Home > Economics, Guest Writer > Making the Leap-Going Carless: breaking down the numbers

Making the Leap-Going Carless: breaking down the numbers

Making the Leap – Going Carless

Guest Contributor Bill Palladino, Part 1 of 2 Going Carless

On July 17, 2009 I made a commitment to myself and my community. On that day, I picked up my nephew Kevin at the Cherry Capital Airport in my 2002 Saturn Vue, gave him the keys and the title, and walked away from car ownership. It was a small but radical gesture, especially in Michigan where many people think that act makes me the bicycling equivalent of Euell Gibbons… oddly righteous but odd just the same.

I’ll admit I’d already begun to use my car less and less. The price of gas, and moreover our addiction to it, had been worrying me for a while. But, even considering a slow ramp-down of use, the impacts personally have been significant. From the MyWHaT Collection

Frankly, I’m ready to celebrate!

A lot of people assume that I’m someone who needs a car. I’m a business owner after all, a meeting go-er, wearer of suits and ties, and carrier of laptops and other trappings of the trade. Somewhere in there, I’d pondered the practicality of it all. At least in my case, car ownership had minimal and only peripheral benefits to my community. My thinking was that I wouldn’t put anyone out of a job by getting rid of my Saturn. And the money I would save from not having the car would allow me to play a more active role in directing where those funds would go.
I’ll cover this past year’s lessons in two parts. The first will look at the financial considerations and the second part will look at the intangibles that are more difficult to measure.
PART ONE: The Cost in Dollars

In my work researching public transportation for the Bay Area Transportation Authority (BATA) , I discovered some very eye-opening realities; this was the driving element for me giving away my car a year ago. In most cases individual vehicle ownership has a negative net effect on local economies. This means that on average more vehicle-related expenses leave the community than stay locally. The math is simple, but difficult to swallow for many. I’ve made some estimates as to how much of the face-value of various goods and services remain in our local economy. Where possible I’ve also provided the references for my calculations.

I’ve listed here my vehicle related expenses for the twelve-month period between July 15, 2008 and July 14, 2009… my last year of car ownership….and this past year of going carless. You can use this cost of car ownership calculator to calculate your own expenses.

Car Payments: Most automobile financing is done by large regional or national banking institutions with token representation in communities (unless you use a small bank or credit union and they don’t broker the loans out.) The check you write typically goes to some faceless PO box in some Midwest city far from here. My lease payments from a car purchased at a Traverse City dealership went to Chase Auto Finance in Fort Worth, Texas. ($260.00 /mo. – $3120/yr. Chase Financial) (Local value of $156.00 based on a generous 2.5% dealer reserve). It’s a powerful lobby as well, recently exempted from new financial regulation despite the fact that car loans are the second largest source of American debt.<

Insurance: one of the largest ongoing vehicle expenses (while mandatory) reserves only a very small percentage of its fees for the local economy (unless a claim is made). And these are mainly sales commissions. My policy was with Auto-Owners based in Lansing, through a local agent. $70/mo. $840.00/yr (Local value $84.00 This assumes a 10% ongoing commission.)

Fuel: Fuel is another piece of the puzzle that astounds. According to U.S. Bureau of Labor Statistics only 3 to 5 cents from every dollar you spend on gasoline or diesel fuel for your car stays in the local community. That’s why the place we get fuel is no longer called a gas station. They’re called convenience stores, because it’s that convenience that makes them the bulk of their profits. They can make more profit selling you a 12 pack of beer than in selling $30 worth of gas. (10,000 miles at 27.5mpg 363.6 gallons @2.50/gal = $909.10. That’s using very conservative numbers. Assuming I purchased all of that in my home community (which isn’t correct), that’s a local value of $45.46.
Even the hyper conservative jocularity of Steven Colbert jumps on this data-set.

Repairs and Maintenance: depending upon the age of your vehicle, the brand, and the type of driving you do, this can vary greatly. In my case, my warranty had expired and these expenses represent new tires, brakes, and some tune-ups. Arguably, this section has the greatest impact on the local economy as much of the money spent went to local labor. But even then, the total economic impact on my community was small. Total expenses of $1299.00 for an approximate local value $700 in labor.

