The topic that morning was "How much am I spending on my car per mile?" The IRS lets me deduct $0.50 per mile in 2010 from my income. Surely, I thought, the tax man did a lot of research before coming up with this number. But it's not costing me this much. What am I missing?
A Frugal Miser Adds Up His Expected Vehicle Expenses
- First, I made a couple assumptions. I rounded the purchase price of my 2009 Pontiac G5 up to $13,000. I also decided that if I didn't drive a car, I could earn 6% by investing the $13K instead (conveniently, my car loan has an interest rate of 5.9%).
- Second, I decided my car will be worthless at 150,000 miles.
Purchase Price: spreading the cost of the car over its expected life, I spend 8.7 cents per mile on depreciating the cost of the car.
Maintenance/Repairs: it's hard to predict what I will spend to maintain my vehicle, but I figure I'll spend $2,500 over 150,000 miles to keep this car running. That's 1.7 cents per mile for maintenance and repairs.
Insurance: So far I have averaged 5,000 miles per month, and I pay about $100/mo. for insurance. I spent about 2 cents per mile for insurance.
Interest/Opportunity Cost: For this calculation, I simplified things. How much interest would I earn on $13,000 at 6%? I would spend $780/year, or $65/month. Since I average 5,000 miles per month, I spend about 1.3 cents per mile on interest.
Adding each of these five areas gives me a per mile cost of 22.6 cents.
This is also how I compute my car costs. Here we also pay an annual council tax and vehicle inspection (depending on how old it is).ReplyDelete
So..this means you´re earning money in your IRS deductions.
I think your insurance is a bit expensive...
Here I pay 76.00 E/semester for a third part only insurance.
Since I bought my car last year I have kept track of all my vehicle expenses. My current cost per mile is $0.84 but that is with depreciating the entire purchase cost. With a more realistic depreciation my cost would be about $0.28 per mile. I expect that cost to go down as I drive my car more.ReplyDelete
Mizé - I've had a lot of traffic tickets, but no accidents, so I bet that has something to do with how much I pay. When I was working the six-figure software sales job I was a little cocky behind the wheel, and I was always running late. Now I pay the price of having a lead foot.ReplyDelete
Andy - I'm really interested in hearing from you over time so that I can compare buying a new car (my plan is to drive it until the wheels fall off) and buying used. I always thought buying used was smart but it will be a fun experiment to see if that's the case for my "buy and hold" scenario.
Time saving - make stops where you desire, at any time and for as long as you desire; sticking to your own vacation schedule rather than that of the public transportation... Lamborghini RentalReplyDelete