Today’s Headlines

  • With Its First Strategic Plan in the Works, Metra Is Finally Looking Towards the Future (Next City)
  • RTA’s Regional Report Card Finds Transit Ridership Is Up, But New Capital Funding Is Down (Tattler)
  • Metra Fare Hikes Are Proof That We Need to Reboot Regional Transit Funding (Active Trans)
  • With Damen Station Closed, Commuters Scurry to Find Alternatives (RedEye, DNA)
  • Police: Doctor Killed in Naperville Collision With Unlicensed Driver Who Failed to Yield (Tribune)
  • Fioretti & Sun-Times Erroneously State That City “Lowered the Length of Yellow Lights”
  • Keating: Thanks to Witnesses, Police Were Able to Find Driver Who Right-Hooked Cyclist Near UIC
  • One Weird Trick for Solving Ventra Fare Disputes on CTA Buses (RedEye)
  • Chicago Drivers Would Save Money by Switching to Ride-Share Plus Transit or Biking (Sun-Times)
  • Color-Coded Map Highlights Chicago Nearly Unrelenting Street Grid (Data Pointed)
  • Meeting Tonight at 6:30 at Spertus to Brainstorm Museum Campus Transportation Ideas (Tribune)

Get National Headlines at Streetsblog USA

  • CL

    According to NerdWallet, “the average cost of owning, maintaining and parking a car in Chicago is $11,981.90 a year.” This is crazy to me — I spend, generously, $2500 per year on gas, insurance, and oil changes. $200 on taxes, plus every few weeks I spend a few bucks at a parking meter. Rich people who park downtown must be driving the average up.

  • AAA and the American Public Transportation Association have generally agreeing numbers and slightly different methodologies. They both consider the cost of garage parking in a city center when calculating (monthly) the average cost of owning, maintaining, and parking a car for a year.

  • BlueFairlane

    I always doubt these numbers, as my cost has never been anywhere near what these sites give you. I haven’t looked at this particular site’s methodology, but what I’ve most often seen them do is base their calculations on somebody making a car payment on an upper end car, and then simultaneously factoring in depreciation. This means they’re counting the same expense twice that I don’t pay even once.

    It’s all irrelevant, anyway. People who drive already understand the financial cost, and have decided they’d rather pay that for what they see as a convenience. The cost argument rarely convinces people to change their mind.

  • CL

    Yeah, I noticed that NerdWallet included “depreciation.” I own my car outright and don’t consider depreciation to be a “cost.”

    I lived on about 19K for several years when I first moved here, and managed to have a car. Scary figures like 11K don’t consider that low income people are going to have less expensive cars and park for free whenever possible.

  • BlueFairlane

    What they fail to do when they include depreciation is account for the value of the thing they’re depreciating. That type of accounting assumes the driver will eventually receive some portion of what they paid for the car back, which will lower the cost per year. By not including the value of the asset, they’re counting the asset’s cost twice. It’s fuzzy math with sketchy motivation.

    I bought my current car outright three years ago, expecting to run it into the ground and receive nothing for resale. There’s no reason for me to count its shrinking value, as I don’t count that value as an asset to begin with.

  • Depreciation absolutely is a cost and is standard accounting, not fuzzy math. Why? Because i can always maintain the current value of cash. The fact that you don’t expect to get anything of value for it doesn’t mean that depreciation isn’t a real cost.

    “The cost argument rarely convinces people to change their mind.”

    Are you serious? This is the single strongest argument that is moving an entire generation of people away from owning cars. Look at any article written about the drop in car ownership rates among millennials. Among the most significantly mentioned factors, if not the most significant, is cost of ownership.

    It is not often talked about how massive a drain on the local economy driving is. If 10,000 Chicagoans stopped owning a car and took public transportation, even at a net cost of only $6,000 per year per vehicle, that would be $60 million dollars of additional money they’d have to spend on other goods and services.

  • You also had to buy the car? Regular maintenance goes up significantly as a car ages. $12k seems high and is probably figuring garage parking but AAA puts the range at 7k-12k which seems like an appropriate range for nearly all situations.

  • BlueFairlane

    Okay, let’s do an example using easy numbers to keep the math simple. Say I buy a car for $10,000, and I expect that car to last 10 years. The cost of that car, then is $1000 per year. Now, depreciation would also reduce the value of the car $1000 per year. This would make the annual cost of the car $2000, so that at the end of the car’s 10-year lifespan, the cost of this thing I spent $10,000 to buy is $20,000. So where’d the extra 10 grand come from? I didn’t spend it. Fuzzy math.

