bluefoxicy

...though with my tendency toward brevity (when I write books, I edit and re-edit and re-organize and try to cut out useless cruft--I consider this a technical writing piece, not an epic fantasy) is turning it into an essay.

The long and short of it is I used the Department of Labor Bureau of Labor Statistics Consumer Expenditures Survey to figure out the biggest expenses--and how to reduce them. I'm also using the US Department of Transportation Federal Highway Administration 2009 National Household Travel Survey Summary of Travel Trends to figure out how much car driving happens and for what. Turning all of this into a summary of wasteful economics that people can fix for themselves.

That's volume one; volume two focuses on broader economics and state-run services that would increase state revenue and decrease economic waste, putting more money in the hands of both the state and the private sector businesses (by reducing the destruction of wealth--more wealth means everyone can get richer, instead of one person getting rich while another gets poor).


In any case, I've been running the numbers. Dad got into the rent versus own argument with me and I decapitated him with the real numbers and a bunch of financial projections off those. Car versus Bike has turned into Unimode versus Diversified Transport Strategies--including Car, Bike, Motorcycle (commuting) strategies and moving closer to work to commute by bicycle.

I'm actually starting to question the wisdom of owning a car or truck.

If your trips don't involve any insurmountable hauling, what's a car for? Family trips, for sure: you carry the wife and two kids with you, you need a mid-sized Sedan with a V6 engine and a good, stiff suspension that handles well. Kids turn into teenagers, though, and then you get them bicycles: there's no need to go everywhere by car if you raise your kids well enough that you're not worried about them wandering off when they're 10 years old (as in, if they do wander off, that's fine, they don't need to stay in your sight 24/7). When I was 8 years old, I walked to school by myself... parents put me outside, and I showed up at school 4 blocks away, with about a third of the trip out of direct line of sight of any administration (my route was a great route to just vanish from, lots of places to turn a corner and then disappear into creeks or woods).

Family life demands a car for those 10, 15, 20, 30, 50, 100+ mile family trips that are intended to not take hours to do and not be an endurance test. Individual rides do not.

So you get panniers, you bike the 2 miles to Safeway or Giant, you load your bike up and go home. No need for the carry capacity of a car.

You move within 5 miles of work and bike it, or you take a motorcycle.

30 mile trip? Motorcycle. Put panniers on the motorcycle, go shopping, come back with things you can't get from closer. Visiting a friend in northern VA? No panniers, just ride down. 61mpg.

A motorcycle costs $4000 for a 249cc Kawasaki Ninja 250. That's a pretty baseline motorcycle; it's not a mid performance $8000 sports bike. That's the baseline I use for a motorcycle, and from what I can tell it costs about as much per year to maintain as a car for someone who seriously maintains his bike. Uses half the fuel of a car, has 1/5 the purchase price, insurance is lower (I'm not even 28 and the insurance is WAY low).

The more you use the bicycle, the less you use the motorcycle and car, which means less maintenance, less fuel, and fewer replacements when the damn thing gets old. A motorcycle costs 1/5 of what a car costs, so using it as a sacrificial costs roughly 1/4 of what operating a car costs when you factor in cost of gas and maintenance minus the cost of replacement amortized over its lifetime. A bicycle costs about 1/10 of what a motorcycle costs: figure on a $1500 bicycle lasting 10 years and costing $150/year in maintenance, $300/year flat out.

That's all well and good, but if you eliminate the car until you need one, you save $20,000 (ignore loan costs, you won't need it if you're this fiscally responsible) plus constantly paying insurance. For a family, at inception you need to buy a car; but rather than a two car family becoming a four car family, you have a one car family becoming a two car family (let the kids share a car) 16 years after you have your first kid.

Owning a car is looking more and more like a liability to me, and a poor financial decision. It'd be nice if I had a girlfriend and we were planning on maybe getting married, keeping the car I have would be an easy decision. If we didn't have a car at all, we could skip on buying one until there's a baby involved. As it is, I have no plans to ever start dating or get married or make babies, and I'm starting to debate the financials of selling my car--a bad deal all around, but is keeping it worse?--after I get into motorcycling.

