costs higher over there, even more costs are dumped onto U.S. society. And while the average automobile in Germany might be driven fewer than 10,000 miles, the yearly average in the U.S. is closer to 15,000 miles. In addition to all of that, the cost of healthcare due to sedentary lifestyles is also way higher in the U.S., as many Germans do like their cars but also walk and ride their bicycles a lot.

Again, reigning in the advertising industry and providing clearer messaging by the government could help make people happier and healthier.

How to Lose One Million Dollar

Owning a home and a car are two of the biggest expenses people usually make. But while a new home might create wealth, a new car can lose 50% of its value within the first three years. In fact, a car is one of the worst investments any person can ever make. These different researchers have calculated the yearly cost of an average automobile around $12,000-$13,000.

Imagine avoiding that second or third household car and replacing it with Public or Active Transportation. Then take only $10,000 of that avoided cost and start investing into your retirement. With an average 5% ROI the money would have multiplied to over $1,000,000 probably around year 36.

This isn’t too bad considering that, according to Vanguard, their average 401k account had less than $240,000 (2022). But worse, half of American households had no savings in retirement accounts at all.

“At ages 55 to 59, the median household had $24,500 in retirement accounts, $7,900 in checking and savings accounts, $76,000 in financial assets, and a net worth of $320,700.”
[USAfacts]

Post.Scriptum.

So let those two numbers sink in again:

92% of households owned a car that might cost around $1,000,000 over 50 years of driving
50% of households have no retirement accounts at all

So why do Bay Area cities – like Redwood City or San Mateo – work so hard to sabotage public and active transportation as much as they do? Why is car-centric regarded as something good by these local politicians? Maybe addiction does really play into it – but this time, we are talking about addiction in local council members.

More Information:

Forbes: U.S. 2024 Car Ownership Data
Forbes: Society Subsidizes Ownership
Yahoo: U.S. 2023 Car Ownership Data
AAA’s Your Driving Costs
VOX: The impossible paradox of car ownership
KBB: Price of owning a car
Journal of Public Health: Are Cars the new Tobacco?
Earth Institute: Transforming Personal Mobility

Editor’s Note: The views and opinions expressed in all blog posts are those of the authors and do not necessarily reflect those of the Redwood City Pulse or its staff.