Economics Of Car Use
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Compared to other popular modes of passenger transportation, the car has a relatively high cost per person-distance
travel Travel is the movement of people between distant geographical Location (geography), locations. Travel can be done by Pedestrian, foot, bicycle, automobile, train, boat, bus, airplane, ship or other means, with or without Baggage, luggage, a ...
led. The income elasticity for cars ranges from very elastic in poor countries, to inelastic in rich nations. The advantages of car usage include on-demand and door-to-door travel, and are not easily substituted by cheaper alternative modes of transport, with the present level and type of auto specific infrastructure in the countries with high auto usage. Public costs related to the car are several including congestion and effects related to emissions.


Private benefits

The benefits of using a car differ by many factors, in regard to location and culture. One general benefit is availability of use which, when coupled with public support via infrastructure (such as
road A road is a thoroughfare used primarily for movement of traffic. Roads differ from streets, whose primary use is local access. They also differ from stroads, which combine the features of streets and roads. Most modern roads are paved. Th ...
s or
fuel station A filling station (also known as a gas station [] or petrol station []) is a facility that sells fuel and engine lubricants for motor vehicles. The most common fuels sold are gasoline (or petrol) and diesel fuel. Fuel dispensers are used to ...
s), can allow highly flexible movement and transportation. Because public transportations are not as well omnipresent and normally don't run at certain day periods, they might not be an option. Car allows a certain freedom of movement, that other means of transport do not. Another private benefit car owners enjoy, is comfort. The car allows the transportation of the driver (and passengers) from a certain point A, to another point B, within an acclimatized and protected interior.


Private costs

According to the RAC motorists in the UK spend an average of GBP 5,000 (US$ 9,000) per year on their car, or roughly 1/3 of the average net wage; while the RACV suggestsHow much does it cost to own a car?
/ref> roughly AUD $10,000 per year, compared to AUD $26,000 median income among all Australian adults or AUD $66,000 median income among all Australian households. This situation is reflected in most other Western nations. For the average car owner,
depreciation In accountancy, depreciation refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation i ...
constitutes about half the cost of running a car. The typical motorist underestimates this fixed cost by big margin, or even ignores it altogether, according to a survey by the RAC. There are a number of reasons for the high cost of car transport: * The typical private car spends most of its lifetime idle and for some vehicles,
depreciation In accountancy, depreciation refers to two aspects of the same concept: first, an actual reduction in the fair value of an asset, such as the decrease in value of factory equipment each year as it is used and wears, and second, the allocation i ...
is a significant proportion of the total cost. * Compared to bulk-carrying vehicles such as airplanes, buses, and
trains A train (from Old French , from Latin">-4; we might wonder whether there's a point at which it's appropriate to talk of the beginnings of French, that is, when it wa ... , from Latin , "to pull, to draw") is a series of connected vehicles th ...
, individual vehicles have worse
economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of Productivity, output produced per unit of cost (production cost). A decrease in ...
. * Capacity utilisation is low. The average occupancy of cars is below 1.5 passengers in most parts of the world. Measures such as High-occupancy vehicle lanes try to address this issue. * The car energy efficiency is one of the lowest amongst several means of transportation. * Government taxes The costs of running a car can be broken down as follows (in no particular order): * Fuel (including fuel tax) * Repairs * Maintenance * Financing *
Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...
* Parking * Tolls on Roads, Bridges and Tunnels * Vehicle tax * Vehicle inspection * Registration * Car washes In the UK car travel has steadily become cheaper over the past five decades. According to the Department for Transport, the real cost of running a car has dropped by 9% between 1980 and 2007. This development is in part due to more cost effective manufacturing technologies, and in part due to engines becoming more fuel-efficient. Of the annual running costs of a car for an average person, 70–75% are fixed costs (with respect to distance travelled): a 10% increase or decrease in usage should result in a 2.5–3% increase or decrease in annual running costs. Some of the annual running costs of a car, which are important in the economics of ownership, concern the service life; a major factor for this deals with the uncertainty of the car lifespan. Many cars, particularly taxis, have achieved very high-mileage (miles driven) status, indicating that maintenance which can extend the car service life may reduce the overall running cost.


Public benefits

In countries deprived from wide door-to-door public transport and with low density, such as
Australia Australia, officially the Commonwealth of Australia, is a country comprising mainland Australia, the mainland of the Australia (continent), Australian continent, the island of Tasmania and list of islands of Australia, numerous smaller isl ...
, the automobile plays an important role on the mobility of citizens. Public transport, by comparison, becomes increasingly uneconomic with lower population densities. Hence cars tend to dominate in rural and suburban environments with public economic gains. The automobile industry, mainly in the beginning of the 20th century when the high motorization rates were not an issue, had also an important public role, which was the creation of jobs. In 1907, 45,000 cars were produced in The United States, but 28 years later in 1935 3,971,000 were produced, nearly 100 times as many. This increase in production required a large, new work force. In 1913 13,623 people worked at
Ford Motor Company Ford Motor Company (commonly known as Ford) is an American multinational corporation, multinational automobile manufacturer headquartered in Dearborn, Michigan, United States. It was founded by Henry Ford and incorporated on June 16, 1903. T ...
, but by 1915 18,028 people worked there. Bradford DeLong, author of The Roaring Twenties, tells us that, "Many more lined up outside the Ford factory for chances to work at what appeared to them to be (and, for those who did not mind the pace of the
assembly line An assembly line, often called ''progressive assembly'', is a manufacturing process where the unfinished product moves in a direct line from workstation to workstation, with parts added in sequence until the final product is completed. By mechan ...
much, was) an incredible boondoggle of a job." There was a surge in the need for workers at big, new high-technology companies such as Ford.
Employment Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a cor ...
largely increased.