Be mindful, as a final note, that I am not a die-hard. I'm a fiscal conservative and I like to play with numbers. I don't care to indoctrinate the country into the cult of car-free living; that's just nutty. Those of you who have families and squeeze by without ever owning a car, good for you; that's not practical on a large scale, most families will be under undue stress to pull that off, and you should realize that what works for you works for a few others too--but not most people. Still, the idea that "everyone needs to own a car" seems completely looney to me at this point; this country could live 90% on two wheels.

(By the way, people are absolutely stupid and evolution demands mass execution; society side-steps evolution, apparently. As expenses go up, people spend more on luxuries and less on food... wtf? Are you kidding me? How does this kind of mindset NOT lead to mass starvation?)

robyr

You are just too precious. When you have taken a few more classes, then you can comment on the economics of luxuries. You don't magically need to eat more because you have more expenses.

Platy

BlueFox, I've got a question and it looks like you're just the guy who could answer it. What is the break-even point between owning a private car (always available, low incremental cost per additional mile once acquired) and renting a car as needed?

bluefoxicy

That's a simple math problem, but you're going to have to do the work.

First, pick your private car. Estimate its lifetime, maintenance costs, fuel costs, etc. If you want to just go with the average cost-per-year of car ownership, https://bls.gov/cex/ and pull the dollar value per year of owning a car, averaged across the entire population. Caveat: this will be lower for you, since you use another vehicle (bicycle), so that's a high number. In other words, the math is wrong if you're not average.

Then, pick your rental scheme. In Baltimore, we have a car share called ZipCar. For occasional drivers, $60/year, plus rental fees of $68/day ($75/day on weekends) or $7.25/hour rental, 180 miles per day included, insurance and gas included.

Now, for the down payment for a car, estimate your savings growth. If you use an investment scheme, 7%/year is usually a good target for maintain/growth with minimal risk (money doubles every 7 years). Otherwise use your savings account interest rate.

If you don't buy the car in cash (i.e. without a loan), figure out your loan rate and work out how much interest you're going to pay. Add that to the remainder of the car's value after down payment. Add the loan rate to your growth in savings or investment, and calculate that growth over 10 years. This is an approximation ... a bad one: it moves all that money (over 5 years!) up front, i.e. assumes 7% growth per year on money you don't even have yet. I'm sure there's an integration function that works out the real value but I'm too lazy to think it up ATM.

Put all that money together and that's the cost of buying a car. Compare that to your rental plans--rent, lease, or car share--and see which costs more per year. Do the comparison assuming both 0% growth (i.e. money under your mattress) and whatever you expect for investment growth (if it's not going into retirement IRA/401(k) or a stock market account, don't kid yourself: it's not going to grow by 7%; your savings account is 1%, that's your growth).


The other big thing to think about is do you need to own? How much more convenient is it to own than rent or car share? If car sharing or renting is going to be a big burden, then maybe you should buy a car. If you intend to do a lot of driving, car sharing might be unduly expensive--almost as much as owning!--much less outright renting. A lease agreement may be palatable; but that takes you into the own versus lease argument.

Definitely consider lifestyle into this as well as finances. Saving even a lot of money but sucking up all your free time or replacing an important part of your life with a useless substitute that doesn't get the job done is just wrong. As for finances, work out the numbers ... if you can't ring a dead sure thing on own versus car share/rent, find a financial adviser and pay at most a couple hundred bucks to work it out. They'll look at all your finances, your goals, your needs, and tell you what's best.


Personally, my lifestyle is such that I find myself purposely driving the car because it needs to be driven. 63 miles this month--I drove it 1.5 miles to the grocery store this weekend because it needed to be driven and I wanted to rest from biking all the time this weekend (for recovery). It got 50 in one day, on the 3rd of the month (which is what I want a motorcycle for). I commuted to work a week ago, one day. A car share would be lucrative for me, rather than owning a car.

bluefoxicy

It's not a matter of eating more. People spent 15% of their income after taxes on food in 1990, 10% in 2009. Salaries are higher, the dollar is worth less, food is now more expensive by inflation, and food is now more expensive by Goldman-Sachs speculation on food futures.

