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Saturday, January 10, 2009

The Real Auto-Bailout: Look at the cash drain of cars

From the WSJ:

A Real Auto Bailout: Escape Your Car

Whether you drive a hybrid or an SUV, your car is a cash-guzzler. Families trying to save real money should consider going without.

. . . . Forget lattes and store-brand cereal. If you really want to see where your money is going, take a closer look at your car. Foreign or domestic, it doesn't matter. It's a cash guzzler, and it is probably costing you more than anything else except your home.

How much? First there's the actual capital cost of buying the vehicle. Obviously people can spend as little as a few thousand dollars buying an old clunker. But most spend a lot more. And that initial cost is just the start. Now add everything from gas and maintenance to insurance, registration, taxes, tolls, parking, tickets and so on.

You'll be lucky if you're spending less than about $4,000 a year. Most people will pay a lot more. If you buy the vehicle with a loan, you'll have to pay interest. If you pay cash, you have to factor in the interest you would have made on that money if you had saved it instead. That's a real cost too, and a substantial one, though most people forget about it.

In 2007, the most recent year that numbers are available, the American Automobile Association figured its members paid about $7,800 a year on average to own and maintain their cars. That figure dropped to about $6,200 for small-car owners.

The AAA's numbers were tabulated before the surge, and recent collapse, of gasoline prices. It's hard to imagine gas prices will to remain at today's panic-level $1.60 per gallon for long. But even if they do, that will only cut the AAA's figures by about $400 annually.

These are not trifling costs. Drivers are hemhorraging money. The federal Bureau of Labor Statistics calculated that in 2006 vehicles sucked down nearly 17 cents of every family dollar.

Maybe it's time for smart families to consider some really tough choices.

Life without a car may seem inconceivable. They are useful and can be fun. In most parts of America, you really can't survive without one. And they've been hammered into the culture and the national psyche.

But a lot of things are happening these days that nobody expected. Rules are changing. People need to make every dollar count.

Trading down to the cheapest car possible is one move. Dumping one vehicle from a two-car household is tougher to do, but offers real savings. Moving into a city with a downtown, and getting rid of your cars completely, can save you even more. When you factor in the savings, city real estate might actually work out in your favor. . . .

A most important insight

Building new roads as economic stimulus is like burning the siding and insulation in your house as a way to keep warm.

New Roads = New Pollution

President-elect Obama and Congress are working to pass a green-jobs economic stimulus package—but it is in danger of being hijacked by the road-building lobby, which wants billions of dollars for unnecessary new roads that would increase global warming pollution. Just 10 miles of a new four-lane highway lead to emissions that are equivalent to the lifetime emissions of 46,700 new Hummers.