Tuesday, July 08, 2008

The Cost of a Ride

As a car owner and frequent giver-of-rides, I'm often asked, "How much do I owe you for gas?" Typically my response, as implied by the question, has been to estimate the number of miles divided by the mpg times the price of gas divided by the number of passengers.

Of course, if I'm transporting friends or family (especially for short distances), it often makes sense to not exchange any money, in the spirit of communal living. But "How much do I owe you for gas" is not the appropriate question for a rider to ask if they are truly attempting to split costs fairly.

Let's start with some numbers. My car cost me $3,000 two years ago, and since then I've paid about $2,000 for major repairs and regular maintenance. My annual minimum liability insurance costs are only about $500, thanks to my perfect driving record. Optimistically assuming that my car runs four more years and then sells for $1,000, and assuming annual maintenance costs of $1,000, the annual cost of owning my car is about $1,830.

Since I drive about 9,000 miles per year, the ownership-cost per mile is about 20 cents. In comparison, the gas-cost per mile is less than 12 cents (assuming $4/gallon gas and 35 mpg). Therefore, the rider who pays only for their share of gas is covering only about 37% of the total cost of the ride.

In case you hadn't noticed, the above analysis is crappy. Considerate these additional considerations:
  • Suppose a rider is merely tagging along on a trip that I have decided to make regardless of whether there are passengers? Then why should the rider pay more than enough to cover the decrease in gas mileage resulting from the weight of their body in the car?
  • The benefit derived from owning a car is not merely a function of how many miles one travels in it. Just having a car in my driveway that I am free to use on a whim for various low-mileage trips is a benefit that my riders don't enjoy.
  • Since cars wear out just as much from age as from miles driven, I could greatly decrease my ownership-cost per mile by driving more miles per year. It doesn't make sense that the amount my passengers pay should especially depend on how much I drive when they are not riding with me.
In conclusion, I don't think that riders should have to pay three times the price of gas, but it would probably be appropriate to throw in at least a few extra dollars to help with just a small portion of the ownership costs. And if a rider outright borrows a car from an owner, they should offer to pay at least twice the cost of gas.

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