People are spending 43% more on food-- $1.43 on $1. Given inflation, $1.00 in 1990 had the same buying power as $1.67 in 2009--even ignoring the specialized price increases in food (which has been occasionally called a crisis), people are spending 14% less on food now (=2009) than in 1990.

Does this mean people eat less? Oh, of course not. It means people are shifting their food budget and buying ramen and dollar-menu burgers to afford simple luxuries. They're eating crappier food, for certain; but they're getting enough. They've just chosen to take their financial hardships out on their biological needs rather than their worldly desires.

In other words: people are failing to secure access to food. They're squeezing their margin of safety for access to food, meaning that in a financial crisis they'll have a harder time keeping up with their food budget. Whereas otherwise they could deal with financial bumps by buying cheaper food, now they ARE buying cheaper food and will NOT buy food AT ALL if they hit a financial bump that demands so much of their food budget.

chewybrian 

Bluefox, I never saw your take on the rent v. own debate (I assume you meant a home, not a car). I'm curious how you came down on that, and what was the net effect, say, over the course of a 30 year mortgage?

Going car free is a bit more fuzzy, I would think. There are personal variables like health, local climate, city/suburb/rural, time, family, etc. Like you, I am not working to 'convert' people, but I try to make them aware of the financial impact. I'd like to see a good analysis of what the average person or family spends on their car, and what they could do with the difference. I put it at about $500 a month to the good, for me, bike v. car, but I wouldn't say I'm average.

I'm not so sure about the food analysis. Just because people are spending less in real dollars does not mean they are eating lower quality food. The difference could boil down to efficiency, like planting with GPS for max. yield. Wal-mart got big, and had an impact on food prices (arguably on quality, too, though...). Changes in tariffs and subsidies and such could change real prices, too (NAFTA, maybe?). The real reason is likely a combination of these factors and others I haven't considered, but probably not a decision to give up good food to buy gas.

Smallwheels

Several years ago I saw a graphic representation of home prices and rental prices that stretched over forty years. The news story was asking if it was better to own a home or rent one. The story accounted for the amount of 10% being a down payment. If you bought the home you spent the 10% up front. If you rented and invested the 10% in the stock market over forty years ago, you and the home owner would be almost dead even regarding expenditures. Since it was a two minute news story there weren't a lot of details.

I've made my decision since then and I'll rent until I can move into my own RV. To me renting is so much more convenient than owning. That alone makes the renting choice better.

Leasing a car versus renting versus owning really depends on mileage and frequency of use.

1. Bicycles don't cost much and have very little maintenance requirements.
2. Bicycles with motors are the same but cost more. They don't require insurance or registration but do require fuel and maintenance. They can be parked anywhere outdoors (indoors with a four stroke or electric motor). They increase range if not always speed, and they save your body from too much stress if you must travel far regularly or make plenty of trips.
3. Small motor scooters or motorcycles cost more and require a special license, registration, and insurance. They can carry you far at the speed of traffic which greatly increases income opportunities.
4. Cars cost plenty of money. If you can operate one with full occupancy all the time then they are very efficient and last many more miles than any bicycle. If you don't operate one with full occupancy then you are spending much more per passenger mile than a motorcyclist.


If we all could pay for our transportation by the mile it would be easy to choose which mode to use. Buying cars or motorcycles costs plenty of money up front. So does leasing a car. All we can do is make guesses with a few mathematical calculations to see which mode is best for our needs.

I'm not so sure mass transit is the cheapest way to get around in some places. Sometimes I wonder if it would be cheaper for all of us if the cities gave out motorized bicycles to the people who wanted them and just stopped having bus service. Maybe charging a monthly rental fee slightly more than a daily round trip bus fare would be more economical than buying $150,000.00 buses and paying for three shifts of drivers and mechanics year round per bus.

bluefoxicy

https://bls.gov/cex/2009/Standard/tenure.xls

Homeowner with Mortgage paid $22,846; without mortgage, $12,287. Renter paid $12,958. These are the 2009 numbers. To become the Homeowner without Mortgage, you have to be the Homeowner with Mortgage for 30 years.