    Here’s where depreciation comes into play. Say we have the same car, but I sell it after a year. I spent $10,000 on the car. Depreciation has reduced the value of the car by $1000, so I get $9000 back. How much did I spend on the car during that year? (Hint: not $2000.) Say I sell the car after 9 years. I spent $10,000. Depreciation has reduced the value of the car by $1000/year, so I can only get $1000 back when I sell it. How much did I spend on the car per year? (Hint: see above.) In short, if you’re going to include the depreciation, you have to subtract resell value from cost.

    As for the effectiveness of the cost argument, my statement was that the cost argument rarely causes anybody to change their mind. These millennials you mention aren’t changing their minds, as they don’t drive to begin with. People already driving to work also aren’t changing their minds, for the most part. They’re still driving to work.

  • Alicia

    Say I buy a car for $10,000, and I expect that car to last 10 years. The cost of that car, then is $1000 per year. Now, depreciation would also reduce the value of the car $1000 per year.

    Nope. Depreciation, in accounting terms, would only result in reducing the value of the car $1000 per year, not $2000. The process of depreciation in accounting is dividing the purchase cost by the amount of time periods (usually in years, but sometimes in months or quarters) you plan to use it. So if you buy the $10,000 car, and you intend to use it 10 years, you depreciate it by $1000 per year.

    “Depreciation” in terms of the loss of market resale value is a different issue from depreciation in accounting, but you seem to be confusing the two concepts in your head.

  • BlueFairlane

    Depreciation, in accounting terms, would only result in reducing the value of the car $1000 per year, not $2000.

    That’s exactly what I’m saying. My first paragraph illustrates the math Chicagio and the supporters of the depreciation argument are doing, and that math is, obviously, wrong. At no point will the cost of a $10,000 car exceed $10,000.

  • “As for the effectiveness of the cost argument, my statement was that the cost argument rarely causes anybody to change their mind. These millennials you mention aren’t changing their minds, as they don’t drive to begin with. People already driving to work also aren’t changing their minds, for the most part. They’re still driving to work.”

    I’m not sure there are many facts that bear this previous statement out.

    Your math is also incorrect. When your paying for a depreciating asset, your cost is the loss of value of the asset plus your payment. Take this a different way, if you buy a house and your annual payment (ignoring interest) is $1000 but your house appreciates $1000 then your cost for owning the house is $0.

  • BlueFairlane

    I’m not sure there are many facts that bear this statement out.

    There are a similar number of facts that disprove it.

    So, why would you use the value of the asset in the house argument while not using the value of the asset in the car argument? You’re trying to have it both ways.

  • No i’m not… I used houses as an example because they tend to appreciate while cars depreciate. The formula is…
    Payment for asset + change in value of the asset = net cost to own

    -$1000 house payment + $1000 increase in house value = $0 net cost

    -$1000 car payment + -$1000 loss in car’s value = $2000 net cost

  • You are absolutely correct although a more accurate depreciation (in terms of market value) wouldn’t be straight-line depreciation since your car loses 10-15% of it’s value the moment you drive it off the lot and, like 30% in the first year.

  • BlueFairlane

    -$1000 car payment + -$1000 loss in car’s value = $2000 net cost

    You just liked a comment from Alicia that told you this is wrong.

    The value of the house you are including is its resale value. If you are going to count the value of a car in the same way, you have to also count the resale value.

    If I have a $30,000 house for 10 years, and my payment is $1000/yr, then my cost has been $10,000. Now, that house may have increased in value by $10,000/yr so that I could sell it now for $40,000, but that’s only pertinent at resale. I can go ahead and do the math to say the cost is zero, but if I do it for the house, I need to do it for the car. Which means I need to include the value of the car at that moment.

    Seriously. Explain to me how after 10 years I spent $20,000 on a car I spent $10,000 on.

  • Kevin M

    Having owned two previously-owned cars for two different 5-year periods in my life, I calculated my estimated annual savings to be around $10k. I made that calculation around 9 years ago, when I decided to sell my last car. Given the change Time Value of Money over the last 9 years, I’d say the NerdWallet figure is right on.

    The maintenance costs–brakes, tires, timing-belt/water-pump, shocks, etc.–these really add up fast on a previously-used car.

    Let’s not forget: the NerdWallet figure is an “average”. Of course some car owners can find ways to spend less, and certainly there are some spending much more.

  • Kevin M

    “People already driving to work also aren’t changing their minds, for the most part. They’re still driving to work.”

    This is your opinion, and I cannot say that you are wrong, but my experience differs. I know of two couples in my life who each reduced their car ownership by 1 and started sharing one car. In each case, one of the members of the relationship changed their commute from driving themselves to work to, instead, car-pooling or taking transit.

