Transportation and Poverty Series (Part 4): The Cost of Car Ownership

Posted by: Pete Nabozny, Associate Principal at CGR and co-owner of Tru Yoga

Last time, we explored the problem of the long commute in Rochester and its impact on the effective wage of low income workers. Obviously, we are not the first to point this problem out. You might logically conclude, like many well-meaning organizations have, that we must provide a program or mechanism through which low-income folks can receive or buy a reasonably priced car. After all, that is the mode of transit for an overwhelming majority of our region’s residents and studies have suggested that access to a vehicle is correlated with more hours worked and more wages earned. A chicken in every pot and a car in every backyard, right President Hoover? The cherry on top is that our region famously has some of the shortest driving commutes in the nation.

But…

Anyone who has owned a car knows that the cost of ownership goes well beyond just monthly car payments. Insurance, routine maintenance, occasional repairs, gasoline, and other fees and unexpected costs add up quickly. The Bureau of Labor Statistics’ Annual Consumer Expenditure Survey indicates that the average American household spends over $9,000 on all forms of transportation each year. The cost of car ownership can consume a disproportionately high share of a low-income person’s earnings.

Let’s revisit our example from the last piece. As a reminder, you live in the Beechwood neighborhood in Northeast Rochester and make $10 an hour working a full-time job at Marketplace Mall. Instead of dealing with a 2 hour and 20 minute daily bus commute, you purchase a used car. Your door-to-door commute is now 20 to 25 minutes each way, saving you at least an hour and a half each day!

And…

You took out a 5-year, $7,500 loan to purchase this car. You need something dependable after all, as your job depends on it. Your annual car related expenses are below –

• Loan payments ($7,500 for 60 months at 3.5% rate) = $1,632
• Fuel (10,000 per year at $2.20 per gallon and 25 miles per gallon) = $880
• Car Maintenance (AAA recommendation of 5.51 cents per mile and 10,000 miles) = $551
• Car Insurance (more expensive in low-income communities) = $1,200
• License, Registration, Taxes, other fees (Also from AAA) = $502
• Parking = FREE (sigh)
• Total Annual Expenses = $4,765

On a monthly basis, you’re spending nearly $400 on transportation. Now remember, you make $10 an hour at your job, or $400 per week before factoring in taxes and withholdings. You’re spending one week of earnings per month on transportation alone!  The costs associated with this modestly priced car consume 25% of your earnings before any taxes are applied, leaving you with few dollars to spend on other essential expenses like housing, food, clothing, and education. And that isn’t even factoring in depreciation on the car and the reality that you’ll need to replace it at some point.

And these are just the routine expenses associated with car ownership. What if your car breaks down? It is quite hard to spend a thousand dollars or more on repairs when you only make $1,600 per month.

Contrast the $4,765 each year that it costs to own a car with the $672 annually ($56 monthly) that an unlimited pass on RTS costs. If you drive, transportation consumes 25% of your income, but if you take the bus, it represents less than 4% of your earnings. Unfortunately, what you save in income, you give back in time.

This is the reality faced by many low-income Rochesterians today. The exodus of jobs from our region’s urban core presents almost impossible choices to low-income workers. Either spend an enormous share of your income on transportation to save time, or sacrifice hours each day commuting to save money. The need to own a car to access many jobs in the region prevents some Rochesterians from finding work, while the costs associated with car ownership diminish the value of each paycheck and prevent workers from paying down debt, building savings, and finding a more secure financial footing.

Rochester’s increasing dispersed regional economy does not work well for people in poverty. A car costs too much money but the bus costs too much time. What can we do to make our transit system work better for low-income members of the community? How can we support an accessible and equitable public transportation system that connects people with jobs, services, shopping opportunities, and educational opportunities? In our next article we’ll look at some research that may help us identify one of the biggest barriers to solving these issues. Continue reading, Part 5: The Problem with Sprawl…