One thing people don't realize is you have to keep your rentals full. If you buy a house and rent it out, you need to have someone paying rent constantly. If you leave that house empty for 1 month, you lose your profits for the year.

Renters have a utility advantage because they live in one big building, not individual leaky houses. Renting a house has no utility advantage over owning a house; renting an apartment means that the heat leaking through 2 of your walls and the ceiling and floor warms your neighbors' apartments, and vice versa.

Conversely, landlords have an advantage because they don't pay utilities or housekeeping. Also, landlords owning a multi-floor apartment complex tend to only pay taxes on a few floors in many areas (here property taxes are assessed on square footage per floor, max two floors). Charging the larger fraction of their rent and property tax covers part of the actual real cost and all of the waste (loan interest, property tax, insurance, etc) while they continue to write off loan interest from their income. That means they can get away with charging less than mortgage and yet build equity in the property--they profit even though your rent is lower than their mortgage.

This makes renting economically feasible, as the rental costs are lower than cost of ownership. Instead of building equity, you build savings that you can invest in other things--stocks, bonds, and ETFs instead of real estate.

Time investment is huge for long trips, which is why I want a motorcycle to go anything over 10-ish miles or anything I don't care to bike at the time. I primarily need to move me, and my mobility is hindered by not driving: I don't go 90 miles on a Saturday morning to buy from stores scattered 30 miles apart from each other all around the city, the cost is excessively high.

When it comes to the Safeway 1.5 miles away, it takes me 10 minutes to get there by bicycle. Time investment in a car is almost as long. 7 miles to work has taken me 41-43 minutes these past 2 days (I took 2 rest days--even drove to Safeway!--and shortened my route from the 8.5 I was going) and takes 40 minutes in the car. 16 miles north to REI or the farmer's market is about 15-20 minutes up the highway, or 2-2.5 hours biking it--you see why I want a motorcycle?

My research tells me it takes as much to maintain a motorcycle as it does to maintain a car. The purchase price is $4000 for a Kawasaki Ninja 250R (anything bigger is luxury), versus $20,000 for a car. Insurance is cheaper even before you're 28 (Progressive drops your rates after 28). Gas costs half as much--well, goes twice as far, same deal. This all means that driving a motorcycle incurs 1/4 the cost of driving a car: it's 1/5 purchase price, same maintenance, and when it eventually wears out you replace it for 1/5 the purchase price of replacing a car. The OWN cost of a motorcycle is much lower, while the OPERATE cost is almost the same.


https://bls.gov/cex/

And, what they use the car for

https://ntl.custhelp.com/app/answers/detail/a_id/419

https://nhts.ornl.gov/index.shtml

This ... is wrong. I don't know how I got $4600/year for car-only commuting; in 2009, it was $7658... the 17% stat indicates it's more like $10,000... oh well, let's ignore that for now.

For biking under 5 miles I found the average trip length (9.87) and used the 42-85 stat: 42% of trips are under 2 miles, 85% are under 5 miles. Assuming 2 and 5 miles (erroneous), we get:

0.42 * 2 + 0.43 * 5 + 0.15x = 9.87

This gives 9.87 - 2.99 = 0.15x, and more interestingly that 2.99 / 9.87 is the projected percentage of actual driving done in trips under 5 miles. This is erroneous, but extremely short driving trips (like, half a mile?) are less likely than longer trips (1-1.5 miles); while trips between 2-5 miles seem equally as likely (so maybe I should have used 3.5 instead of 5).

This is all for lack of good data.

Column 2 here lops off that much and replaces it with a $300/year bicycle ($1500 purchase cost, 10 year life, $150/year maintenance).

