These days, it’s painfully obvious to anyone who owns a car that driving has gotten pretty dang expensive. But have you ever stopped to calculate exactly how much you’re paying per mile?

If you want to figure out how to cut back on your expenses, first you’ve got to have an accurate, thorough understanding of those expenses. With this in mind, let’s take a closer look at the real cost of driving.

Improving on AAA’s Formula

The AAA estimates that if you drive your car 10,000 miles each year, your cost per mile is about 71 cents. Of course, this amount varies greatly depending on current gas prices and on the type of car you drive. For more information, see the AAA publication Your Driving Costs (the link here will take you to a PDF version of the 2008 edition).

Does 71 cents sound a little high to you? In fact, I’d say that for most people, it is a little high.

Here are the expenses that AAA includes in its calculations: gas, maintenance, tires, depreciation, insurance, taxes, license and registration, and finance charges. Basically, the reason the cost per mile is so high is because AAA treats all vehicle-related expenses as per-mile costs. For your situation, however, it may make sense to treat some of these expenses as annual “fees” you have to pay to own your car, and not as costs you pay for each mile you drive.

For example, let’s say your situation is as follows: you absolutely need a car for some trips, but in many cases you also have the option of taking public transportation. Since you have to have a car no matter what, you can’t avoid insurance expenses, license and registration fees, etc. If this is your situation, it doesn’t make sense to calculate these expenses as per-mile costs.

Instead, your only real per-mile costs are gas, maintenance, tires, and depreciation. With this in mind, you can use AAA’s pamphlet to recalculate your real cost of driving. You definitely need to factor in current gas prices and deprecation for the car you own - more on this in a sec - but in any case, your cost of driving as calculated by this method will be way less than AAA’s estimate.

If your situation resembles the one I described above (i.e. you’ve simply gotta have a car, but you can sometimes use other methods to get where you need to go), this alternate method of calculating your cost per mile will be much more helpful in determining whether it’ll be cheaper to use your car or some other method of transportation.

Now, if you don’t have to have a car, AAA’s formula makes sense. If expenses such as insurance, license and registration fees, etc. are just options for you, then these really are a part of your per-mile cost of driving. Think of it this way: if every mile you drive in your car is a choice, then every car-related expense is also a choice. This means that you should factor in these expenses when you weigh the cost of driving vs. other methods of transportation.

Calculating Depreciation

So how do you calculate the depreciation on your car? AAA’s figures are way too high if you’re driving a car that’s more than a year or two old. Here’s the method I’d recommend to get a better idea of how much your car is going to depreciate.

Check the Blue Book value for your car at its current mileage. You can do this at KBB.com. Then check the Blue Book value for your car at its current mileage plus the number of miles you drive it each year. Divide the difference in value by the same annual mileage figure. You’ll now have a rough idea of how much your car is going to depreciate for each mile you drive it this year (recalculate it next year and the number will go down because the value of your car will have gone down too).

You’ll find that a Mercedes Benz depreciates a lot more per mile than a Toyota Corolla. Do you need any more reasons to buy an inexpensive, reliable Japanese car??

Running the Numbers

Okay, so if the above wasn’t quite crystal clear, I’ll try to make it that way by running some numbers.

Let’s say you drive a 2000 Honda Accord, that you’ve got 80,000 miles on it now, that you plan to rack up 10,000 more miles each year, and that you get about 24 miles to the gallon. With gas at $3.75, you’ll pay 15.63 cents per mile for gas. Add to that AAA’s estimates of 4.67 cents per mile for maintenance and and .85 cents per tires. Now we’re up to 21.15 cents per mile driven.

Using the method above, I calculated the depreciation to be about 5.25 cents per mile. Add this to the previous figure for a grand total of 26.4 cents. This amount is the total per-mile cost of driving this car - assuming that you have to have a car anyway. This is the figure you should use when deciding whether to drive or take the bus or ride your bike or whatever.

By the way, I believe that if you consistently seek out bargains on maintenance and tires, you can significantly undercut AAA’s estimates in those areas.

One More Thing…

Some would argue that there are environmental “costs” this formula fails to take into account. Fair enough. There are.

Also, when you drive your car a lot, you increase the likelihood that you’re going to have an accident. Accidents cost money. How much does this increase your cost of driving per mile? You got me!

I feel like it’s a little irresponsible to suggest that driving is cheaper than it’s commonly represented to be, but in my opinion, it is. Oftentimes the people who are bandying about ultra-high per-mile figures are connected with public transportation or have some other vested interest in making you think that driving is super expensive. Well, owning a car is certainly not inexpensive, but as I said before, it’s critically important to have an accurate picture of your expenses if you want to live cheap. To do that, you’ve gotta run some numbers and think for yourself… and these principles apply to much more than just the cost of driving!

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