Have ever wondered about the full cost of car ownership and if it really makes sense to own a personal vehicle? Well, we can tell that most of you would have never given it a thought. We at CarIndigo bring you an insight into the value of car ownership and its use in the United States.
According to a study published on nature.com, a group of four researchers from MIT and Wellesley conducted a series of online tests across four American metro cities- Chicago, Illinois; Seattle, Washington; Dallas, Texas; and Washington DC. The experiment showed that the average cost of car ownership for a year is about $11,200. However, one must understand that more than half, nearly 58% of the value of personal vehicle ownership is non-use value. Non-use value means the ability to travel at any given moment a personal vehicle brings you and also the snob value associated with the brand or the type of vehicle. Moreover, the non-use value of a personal vehicle was at an all-time high when everybody was locked indoors and all cars sat idle. Interestingly though, the findings of this experiment highlight the need of providing people with a reliable and convenient mode of shared transport.
About 91% adult population of the United States travel to work in their cars. Americans are heavily dependent on their cars for a very simple reason. No mode of transportation can quite match the convenience of a personal car. But then, owning a car is expensive and it sits idle for 90% of its lifetime. Moreover, parking for cars takes up large amounts of space in cities and yet it is the most preferred way of transport in the country. That brings us to the question that why have mobility services failed to attract a larger set of audience over the years? On-demand mobility services cut the cost of purchasing a car and you only pay for what you use. But then, why hasn’t this model proven to be successful?
The primary reason for that is that people underestimate the true cost of car ownership. The study has found that people miscalculate the cost of ownership by almost 52%. And if only people calculated it correctly, then perhaps there would be fewer cars on the road! We have all developed a mental bias towards shared mobility and that’s the very reason why most of us fail to correctly calculate the cost of ownership and buy a car even if it means a financial brunt. On the flip side though, owning a car brings the freedom of traveling at will and wish even if it lays idle for most of the time. That means a car enables safe and comfortable transport to places of work, education and also lets you visit family and friends frequently. Further, research has shown that very often people associate car ownership with social status and the car you drive is your symbol of wealth. For many people, a car is a matter of pride and that’s another factor why most of us simply prefer having a car even if drains our money.
You’ll find many studies that suggest private ownership of cars will decline over the years but other studies indicate exactly the opposite. Car ownership has a unique socioeconomic link and that’s a big reason why people will continue to own a personal vehicle even if they are provided with abundant shared mobility services. Ride-hailing services have grown over the past few years and these services allow you to seamlessly plan your trips. These services are often considered as an alternative to car ownership. And these services have indeed had an impact on car ownership in certain cities on various scales, especially where there is a strong network of such services. People who frequently use these services were surveyed and many of them confessed to having thought of or already given up personal car ownership. However, the net effect of these services isn’t significant and the trend for car ownership continues to rise every year.
Fun fact, the study suggests that car ownership rose during the pandemic even when most cars were sitting idle in the garage and movement was restricted. The value of car ownership rose multiple times in this period and a major influencer of this was the flexibility car ownership provides. Moreover, the apprehension and fear of virus transmission in public transport further stimulated people into buying cars. So even if it meant that a brand new car would be just sitting in the garage, it provided the security that you’d want while traveling even if travel was restricted to grocery stores or pharmacies.
The major findings of the experiment conducted can be summed up in five points.
- Personal cars cost less than what they are valued. Further, a large portion of that value comes from ownership than use.
- Secondly, the value of car ownership and use is way lesser for urban residents since urban places have a much more robust network of ride-hailing and shared mobility services.
- Moreover, the trend of car ownership grew significantly in the pandemic but then the value of car use dropped down as most of them were sitting idle in their garages with restrictions on travel being laid.
- People who travel more by other modes of transport are likely to give up car ownership but the number isn’t that huge.
- Finally, despite the monetary strain car ownership brings in, people value the flexibility they offer and that is a major driver of the continuing trend of personal car ownership.