The Financial Burden of Being Mobile

Rowena learned about the true cost of cars the hard way. Raised in a happy if car-less California home, Rowena marveled upon getting a steady job after college that, for a small down payment and $199 a month, she could afford a beautiful new Honda. When her lease was up, the dealer convinced her to buy a somewhat nicer car for "just $299" a month. Before long, with all the other costs of owning and driving, she couldn't make the payments and her vehicle was repossessed. When we spoke with her later, she did the math, figuring that she had handed her dealer and loan company about $15,000. Insurance, gas, parking, tickets, tolls, taxes and fees had consumed another $12,000.

Four years and $27,000 after excitedly stepping into her first car, Rowena found herself curbside with no vehicle, zero savings and a credit rating in ruins.

Young or old, profligate or prudent, first-time lessee or seasoned buyer, many Americans have little idea of the true financial cost of car ownership. While rent or mortgage dominates the average household budget, transportation is a close second -- and in some zip codes even exceeds housing. Transportation swallows one out of every five dollars earned by the average American family, double the bite it took in 1960. This alone could account for much of the drop over that period in the household savings rate, which by the aughts had skidded close to zero.

We know a lot about how things got this bad. Back in 1960, developers had not yet fully sprawled out our housing stock; government had not yet spent billions on road building, letting transit atrophy; automakers had not yet piled on horsepower, luxury, and cargo space; lenders had not yet invented yo-yo financing and other predatory car loan terms; and drivers had yet to consider short trips unwalkable and bus trips social suicide.

By 2009, the purchase price of a new vehicle, most of which is financed, averaged over $27,000. And that's just the cost to buy; the cost to own and operate a midsize SUV like the Toyota Highlander can total $45,000 over five years. The Department of Energy reports that the typical household drove its two vehicles a total of 20,000 miles last year. If each is a midsize sedan, that's $14,600 a year, using AAA's estimated driving cost of 73 cents a mile. In a lifetime, a middle class American family could easily "invest" almost $1 million in vehicles.

And these numbers exclude other hidden expenses such as the mortgage and property taxes on our garages -- or the chunk of our tax dollars spent on road building and policing; oil and car company subsidies and bailouts; crash response on the highway and in the ER; the costs of road congestion passed on in consumer prices; or the overseas oil protection services of the U.S. military.

While car costs for middle class families appear unsustainable, these costs are crushing for working and poor families. That a car-dependent society makes such families poorer is well established, a reality that rubs against the conventional wisdom that cars create opportunity. This mistaken belief is not without basis: the poor and car-less can face extreme difficulty in getting and keeping employment. Charities nationwide work to help get the poor into cars for just this reason.

But cars chomp a disproportionate bite out of the smaller budgets of struggling families, who can be one busted transmission away from losing their wheels. They also suffer from pervasive discrimination in vehicle pricing, financing and insurance. Someone with a low income or living in a poor or minority neighborhood may well pay more to own and operate the same car than someone holding a higher paying job or living in the next town over.

While a fortunate handful of oil, auto and finance execs make a fine living off of the current system, Americans on the bottom half of the income distribution chart can't live with the car and can't live without it. So, how can we reduce the cost of being mobile?

One key is financial literacy, which must become a priority at home and at school. Until we understand how much we really dole out to own and operate our vehicles, we have neither the impetus nor the power to spend less of our paychecks or our tax dollars on them. We focus and fret only on those most visible and variable costs -- like gasoline and tolls -- that represent just one or two slices of the pie.

Then, we must explore and expand our transportation options. On average, families who use transit spend $788 a month less on transportation -- that's more than $9,000 a year they have available to reduce debt, save or spend, or weather a crisis. Some of them have the great fortune to live in communities with good transit; others had the foresight and ability to live near their workplaces or find jobs near their homes. The rest of us can explore what alternatives are now available and can push our towns, cities and regions to improve them. And replacing just some trips with walking, biking or carpooling could allow us to get rid of our second or third car.

A wider and deeper understanding of the true cost of car ownership should lead to louder public support for candidates and government initiatives that provide our families -- and Americans at every income level -- with mobility and freedom from the financial shackles of a system overly dependent on cars.

Anne Lutz Fernandez, a former marketer and banker, and Catherine Lutz, an anthropologist at the Watson Institute at Brown University, are the authors of "Carjacked: The Culture of the Automobile and its Effect on our Lives"(Palgrave Macmillan).