Often in this subreddit people bring up the topics of high cost of living and car dependence. Today I would like to bring up something that is in the intersection of these two. The financial cost of car dependence which is one of the numerous costs of car dependence.
​
This is going to be an attempt in doing a life-cycle analysis of all the financial expenses related to using a car. The goal is to come up with an estimate of the total monetary cost cars bring to their users, as well as a per year average for such cost.
​
I’m posting this as I go though the calculation expecting to get your feedback to help improve my calculation. Also note I’m not an expert in this kind of financial estimates.
​
I was compelled to do this because I wanted to get a more accurate estimate for myself out of curiosity. I also wanted to share this with people because this is often an expense people massively underestimate. According to a study Germans underestimate the cost of car ownership to 52% of the actual costs\[1,2\]. If this affects Germans, who are stereotypically the most fiscally responsible people in EU it probably affects Cypriots who are some of the least financially educated in the EU \[3,4\].
​
In this calculation I assumed the purchase of a new vehicle (even though this is probably not the case for many people in Cyprus) for two reasons:
1. It simplifies and it is easier to standardize the calculation in this life-cycle assessment.
2. Second hand vehicles will last for few years, they have worst fuel economy and usually all mechanical problems appear during the end of its life-cycle. Therefore the statement that second-hand vehicles are cheaper is generally not true if all expenses are accounted and one also calculate the average cost per useful year of use. If we are to trust the free market the price of second hand vehicles is right.
​
Also the calculation changes massive depending on the car therefore I’m focusing on the methodology but here I’ll present an example to have some numbers to illustrate my point. I can also share the spreadsheet I used for the calculation with all the formulas such that each of you can play around with numbers that make more sense to you and see what answer you get.
​
For this examples I’m using the following assumptions for what I imagine the average person should expect (k€ means thousands of euro):
\- Initial coast of the car = 27 k€ (probably very conservative).
\- Useful lifetime of the vehicle = 20 years.
\- Cost of financing (e.g. money lost to interest payments) = 0.
\- Cost of fuel = 1.5 €/L This is an extremely sensitive parameter since fuel is a big cost of car ownership and I use this single value for the entire lifetime of the vehicle. Not very accurate but the best given I cant predict future prices.
\- Cost of insurance = 350 €/year.
\- Annual cost of parking = 30 €.
\- Average annual cost of maintenance = 500 €.
\- Annual car wash bill 20 € and other miscellaneous costs 10€.
\- Average daily commute = 40 km. This includes everything except long road-trips. Basically distance traveled outside highway. This separation is done because fuel economy changes a lot especially accounting for traffic.
\- Average annual long distance travel = 4000 km.
\- Daily commute efficiency = 10 km/L.
\- Highway commute efficiency = 20 km/L.
​
Putting all of the above together this results to a bill of 95.5 k€ per car during the lifetime of the vehicle or equivalently 4.78 k€ per car per year. This means that a family can save around that number by reducing their car fleet by one car. Of course not buying a car one has other costs e.g. buss tickets, electric bike e.t.c but this are expected to be at least an order of magnitude lower and therefore negligible since the above calculation is also approximate. Of course to save \~100 k€ you first have to earn \~100 k€.
​
It should be noted that from the above I only accounted for monetary cost not health, environmental, psychological, loss of time e.t.c. I also ignored a lot of monetary costs. One such cost is the cost of having accidents, big or small. This is tricky to account for because they are rare and extremely costly, therefore the average cost is not very meaningful for the individual. You either get it and you pay a lot or not. Also it is difficult to put a price to loss of life or good health. Same with police tickets. Another unaccounted financial cost is the increased taxes due to road maintenance. Another is the financial cost that parking has to the economy since it takes space that could otherwise could be a building (commercial or residential).
​
Ironically I think I’m also underestimating this cost first by my conservative estimates and second by the above costs I couldn’t Include. I’m imagining the true cost will be closer to 200 k€ that my current estimate or \~ 10 k€ per year.
​
This post is already long and I would also like to keep it on topic. Therefore we can possibly open another thread for potential ways one can avoid this large cost.
​
I’m welcoming your feedback. I’m not very fast at responding but I’ll try to reply to all comments that are on-topic.
​
Link to the spreadsheet with the formula: [https://u.pcloud.link/publink/show?code=kZbhrNVZtd7qbzkT8Xm8jBghG8xUKysHvs47](https://u.pcloud.link/publink/show?code=kZbhrNVZtd7qbzkT8Xm8jBghG8xUKysHvs47)
Red cells are inputs (therefore editable), yellow are results of intermediate calculation, green are final calculations.
This was prepared in LibreOffice Calc. For any incompatibilities with Microsoft excel blame Microsoft.
​
Additionally here are some related videos and other links I found interesting :
[https://www.youtube.com/watch?v=ztHZj6QNlkM](https://www.youtube.com/watch?v=ztHZj6QNlkM)
[https://www.youtube.com/watch?v=kO8NnVdeUp8](https://www.youtube.com/watch?v=kO8NnVdeUp8)
[https://www.forbes.com/sites/carltonreid/2022/02/04/lifetime-cost-of-small-car-689000-society-subsidises-this-ownership-with-275000/](https://www.forbes.com/sites/carltonreid/2022/02/04/lifetime-cost-of-small-car-689000-society-subsidises-this-ownership-with-275000/)
​
\[1\] [https://cleantechnica.com/2020/08/07/the-costs-of-owning-a-conventional-car-are-far-higher-than-people-think/](https://cleantechnica.com/2020/08/07/the-costs-of-owning-a-conventional-car-are-far-higher-than-people-think/)
\[2\] [https://www.nature.com/articles/d41586-020-01118-w](https://www.nature.com/articles/d41586-020-01118-w)
\[3\] [https://cyprus-mail.com/2023/03/11/average-score-for-financial-literacy-in-cyprus-below-oecd-minimum/](https://cyprus-mail.com/2023/03/11/average-score-for-financial-literacy-in-cyprus-below-oecd-minimum/)
\[4\] [https://www.bruegel.org/sites/default/files/wp\_attachments/PC-08\_2018.pdf](https://www.bruegel.org/sites/default/files/wp_attachments/PC-08_2018.pdf)
​
by black-mouflon
3 comments
I’ve calculated the basic cost of driving, for myself, to be around €1~1,50 per 5km. I have a very cheap car and mainly drive in Nicosia.
I’ve never seen gas consumption expressed as *x* km/L, isnt *x* L/100km universal?
Feedback: A number of estimations are based on the assumption that there is one car per family. If there are more, some of the costs are shared by the cars. With proper maintenance, a car can last thirty, or thirty-five years. If one buys a good used car instead, the initial costs drop sharply. Public transport scales with the number of people in the family; a car’s costs are more fixed. The financial cost is one side of the issue; the other one is the environmental encumbrance.