Parking: in a downtown area like Traverse City, vehicle parking is the constant burr in the sides of residents and businesses. I’m lucky enough to have free parking in my condo association’s lot, but I do travel quite a bit and thus used the paid parking lot at the Cherry Capital Airport frequently. In 2008/2009 I spent 78 days out-of-town, leaving my car in the lot at a cost of $6.50/day. $526.50 (Most of that staying in town.)

These are the same numbers from the table above. Featuring my actual expenses for auto and bicycle use in 2008-2010. The left-hand pie chart represents auto expenses from 08/09, and the right-hand chart the translated expenses for using my bicycles instead after dumping the car.

Plainly, this shows significant savings after getting rid of the car. It’s important to note that I gave the car away. Had I sold it, I could’ve easily netted another $4500. What I’d like you to focus on however is the graph below.

It shows that for the year of car ownership approximately 23% of my expenses stayed in the local community. In the following year, riding my bikes, 41% of expenses stayed local.

>This scale of local value retention is an assumption you can make anytime you choose to purchase something with a smaller carbon footprint. If it took a lot of fuel to get it here, and/or it takes a lot of fuel to keep in running, the majority of money you spend on it will leave the community and never return.

Finally, when you factor in the savings from one year to the next, it’s easy to see that I pocketed well over $5600 by not owning a car.

My conscious choice was to find ways to spend that money where more of it would remain in the local economy.
And I’ll cover how I did that in the Part Two.

  1. Rory
    July 14, 2010 at 10:07 am

    Great post. I like how you tied in the local value calculations. And too bad your condo association doesn’t separate your parking spot from the cost of your unit and you’d have pocketed even more cash.

    Congrats on your almost year anniversary of giving up the keys!

  2. faroop
    July 18, 2010 at 2:31 pm

    Thanks for this post and the number crunching! Looking forward to your next installment 🙂 I particularly like the view of more money staying in the local community. Re: @Rory’s comment about the parking spot — are you going to lease it out? Carsharing services often lease spots for their cars and that could be an option to consider, sometimes they “pay” with free memberships (zipcar in our area will do this sometimes).

  3. July 19, 2010 at 10:00 pm

    Yes, great post. Would your condo association allow you to sub-let your parking spot? Or is there no market for that?

    Have you analyzed whether or not you’ll need to rent a car, and if so, how often?

  4. Bill Palladino
    July 19, 2010 at 11:42 pm

    Thanks to all for the comments on this post. The condo association has a loose set of regulations on the parking system here. So we don’t actually have allotted spaces. But I will admit to allowing one of my friends to park here during the festivals as she works downtown during evenings. I’m a big fan of some of the newer Urban planning gurus who are creating car-less condominiums. These are developments that get permission from local communities to build without requiring parking spaces. They qualify for this by putting into the lease or purchase agreements that no residents can keep a vehicle. Think of how much more space might be allotted for actual dwelling units in my Midtown neighborhood if we couldn’t own cars while choosing to live here. Wow! Not saying that’s for everyone… but imagine what it could do for certain urban areas.

    The car rental thing is substantial, but because my clients pay for all associated expenses for that type of use I didn’t include it as a direct impact. One thing I did not mention are the tax implications. At least while my car was on lease, I was able to deduct more of the cost of ownership. But I’d purchased the car outright several years prior to this experiment so did not include those numbers. As for most of the estimates represented, your own experiences may differ.

    Be on the watch soon for Part Two of the post where I delve into non-financial implications of getting rid of the car, from the way I shop, to my physical and mental health. Coming soon!

  5. July 20, 2010 at 1:05 pm

    Thank you again for the number crunching, Bill. It’s been an eye-opener for many of readers. You’re mention of the car free condo units reminded me of this Toronto unit (42 storeys, no parking) that fought like hell to not provide parking. They finally won, and will provide 315 spaces for bikes and car parking for car-sharing businesses only.

  6. Jim
    August 5, 2013 at 2:26 pm

    Using percentage to compare before/after local expenditures is completely specious. One could just as easily say that you took $1080 OUT of the local economy by getting rid of your car. Percentages are only meaningful if you are using comparable base totals. If that $5638 savings was used to take a Caribbean cruise, you’ve caused a net decline in local spending. To make these figures meaningful, you need to report the numbers as a percentage of TOTAL annual spending, not just transportation spending.

  1. August 17, 2010 at 10:45 am

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