    Personally, cost was the biggest factor to me when I decided to sell my car (and not replace it) 9 years ago.

  • BlueFairlane

    There are some people making this decision. In my experience, the number of such people is very low.

  • duppie

    But you had to buy it outright 3 years ago. Let’s say you paid $10K. whether you took out a loan or paid cash, you still need to amortize those $10K over the expected lifespan of the car. Assume you keep the car for 10 years, that car still costs you $1K /year.

    Nothing fuzzy about that.

  • BlueFairlane

    Yes. It costs the same. I include that cost in my calculation. These calculators want me to also include depreciation, which is counting my cost twice. You either count the price of the car (whether paid in full or over time) or depreciation. Not both.

  • Guest

    You seem to think that the cost argument is only effective if someone was driving to work yesterday and magically decided to stop driving today. If that’s how you see it, then you’re probably right. However, cost will definitely factor into longer-term trends.

    What about someone who has been commuting by car for years, is starting to look for a new job, and has decided that working in a location that allows them to dump the second family car? Or someone who lives in Des Moines and owns a car, but is moving to Chicago and has decided to sell the car before they move?

  • Because after spending $10k on an asset you expect to have a $10k asset but you don’t, you have a $1.5k asset. To be fair, you got utility out of your asset but you also lost a lot of money.

    Edit: Also, unless i was misunderstanding, Alicia was describing the difference between appreciation/depreciation on the “book value” versus “market value”. Book value is purely an accounting number whereas market value is the true value of an asset.

  • BlueFairlane

    Your statement is equivalent to saying, “When you spend $10,000 you expect to have $10,000,” which is absurd. I mean, really, if your argument were sound, everybody should go spend $10,000 buying cars, because they get twice as much for their money. You should buy a $10,000 car and then turn around and sell it right then. You’ll have $20,000 in no time!

    If I spend a buck on a candy bar, I have an asset worth $1. Until I eat it. Eating the candy bar does not mean the candy bar cost me $2.

  • BlueFairlane

    My statement is in reference to the Sun-Times article that says Chicago drivers would save money by not driving. The article does not cover people who move here from Des Moines, or people whose life situation changes in some dramatic way.

  • Guest

    “This means they’re counting the same expense twice that I don’t pay even once”

    You don’t pay for the car you own? Are you hiding a genie somewhere? No wonder your costs are much lower than the average.

  • BlueFairlane

    As far as your edit goes …

    … you also lost a lot of money.

    Yes, and the amount of money you lost is the amount you paid for the car, not the amount you paid for the car times two.

    The depreciation included in any cost calculator is always going to be book value, as you have no idea what market value will be when you try to sell the car. So depreciation at this point is a mythical number, a guess at the market value. Which you then have to put back into your equation. If you count depreciation, you have to count value.

  • BlueFairlane

    Yes, I have a genie that magically transforms any amount I spend on a car into twice that amount. *poof* I’m rich.

  • A candy bar would not be considered a depreciable asset, unless you hang on to your candy bars much longer than I do. To be depreciable, an asset must have a definite life span but, longer than a year.

    If you don’t treat cars as depreciable assets, fine. But literally the entire accounting, finance, business, and economic world does.

  • BlueFairlane

    Okay, let’s look at it that way. When you buy a candy bar, a candy bar ceases to have any value. You spent your buck. When you buy a car, the car still has value. Thus you haven’t spent $10,000 on the car. You merely exchanged $10,000 in cash for $10,000 in car. Over time, the car loses that value until the value of the car is zero. Thus you have spent $10,000 over the life of the car. You have not spent $20,000.

    It’s either/or. You count cost or depreciation, not both.

  • Wewilliewinkleman

    What you are trying to express may be better expressed as a residual value.

    I buy a $10,000 asset. Depreciable at $1,000 a year for ten years would result in an asset with no “book value” but a residual or asset value. Even if the residual value is scrap, there may always be some value.

    So after 10 years with $10,000 depreciation, you may still have an asset with value.

    How you pay for the asset whether you pay all in one lump sum or monthly has nothing to do with value as the book value never changes no matter how you pay for it.

  • Again, if that’s the way you want to treat it, more power to you. But that’s not how the rest of the world does it.

  • Wewilliewinkleman

    As I said above, the book value of an asset never changes and is not dependent upon how you pay for the item.

  • BlueFairlane

    If the rest of the world says I spent $20,000 when I spent $10,000 car … well, then Americans shouldn’t place so badly at math.

    If your “true cost of car ownership” is counting mythical money I don’t actually spend, then I’m okay with that. You can make it three times the value of the car if you want.

