It’s Life in the Fast Lane Day of Reckoning!
The socio-economic and environmental consequences of British Petroleum’s oil drilling accident on the Gulf states will be reckoned for a long time to come; but, figuring out what it costs you to own and drive your car is a lot easier. And it might open your eyes to the price we directly pay for the vehicles we drive.
If you’ve ever had reason to claim reimbursement for your automobile expense, then you’ll be familiar with the standard mileage rate for business the IRS uses for calculating your tax deduction. The figure is based on an annual study of the fixed and variable costs of operating an automobile, and for 2010, it is fifty cents per mile.
So, how does that work? Well, let’s break it down:
Let’s say took out a loan to buy a nice, new mid-size car, like a Camry, a Malibu or an Accord, you drive 15,000 miles per year and gas costs $3 a gallon.
According to AAA, your annual Operating Costs – what it costs you to use the car – would roughly be:
- $1850 for gasoline,
- $700 for maintenance,
- $172 for tires,
for a total of $2670.
Now, according to AAA, the annual cost just to OWN the car - even if you do nothing with it – is about:
- $900 for insurance,
- $560 for license, registration and taxes,
- $3,360 for depreciation (that’s the worth you lose every year); and
- $770 a year for financing (assuming 10% down, and 5 years at 6%),
for a total of $5590.
Total annual cost to own and operate, about $8260. That’s about fifty cents per mile!
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Notes:
Clever readers that you are, you’ve already figured out that the way to win, tax-wise, at the above series of calculations is to buy a used, highly fuel efficient car, such as a Toyota Matrix or a Prius. Gasoline and maintenance drop, and if you buy it outright, there’s no financing involved. Since it’s already depreciated some – being a used car – depreciation is considerably less.
Also, keeping a car for a REALLY long time has similar implications, except of course that maintenance may go considerably higher with age. Also, unless your old reliable beast is fuel-efficient, you’ll pay probably double the above figure for gas each year.