Public costs

The external costs of automobiles, as similarly other economic externalities, are the measurable costs for other parties except the car proprietor, such costs not being taken into account when the proprietor opts to drive their car. According to the
Harvard University Harvard University is a Private university, private Ivy League research university in Cambridge, Massachusetts, United States. Founded in 1636 and named for its first benefactor, the History of the Puritans in North America, Puritan clergyma ...
, the main externalities of driving are local and global
pollution Pollution is the introduction of contaminants into the natural environment that cause harm. Pollution can take the form of any substance (solid, liquid, or gas) or energy (such as radioactivity, heat, sound, or light). Pollutants, the component ...
, oil dependence, traffic congestion and traffic accidents; while according to a meta-study conducted by the Delft University these externalities are congestion and scarcity costs,
accident An accident is an unintended, normally unwanted event that was not deliberately caused by humans. The term ''accident'' implies that the event may have been caused by Risk assessment, unrecognized or unaddressed risks. Many researchers, insurers ...
costs,
air pollution Air pollution is the presence of substances in the Atmosphere of Earth, air that are harmful to humans, other living beings or the environment. Pollutants can be Gas, gases like Ground-level ozone, ozone or nitrogen oxides or small particles li ...
costs,
noise Noise is sound, chiefly unwanted, unintentional, or harmful sound considered unpleasant, loud, or disruptive to mental or hearing faculties. From a physics standpoint, there is no distinction between noise and desired sound, as both are vibrat ...
costs,
climate change Present-day climate change includes both global warming—the ongoing increase in Global surface temperature, global average temperature—and its wider effects on Earth's climate system. Climate variability and change, Climate change in ...
costs, costs for nature and landscape, costs for
water pollution Water pollution (or aquatic pollution) is the contamination of Body of water, water bodies, with a negative impact on their uses. It is usually a result of human activities. Water bodies include lakes, rivers, oceans, aquifers, reservoirs and ...
, costs for soil pollution and costs of energy dependency. The existence of the car allows on-demand travel, given, that the necessary infrastructure is in place. This infrastructure represents a monetary cost, but also cost in terms of common assets that are difficult to represent monetarily, such as land use and air pollution. The car allowed a shift in residential locations, as civil engineering grew to handle the infrastructure requirements, allowing the growth of the suburbs. As shown by Ford, the car changed the economic landscape. The efforts to resolve costs that have ensued from the influence of the car, such as pollution and fuel costs, will have a similar impact on the economic landscape. For instance, providing carpooling lanes to cars with multiple passengers has received attention as it helps reduce traffic.
Sharing Sharing is the joint use of a resource or space. It is also the process of dividing and distributing. In its narrow sense, it refers to joint or alternating use of inherently finite goods, such as a common pasture or a shared residence. Still ...
one or more cars between many people reduces the fixed costs per person and limits extraneous vehicles; the use of fleet vehicles affords savings through joint use of a set of autos by a very large group of persons either for business or pleasure. Since cars demand a high land use, they become increasingly uneconomic with higher population densities. This can either manifest itself in higher costs of driving in densely populated areas (parking fees and road pricing), or, in the absence of a
price mechanism In economics, a price mechanism refers to the way in which price determines the allocation of resources and influences the quantity supplied and the quantity demanded of goods and services. The price mechanism, part of a market system, functions ...
, in a shortage in the form of
traffic jams Traffic congestion is a condition in transport that is characterized by slower speeds, longer trip times, and increased vehicular Queuing theory, queueing. Traffic congestion on urban road networks has increased substantially since the 1950s, ...
. A study attempted to quantify the costs of cars (i.e. of car-use and related decisions and activity such as production and transport/infrastructure policy) in conventional currency, finding that the total lifetime cost of cars in Germany is between 0.6 and 1.0 million euros with the share of this cost born by society being between 41% (€4674 per year) and 29% (€5273 per year). This suggests that cars consume "a large share of disposable income", creating "complexities in perceptions of transport costs, the economic viability of alternative transport modes, or the justification of taxes".


See also

*
Automotive industry The automotive industry comprises a wide range of company, companies and organizations involved in the design, Business development, development, manufacturing, marketing, selling, Maintenance, repairing, and Custom car, modification of motor ve ...
(includes production statistics) *
Car costs A car, or an automobile, is a motor vehicle with wheels. Most definitions of cars state that they run primarily on roads, seat one to eight people, have four wheels, and mainly transport people rather than cargo. There are around one bill ...
* Effects of the car on societies


References

{{reflist, 2 * Transport economics Interdisciplinary subfields of economics