This isn’t a joke, I make roughly $26/hr taking public transit. I’m not paid by the city or ETS or any green organization — I’m paid by myself, with the money I’m not spending on a car.
I take the bus and/or the train every single day. Assuming a 20 minute commute, there & back, that’s about 40 minutes, 7 days per week. This works out to roughly 20 hours per month.
Now, to do this calculation we have to consider the alternative: car ownership. Very, very, very few people recognize how abhorrently expensive owning a vehicle actually is. They will purposely deceive themselves, make wild justifications, omit essential calculations, all in the name of keeping their car. Oh I know, it’s so convenient and you need it because you live out of town or whatever, but some vehicle owners are just kidding themselves.
Here’s a fun scenario to prove my point!
First, let’s pretend I own a modest used Mini Cooper (my secret obsession) that cost $15,000. I put $1000 down when I bought it, and am now paying down the remaining $14,000 on a 5 year loan at 5.50%. This works out to $267 per month. Totally affordable, right?
(sidenote: this will cost $2,047 in interest over the life time of the loan, bringing my total car ownership up to $17,000 after it has had 5 years to depreciate in value. AWESOME.)
Let’s say I’m pretty good about driving and only spend $100 each month on gas.
Insurance is also around $100 each month, because I have no accident history.
For maintenance (license & registration, car washes, oil changes, tune ups, tire changes & rotations, any insurance deductibles in case of accident, repairs, etc.) I spend about $600 a year, or what works out to $50 each month.
I’m now spending $517 each month to own my car. That’s the same $517 I would be saving by forgoing car ownership and using public transit. That amount divided by the approximate 20hrs I spend on transit each month works out $26/hr. Ok, I’m cutting one corner here because my bus pass is paid by my tuition, which is paid by my graduate student stipend, so it’s essentially “free”, but if I had to buy one for $86 each month, my net would only work out to about $22/hr. A little bit of a pay cut, but nothing I can’t live with.
I know, I know. Your car payments are smaller, you spend less on gas, and the price is worth the convenience. That’s not necessarily the point: even if your car is costing you half of what I presented above, you’re still probably paying too much.
The real kicker is when you pretend you went without a vehicle, and instead invested that initial $1000 down-payment, plus the $517 each month for 5 years. Even if you did so in the most basic savings account that are boasting an interest rate of only 1.5%, you would yield — wait for it — over $33,000. That’s 2x the value of the car in cold hard cash, even though you invested the exact same amount of money.
If you want to play around with your own car loan calculations, try TD’s auto-loans calculator. You can adjust the loan amount, interest rate and length of term. It will give you your monthly payment and the total interest over the lifetime of the loan.
To determine how much you can save by just-saying-no to car payments, insurance, gas and maintenance, try out ING’s savings calculators. Here you can put in an initial investment, determine a monthly, weekly or biweekly contribution, and it will tell you how much you’ll have in the end.
What I want to know is, why is it normal to take out a 5 year car loan, but abnormal to save for 5 years to buy a car? Buying a car with cash would allow you not only to get a nicer car, but you would significantly reduce the monthly cost of car ownership plus avoid wasting money on the interest of a loan.
Join me on the bus!
16 Comments. Leave new
I totally agree.
I don’t own a vehicle, and take the bus for reasons I might explain later, and love how much money I save because of doing so. $86 for a bus pass is little compared to the costs of a vehicle. Good post. You’re blog is Awesome. Keep it up.
This is an AWESOME post. So glad you put it into cold hard numbers. Much easier for others to understand. Thank you!
Great perspective on this issue! Looking fwd to reading more of your posts on transit.
You would save even more if you rode a bike cause after some basic equipment investment you would be basically riding for free!
This is fantastic! Thanks for figuring out the numbers.
It definitely makes me, a driver who loves to drive, think it over. I mean, you’re not calculating gas costs, what happens when your car breaks down, new tires, or any fees like that. However, I bought my car for only a few thousand dollars, so there was no long drawn out payment process. Also, you only have to take transit for 20 minutes – I’m actually envious! When I was a transit user it was a minimum hour long trip anywhere. It would take 90 minutes to get to work, and in winter nearly 2 hours to get to school.. I would get less done and have to cab around a lot more. The extra costs far outweighed the benefits of taking transit. And I also feel that my time costs money. Then again, I definitely wasn’t making $26 an hour using transit, but applaud you for finding a way that it works.
not to mention cars are killing are our children with lung cancers and athsma. But no one cars about that. screw the future! I need to drive to the mall now!
I was linked here via the City of Vancouver’s Twitter account and had to click!
First, I want to offer kudos to you for having hashed it out and figured out the money you are paying yourself for using transit full time. In my profession, one of the most important ways to encourage increased transit use is to break it down, literally, into dollars in cents. Any other advantage, explicit or perceived, of transit use is not nearly as persuasive as one’s own wallet.
As another commenter has stated, however, time is also valuable. Access time (the time it takes to get to the bus stop), added to waiting time, added to actual transit time can turn into a long commute for those that live in the suburbs or need to transfer routes. Imagine that your commute by transit would take you nearly two hours to get to your destination, and that you already have invested in a vehicle (brand new or otherwise, it doesn’t matter). It would take very desperate measures to get that commuter to switch.
Great post. I take transit and don’t own a car either. This post really applies to me, because I’ve also had a “maybe someday” idea about owning a Mini. Thanks for breaking it down to an hourly wage. That makes this really intuitive.
Instead of paying for a vehicle I’ve chosen to buy a home in a denser urban neighborhood with good transit service. All my other friends who own cars don’t own a home and they’re not nearly as financially stable. I don’t see why people fool themselves into thinking that a car is an absolute essential. There are other options if you’re willing to move.
Are you kidding me and everyone else? I have taken bus rides and they suck. Sleeping on a bus sucks too. Stiff neck. Privacy is non existent on a bus. Take your bus trips and shove them up your south end! Give me my aged Toyota SUV anyday!
I’m carl-less too. I couldn’t agree more!
This is great. I wish I could be car-less, although where I work it’s nigh impossible.
$85 for parking there, ALONE would cover the cost of public transportation
Then factor in gas at $20/month (I don’t drive much), the fact that I pay about $30/month in insurance & car license fees and you’re looking at perhaps $50 saved per month, or $600/year.
Oh wait. That isn’t so bad. I could pay that, just to stay warm in my car when it’s really really snowy out. I do like to take the bus when it’s warmer out, though. And I prefer walking.
Nice article, thanks for the information.
Nice article. I just calculated my potential hourly rate at about $20/hour. 🙂
Oops. Nevermind, it’s closer to $11/hour. 😛
Linking back to this!
Interesting post! I wish I had the option of taking the bus. But living in a small town with no public transportation it’s impossible not to have a car. Especially being a supply teacher where I’m driving close to 35 minutes daily to different schools. Perhaps city living is cheaper afterall if you rely on public transportation.
I used public for 12 years around Vancouver. First car at 38. Never bus again. I stopped getting flu every year for 1-2 weeks missing work. That along pays for the car. Ever waited for the bus for 2 hrs because they just pass by because full, and driver couldn’t care less to squeeze it for one more person. My rides were about 2 hrs long from end to end.
But sure for many the buss is the option.