Column 3 assumes a motorcycle costs 1/4 as much to own and operate as a car, and uses all driving except "Family/Personal errands" and "Other" from Table 12 of the US Department of Transportation 2009 Household travel Survey Summary of Travel Trends. I expect, actually, that the excluded groups include a lot of sub-5mi trips and "Family/personal errands" includes a lot of grocery shopping doable by bike. Notably, "Family" errands likely include kids at times, meaning a bike or motorcycle commute is inappropriate for some portion of these. I ignored that prediction as I have no numbers for it, but did also perform the bike calculation on this additionally.

The last column predicts if you move closer to work and bike commute to everything appropriate for it, kicking out the motorcycle entirely. My experience tells me this is a huge overestimate of car usage for a single guy; and my reasoning tells me that "Family Errands" would likely fall to the car as a family man, as you're carrying 3 passengers. Again, not great.

The best I can honestly do with this is use it to illustrate why I need more specific data from the DOT. Somewhere in that report is average number of passengers carried, trip lengths, type of trips ... but it's so hard to turn that muddle of overlapping data into a distinct image that lets me say, "Look here, these trips require a car; while these other trips are single-person and feasible by bike or motorcycle. These trips are inordinately long by casual bicycling, so a motorcycle fits best."

In any case, this is my best try.




EDIT: Here's my update using the CEX number for transportation average overall, adjusting the Motorcycle statistic accordingly.



My worry is that people are raising their luxury spending and bringing their food costs down in an era where the price of food has gone up. That means they're squeezing some of the flexibility in food for irresponsible spending. Sure, it's possible to spend wastefully on food, or to reduce food spending to increase savings or whatever; but the picture the data paints doesn't show me where that money's going, and it does show an increase in luxury spending.

Roody

My understanding is that rich people spend a smaller proportion of their income on food--and housing, for that matter, and transportation. And of course they spend a smaller proportion on taxes. This leaves them with a lot more money for investments and for luxuries, and they spend a larger proportion of income on both.

Of course, in absolute dollar amounts, rich people spend more money on everything. And I too have read that they are spending more dollars than ever on luxuries. I think there are two reasons for this: they (unlike the rest of us) have increasingly large incomes, and many types of investments are shakey right now, so they invest less.

bluefoxicy

2009:
Income after taxes .............................. 60,753
Average annual expenditures....................... $49,067
Food............................................. 6,372

1999:
Income after taxes a/ ....................... 40,652
Average annual expenditures.................. $36,995
Food........................................ 5,031

6372 / 5031 = 1.43

$1 circa 1999 = $1.63 circa 2009

These are the averages of everyone surveyed from diverse income groups, diverse age ranges, housing tenures, and geographical distributions. Around 108,000 people sampled in 1999 and 120,000 sampled in 2009.

It should have come to $8200 on average for food in 2009, according to inflation. It did not.

Buzz Wired

Excellent!

I commuted to work by bicycle several months ago as I regularly like to do, that day I felt the need for a take and bake pizza. Towards the end of the day I couldn't figure out how me and a pizza could make it home on a bike. So I rode home on the bike. Drove my car back to within 1/4 mile of where I work to get the pizza. And drove it home.

A five passenger full size car to carry me and a pizza - Less than two miles!?

Then I thought, normally it is only me, the 5 passenger car, and my wallet and cell phone. Even more of a stupid, lazy situation.

That changed my life and I found this car free sub forum...

Keep up the ideas!

This is a great place.

Roody

I hope you found the thread we had years ago on how to carry a pizza on a bike. It really isn't difficult once you know a few tricks of the trade.

wphamilton

Was the per capita quantity of food purchased in 2009 lower? Was the quality lower? We can't just assume "yes" because it's possible that people simply paid less for the same food.

Did the proportions of dining out versus cooking change?

Does your overall trend hold for different demographics?

I don't think your conclusion that people shifted priorities is yet justified by the data as presented. You've suggested a possibility.

wahoonc

I am wondering about that $1500 bike!? I have never paid anywhere close to that for a commuting bike. I think the most I have tied up in a single bike is about $900.

My original car free bike cost $25 and I rode the hell out of it for 4-5 years. Maintenance costs were minimal, I bought tires and tubes at Kmart or Ace hardware.

Aaron