It costs about fifty cents a mile to drive somewhere. So if you go five miles to the store to pick up milk, that milk costs you $5 more. If you drive even a mile out of your way to save a few cents on gas, you are losing money. The arithmetic is there, but we don't believe it.
This is likely because of all the sunk costs of the vehicle - purchase, insurance, upkeep - that we don't notice once we have already spent them. I think we also do live by arithmetic that much, and so think that large-sounding sums of money for an individual are actual large amounts when distributed over a country or an industry. We deplore the money in politics, but it is invisible compared to the amount spent on cosmetics, for example.
Sunk costs are sunk, yes.
ReplyDeleteRight now both my Jeep and my Ford are disabled due to maintenance issues, and so the only way to get anywhere is by motorcycle. (Poor me.) The bikes get between 40-60 MPG, so I probably save money given that the closest store is 15 miles away, even though I might have to make two trips to get the same amount of groceries. The math becomes hard to calculate at some point: how much am I spending on maintaining these vehicles? How much is the gas per mile? How many trips do I have to make to get the same volume of stuff? At some point it's not that I don't believe it, it's that I can't calculate it without significant effort.
I think your number of 50 cents per mile is a little high. Even with a relatively large car and V6, I get about 20 mpg in the city. Gas is currently under $4.00 per gallon. At that rate, it is more like 20 cents per mile.
ReplyDeleteIf you get the 50 cent figure by adding in depreciation, taxes, etc, those are sunk costs, and do not count towards incremental costs of driving another mile. That is, when deciding whether or not to make that run to the store for a package of twinkies, you should not be including them.
However, your point is still valid. I have never been able to convince my wife that driving several miles and back to recycle junk mail that has essentially no value, does not make sense.
Your use of economics is uncharacteristically simplistic.
ReplyDeleteAs others have pointed out, the variable cost might be $2 more for that gallon of milk.
If The Royal and Ancient Society of Toll House Tasters were meeting at my house in an hour, a gallon of milk would be worth much more than $6.
Businesses reimburse employees $.50/mile for a reason. They aren't just being generous. It's not just the gas, but the vehicle, insurance, maintenance, maybe storage. With gas higher, it's likely a bit more now. You can bring down the cost by driving a beater and not doing cosmetic maintenance, but you're rarely getting below 40 cents a mile.
ReplyDeleteFederal mileage reimbursement has come down from a high of .57/mile down to something like .51/mile, if my memory serves. And yes, it takes into account depreciation and maintenance costs.
DeleteYour basic point isn't affected by comparing incremental or all-in costs to the amount saved, at some point the juice is no longer worth the squeeze and we don't always make a fine calculation of the point. I drive a couple of hours round trip to work on the historic railroad and pass gas stations with prices .30-.40/gallon lower than the cheapest I can find in Louisville so $3-4 per 10 gallon fill. On the flip side it takes me about a gallon of gas to get from my house to the station so it's a wash though I was doing it largely to save fuel discount points for my wife to use. Other factors always enter in the equation.
ReplyDeleteI'm not sure exactly what you meant by the reference to living by arithmetic but I also agree that we hardly ever get any context for discussions about political spending. I seem to remember one of the entries in bs king's stats lexicon was 'free-floating figures', numbers that may be accurate but are presented with no further discussion about why we should think they are either too low or too high.
Uncle Bill: If you get the 50 cent figure by adding in depreciation, taxes, etc, those are sunk costs, and do not count towards incremental costs of driving another mile.
ReplyDeleteDriving a car reduces its value. A car with 200,000 miles on it is worth less than the same car with 20,000 miles on it. The cost of driving a car is calculated by taking all the costs over time, and deducting its remaining value at the end of the period. Only accounting for the cost of gas gives a distorted view of the actual cost.
Call it a buck a mile distance, there and back.
Perhaps you need to move closer to your milk? It costs me about 66 cents in gasoline for a round trip to the nearest milk supplier. The recurring sunk costs (registration, insurance, and maintenance) for the trip are $1.50 because I drive 200 miles or less a month. If I drove 400 miles a month, it would be close to 50 cents per mile total cost to own and drive my vehicle.
ReplyDeleteDepreciation for a vehicle is generally based on age, not mileage. My vehicle is very low mileage, but the same model with 5 times that mileage has depreciated at a much slower rate per mile than mine has. Thus, the current value of mine is not an 'appreciable' amount more.
ReplyDeleteIf I were a business and had depreciated either vehicle for tax purposes, they would both have depreciated to zero regardless the current value.
Donna B: Depreciation for a vehicle is generally based on age, not mileage.
ReplyDeleteIt varies by model and mileage. For a Chevy Malibu, a six-year-old car will be depreciated about $7,000 compared to a one-year-old car for the same mileage. Mileage depreciation is about 8¢ per mile, or about $8,000 for 100,000 miles. A more expensive car will generally depreciate more.
If you drive less, then capital depreciation will actually be more per mile as the car is losing value just sitting there.
The half a buck per mile is for the average situation.
I did not factor in a noneconomic factor that is quite real, the pleasure of driving, getting out, taking a ride. A person might say to himself "I feel like a drive" and go looking for excuses to take one.
ReplyDeleteWe also put tasks together to make them more efficient. It might not be very efficient to go five miles out of your way after church to go get groceries, but it's more efficient than going there from your house. And it might be on roads you like to see.
I am not invalidating either of those things, only pointing out that the financial cost of them is likely higher than you thought.
Just for fun, here's a calculation:
ReplyDeleteAssumptions
Chevy Malibu
30 miles per gallon.
Gas averaging $3 per gallon, so gas is about 10¢ per mile.
Keep the car from when it is one year old (after losing that new car smell) to when it is six years old, a period of five years.
Capital depreciation due to age is about $6000.
Mileage depreciation about 8¢ per mile.
Maintenance $50 every 3,000 miles (oil, tire rotation, wipers, etc.). Full warranty covers everything else.
Full coverage insurance, $1500 per year.
Now, the total cost per mile depends on how many miles you drive over that five years.
25,000 miles, 74¢ per mile
50,000 miles, 47¢ per mile
100,000 miles, 33¢ per mile
None of this includes the time-cost of the human driver, or robot.
Sorry, Assistant Village Idiot, but there doesn't seem to be a "pleasure of driving" input on the spreadsheet. You'll just have to adjust these figures manually.
;-)
Here in New England if you drive some back roads in the hills you come to a small town or the ghost of a small town. I often think about how isolated people were before cars. If no railroad came by everything was a couple of hours walk or slow horse carriage ride. Centers were about 5-10 miles apart so a couple of hours each way. Maple Syrup was a good crop because it could be more easily transported to markets. The car gave us our time back so we would afford to see people 30 miles away. No wonder Henry Ford sold so many Model T’s with their Jeep like characteristics.
ReplyDeleteTry living a bit further out of town, as we do. It forces efficiency - one tends to make a list and spread out the trips to weekly or bi-weekly, and the trips become errand expeditions. If the supermarket is included, we're far enough away to bring the big cooler so stuff stays frozen.
ReplyDelete