Thursday, September 9, 2010

The Personal Cost of Owning a Vehicle

D.C.StreetsBlog examines the True Cost of Cars. Owning a vehicle is a major financial undertaking with upfront, insurance, maintenance and hidden costs. “By 2009, the average purchase price of a new vehicle was over $27,000.” Not to mention the interest paid by financing or other costs. Maintaining a vehicle is the 2nd highest expense for households and sometimes outweighs the mortgage or rent. Car ownership is often presented as providing an idealized sense of freedom, but in these harsh economic times, individuals are crippled with the outlandish costs.

Dealerships are known to prey on those less educated in the market. For instance, in the example provided by D.C.StreetsBlog, “A used car lot… advertised a 6-year-old Hyundai for $9,000 while the actual Blue Book value, more likely to be paid by middle class car buyers, was $2,880.” And granted, the buyer should scope the competition and do the research, but this is a major price hike, and should be considered gouging.

Likewise, car insurance can create an incredible burden for low income citizens, especially those residing in African American communities. In 2005, a survey of three large insurers “found that drivers with clean driving records in some African American communities paid nearly $1,000 more per year than did drivers with similar records living in predominantly white zip codes.” D.C.StreetsBlog further illustrates the outrageous prices stating “Car owners living in some low income areas of Los Angeles can be charged as much as $3,500 per year for insurance.” Some vehicles are not even worth that much and in order to drive, insurance is required.

Better save your money to maintain your vehicle. According to the Department of Energy, the typical two-car household drove 20,000 miles last year. With the assumption that both vehicles were mid-size sedans, and the cost of driving estimated at 73 cents per mile provided by AAA, their total cost was $14,600 for one year! “In a lifetime of car ownership, an American family will likely “invest” almost $1 million in its vehicles.”

Lastly there are the additional hidden costs to car ownership such as “tax bills for road-building, oil and car company subsidies and bailouts, local police and rescue services… costs of road congestion… or the oil-protection services of the U.S. military in the Middle East and elsewhere.” D.C.StreetsBlog makes a critical argument, one worth standing behind, that as the car companies continue to lay off workers and take bailout money, their CEO’s reap high rewards “GM’s just-resigned Ed Whitacre made $9 million last year while Ford’s Alan Mulally pulled in just under $18 million,” for instance. The disparity between the wealthiest Americans and the bottom half of the economic curve continues to grow leaving many who “can’t live with the car and they can’t live without it.”