Rowena learned about the true cost of cars the hard way. Raised by her mom, a Filipina immigrant, in a happy if carless home in northern California, Rowena marveled upon graduating from college and getting a steady job that she could afford to lease her very own car. For a small down payment and $199 a month, she was in a beautiful new Honda.
Three years later, lease up, the dealer convinced her to buy a somewhat nicer car, one with “just $299” in monthly payments. When the car was repossessed a year later because she couldn’t make the payments, she figured she had handed her dealer and loan company over $15,000. Sitting down to do the math, she estimated that insurance, gas, parking, tickets, tolls, taxes, and fees had vacuumed an additional $12,000 out of her accounts.
So four years and $27,000 later, Rowena had no vehicle, no savings, and a credit rating in ruins.
The full burden of car ownership far exceeds the purchase price. Photo: slambo_42/Flickr
Like most Americans, Rowena had no idea of the true total and ongoing financial cost of car ownership, and, like most Americans, she found her dealer in no rush to warn her about them. While rent or mortgage remains the largest budget item for the average household, transportation now comes in a close second, and in some zip codes it even exceeds housing.
Transportation swallows one out of every five dollars earned by the average American family, double the bite it took in 1960. This increase alone could account for much of the plummet, over that fifty-year period, in the household savings rate, which by the aughts had skidded close to zero.
We know how things got this bad. Back in 1960, developers had not yet fully sprawled out our housing stock; government had not yet spent billions on road building, letting transit atrophy; automakers had not yet piled on horsepower, luxury, and cargo space; lenders had not yet become so likely to set unsustainable and predatory car credit terms; and drivers had yet to consider short trips unwalkable and bus trips social suicide.