  • I agree, that’s better stated. However, what BlueFairlane is expressing is that he doesn’t expect a car to have any residual value so he doesn’t have to consider depreciation as an expense. If it works for him, that’s fine, but this is the generally accepted practice and doesn’t mean that AAA or nerdwallet are cooking the bookings when calculating those values.

  • BlueFairlane

    That’s not what I’m saying. I’m saying the loss of residual value is already included in the money I paid for the car and therefore doesn’t need to be counted again as depreciation. I’ve already had all the expense I’m going to have.

  • Alicia

    Again – depreciation in accounting is not the same as “depreciation” in the sense of determining the market resale value of an asset that you have no intention of reselling.

    Confusing the two is less accurate, not more.

  • BlueFairlane

    Here’s a question. If I spend $20,000 when I spend $10,000 for a car, where does the extra money go? Does the dealer get it? Because seriously, that would be great for the economy.

    I propose a plan. The US debt is about $17 trillion. If the government can get 85 million people to buy a car, we can use the extra money generated to pay off the debt!

  • jared

    What percentage of people really pay to park downtown? Most people don’t work downtown and those that do don’t necessarily drive.

  • Wewilliewinkleman

    No. The cost is the cost. Whether you drive it one year or ten years, whether you pay in one lump sum or with payments. The value is the value and has no relationship to the cost, except higher cost may result in a depreciated asset at the end of its useful life having a value.

  • Wewilliewinkleman

    Wrong again. Some items have a useful life. Some don’t. A car has a depreciation life (generally by IRS rules 5 years), but has a useful life of… 10, 15 years? (New cars last longer these days than in years past).

    Does a diamond ring have a useful life. Say, unless you wear your jewelry hard and the gold setting holding the ring wears out, as James Bond once told me, that diamonds are forever.

    Anything mechanical is going to have a short useful life. Assets like jewelry, paintings, other collectibles may have incredible useful life. A good solid piece of furniture could have a useful life of many years, where as cheap junk falls apart and is trashed. Even solid furniture turned out into the alley, may have a continual useful life if you snag it right away.

    Buildings have a useful life. But in reality most are used beyond the depreciation life. Residential rentals depreciate over 30 years, but most last twice as long. But real estate is one of the few assets (other than cash equivalents like stocks/bonds) that you can own which can appreciate in value if held long term.

    What do you own (discounting investments and possibly high grade collectibles) that will not over time depreciate in value? I can go out and buy a fabulous set of kitchen appliances. Eventually they too will wear out. Are they counted as an asset in personal worth. Yeah as used appliances. Same as a used auto.

  • Wewilliewinkleman

    What’s wrong with the Nerd Wallet computation is this.

    They used a standard brand new Toyota Camry (value approximately $25,000). Using standard IRS depreciation over 5 years time, the car should have no value.

    $5000/year + 1,800/parking + gas, insurance, routine maintenance + maybe financing costs = $11,900/year?

    What’s wrong is the following. Most cars after 5 years time have a significant residual value. Say after 5 years time, this car has $15,000 in value, they are not reducing the cost of operating a car over 5 years time by the $3,000/year captured in residual or used car value.

    Further, they are figuring $150.00 per month to garage a car. That may be either too high or too low depending upon circumstance. You may own a garage or park on the street. Or you could be paying the highest garage rental in downtown residential buildings.

    Also, this $11,900 figure only works if you are purchasing a brand new car. You can get a pretty good car on a $300/month lease. Which many people do. Also, a lot of people buy a reliable used car.

    But Streetsblog spin that if you didn’t spend this money, you would have lots of money to spend on something else. Yeah, that’s right. But do you really want someone else telling you how you can or cannot spend your money? What’s the next thing people will tell you that you can or cannot spend your money on?

  • Kevin M

    You lost me at your last paragraph. How did SB spin this with their headline, “Chicago Drivers Would Save Money by Switching to Ride-Share Plus Transit or Biking”?

    And, who’s telling you how you can or cannot spend your money?

  • Floyd Thursby

    Yep. According to this I spent over $30,000 on a car I got for free.

    Although I can see how to get to $10K/yr. It requires certain specific circumstances like constantly buying new cars every few years or being 22 years old driving a V8 camaro in a state/city where insurance is $4K/yr for such a thing. Plus extra for parking and then needing considerable professional repair every year…. that gets there.

  • R.A. Stewart

    “RTA’s Regional Report Card Finds Transit Ridership Is Up, But New Capital Funding Is Down”

    But of course.

    When transit ridership goes down, cut funding.

    When transit ridership goes up, cut funding.

    When driving goes up, build more roads.

    When driving goes down, build more roads.

    It’s simple. I don’t see why people have such a problem understanding it.