The Lifetime Cost of a Small Car Can Be $689,000

A new German study looks at the direct and externalized costs and they are scary.

Everybody rides cars
Everybody Rides!.

fotog / Getty Images

In a recent post, "Electric Vehicle Accessibility for Black and Brown Communities Is Essential for Successful EV Adoption in US," Treehugger contributor Marc Carter noted the main issues were lower incomes and higher costs of electric cars. But internal combustion engine (ICE) powered cars are also incredibly expensive: Transportation writer Carlton Reid points to a new study in his Forbes piece, "Lifetime Cost Of Small Car $689,000; Society Subsidizes This Ownership With $275,000."

Reid is doing a conversion of the cost in euros from the study, "The Lifetime Cost of Driving a Car." The study authors—Stefan Gössling, Jessica Kees, and Todd Litman (known to Treehugger for his previous research and writing)—looked at the full cost of car ownership. They noted: "Cars are expensive because of their high purchasing cost, depreciation, as well as the additional cost incurred by insurance, repairs, fuel purchases and residential parking." But there are also other "external" costs of ownership such as road and parking costs, and the costs incurred due to pollution, noise, or crash damages.

"The true scale of social costs is rarely considered, as assessments by transport planners only consider a limited number of cost items. Social costs, including market and non-market costs, thus represent significant subsidies forwarded to vehicle owners, with far-reaching implication for transport behaviour and traffic outcomes."

The study finds that the lifetime costs of driving are staggering, but really, the lifetime costs of anything appear staggering if you multiply it over 50 years. The percentage of net income that goes to supporting the car is also outrageous: for the extremely wealthy it is only 1%, for mere millionaires, it is 13%. But for an unskilled worker it is 36% for an economy car, and if they go out and buy an F-150, as many workers do—about the same cost as the Mercedes GLC in the study—it rises to 69% of their annual income.

We have written before in "What Is the True Cost of Car Ownership?" that the indirect subsidies and externalized costs can be more than 50% of the direct cost. This study makes it clear that all those subsidies actually create a vicious circle that encourages driving while depressing the use of alternative modes.

"Results also have relevance for transport behavior, as they confirm a large fixed cost of car ownership in the order of about 75–80% of total private car cost. High fixed costs make it rational for motorists to maximize their driving, as they are likely to only consider the variable travel cost. The spending of thousands of Euros annually on fixed costs, in combination with thousands of Euros in road and parking subsidies, make it seem rational to buy a car, and, once the car is bought, not to consider other transport modes such as trains or busses, which appear costly in comparison. Because of this price structure, driving is cheaper than public transit travel for most trips."

So, once you own a car, it is a "sunk cost" and unless you are driving into a major city with expensive parking, it is incrementally cheaper to drive.

The study then looks at the social costs and subsidies that are on top of this, but that is not paid directly by the driver.

"For the car models evaluated in this paper, this cost is equivalent to 29% to 41% of the total vehicle cost. Social costs are a subsidy to car owners that is either born by all residents in the country, including the share of households not owning cars, or, in the case of climate change, future generations. For larger car models, this subsidy is in the order of €5000 [$5,693] per year."
Total costs of car ownership and operation

Lloyd Alter

In an earlier post where I calculated the study and the cost per citizen for those externalized social costs, I came up with a similar number: $5,701. I concluded:

"So the next time a driver complains that cyclists don't pay their way, you can point out that every single one of them, and every pedestrian and even every child in a stroller is contributing on average $5,701 every year to support drivers and their infrastructure. They should be thanking you for paying taxes and not driving."

The problem with getting rid of these subsidies and making drivers cover the true cost of their driving is that increasing the cost of operating a car disproportionately affects the poorer driver because the cost of owning and operating the car is a bigger proportion of their income. This is often used as an excuse by many who never much cared about the poor, but don't want to pay more for gas themselves, but happens to be true. The authors note that a rise of only 6.5 cents per liter of diesel (25 cents per gallon) caused violent riots in France.

"Conditions are even worse in North America, where many people, including those with low incomes, can hardly imagine living car-free, and are willing to spend more than is cost effective to own a personal car for status sake. As a result, efforts to internalize automobile costs through fuel taxes, road tolls and parking fees are often opposed as being regressive and unfair to poor people, while the benefits to lower-income people, such as improved walking and bicycling conditions, more efficient public transit services, reduced pollution exposure, and reductions in other, more regressive taxes, are ignored."

The study authors suggest car ownership is a form of "economic lock-in that depletes a large share of the discretionary income of low-income groups." As we do here on Treehugger, they suggest the promotion of alternatives, active transportation like cycling, and note that electric bikes "make it feasible to cover even distances of 10 km [6 miles], again at a cost that is far below automobility."

The conclusion is relevant to the discussion in our earlier post about making electric cars more accessible to low-income communities:

"This analysis indicates that most lower-income and many moderate-income households are harmed overall by policies that favor automobile travel over more affordable and resource-efficient modes. Such policies force many households to own more vehicles than they can afford, and imposes large external costs, particularly on people who rely on walking, bicycling and public transit. Because vehicle value and mileage tends to increase with income, automobile subsidies tend to be regressive. Company car benefits, low fuel taxes, road and parking subsidies, and electric vehicle subsidies primarily benefit wealthy motorists." 

Carter wrote in the aforementioned post about electric vehicle accessibility that "mobility justice and equity is about providing everyone with appropriate, affordable, and accessible options to meet their mobility needs." It seems pretty clear that cars don't fill that bill, whatever they run on.

View Article Sources
  1. Stefan Gössling, Jessica Kees, Todd Litman, "The lifetime cost of driving a car." Ecological Economics, vol. 194, 2022. doi:10.1016/j.ecolecon.2021.107335