Does it cost less to drive to work than catch the train?

Laneways of Melbourne (photo from Planning Institute - VYP Street Art Tour)

The Public Transport Users Association (PTUA) is keen to make the case that it costs more to travel by public transport in Melbourne than it does by car. The PTUA says above-inflation fare rises over the last decade mean public transport now costs much more than “petrol in the car” for many trips.

The PTUA might take some moral support from this op-ed in The Age this week by journalist Gabriella Costa (the paper calls it an ‘Analysis’). Like the PTUA, she also argues that commuting by car is cheaper. She says the 9% fare increase announced this week by the Government will make driving a better option. Her contention is that, “even loosely, the maths just don’t add up” for rail:

And it’s a simple equation. A Metro daily ticket from a zone 2 station into the city? $11.90 from January 1. Petrol from home to work and back? two to three litres. Parking: less than $10 a day on the city’s edge.

Ms Costa doesn’t actually do the maths, so I have. Unless she gets her petrol for free, even on those numbers it still costs less to take the train to the city than drive! Petrol at $1.35 per litre is $4.00 a day, plus $10 for parking. Even loosely, that adds up in favour of the train! But as we all know, there’s more to the financial cost of driving than just petrol and parking, so I’ll try to do a tighter estimate.

Ms Costa’s example is based on her own circumstances. I know from her article that she lives in St Albans, near Giniver station in Zone 2. By her estimate, she’s 17 km by road from where she works in the city (presumably at The Age HQ in Spencer St). I’ll assume she commutes 220 days a year after taking rec leave, public holidays, sick leave, the odd day off, a bit of work-related travel and weekends into account. If she drove to work on every one of these 220 days she’d therefore travel 7,480 km in a year.

I’ll assume she drives the cheapest vehicle you can buy new in the small car class, a Hyundai i30. According to the RACV, operating costs of this vehicle for fuel, tyres and servicing, are 16.6 cents per kilometre, giving her an annual commuting cost of $1,224. That’s conservative because the fuel component is based on a city-country average – commuting in busy traffic is thirstier work.

Add to that parking at $10 per day for 220 days and her all up cost for a year of commuting by car to the CBD totals $3,444. That’s still quite a bit more than the cost of catching the train from St Albans, even under the new fare structure that takes effect from 1 January.

St Albans is in Zone 2, so Ms Costa could buy a myki Yearly Pass in 2012 for $2,021. That would save her $1480 compared to driving. Even if she travelled every day on a myki Daily Cap it would cost $2,438 over the course of a year, still putting her ahead by $1,000 compared to driving.

And if she lived any further out the cost of train travel would stay the same but driving would cost considerably more. If, for example, she lived in Pakenham (since she mentions it in her article) her annual expenditure on driving would increase to $6,371 p.a. because it’s 57 km from her workplace. But the cost of the train would be the same as it is from St Albans, since both stations are in Zone 2.

It’s important to note that I’ve only considered variable costs, specifically parking, fuel, tyres and servicing – I’ve taken no account of the cost of owning the car. But it makes no sense to ignore standing costs, because if she doesn’t actually have a car she can’t drive to work! The RACV says the annual standing cost of a Hyundai i30 is $5,668, made up primarily of depreciation, interest, insurance and registration.

If I assume commuting accounts for half of her total annual travel by car (i.e. she drives 7,480 km to work each year as well as doing a further 7,480 km p.a. in non-work travel), then the standing costs that should be attributed to her journey to work come to $2,834.

Add that $2,834 to the $3,444 she pays for parking, fuel, tyres and servicing and Ms Costa is up for an annual total of $6,278 for the privilege of driving to work from St Albans. Remember, a myki Yearly Pass will cost much less, just $2,021, and even a myki Daily Cap will cost her $2,438 for the year.

However judging from her article, Ms Costa would likely take the view that since she (apparently) already owns a car, none of the standing costs should be attributed to commuting. That’s a common perception. If people already own a car, they tend to see the standing costs as sunk, since they don’t have to shell out more on things like rego and insurance in order to make the marginal trip.

For example, consider this letter to the Herald-Sun cited approvingly by the PTUA. A Mr Kelly-Grimshaw writes:

….if you take into account the cost of registration, insurance, maintenance and the total cost of the car then public transport would be much cheaper (than driving). But you would need to pay these costs regardless, as the car still exists for use on the weekends.

There’s some perceptual bias in the “reptilian” part of our brains (what psychologist and Nobel laureate Daniel Kahneman calls System 1) that’s quite happy to load the entire standing costs of car ownership on to some travel (in this case “weekends”), but not all of it.

Even so, putting an extra 7,480 km of commuting on the clock each year would certainly have a significant impact on the resale value of Ms Costa’s car (it would be an additional 25,000 km p.a. if she lived in Pakenham!). Depreciation is the single biggest item in the RACV’s estimate of standing costs, amounting to $2,677 p.a. for the Hyundai i30.

So I think it would be hard to ignore depreciation, at least when it was explained. In fact, it’s arguably a flaw in the RACV’s methodology that mileage-related depreciation isn’t treated as a variable cost.

Here are some options for Ms Costa. On the assumptions I’ve used above, her total transport cost for all purposes will be $12,556 per year if she drives to work. If instead she leaves the car at home and commutes by train using a myki Yearly Pass, her total annual transport costs will be $8,933 ($9,350 with a myki Daily Cap).

However if she could manage to live without a car in St Albans she’d save some serious money. After spending $2,021 for a myki Yearly Pass, she’d have a lot of money “left over” for taxis, walking shoes and perhaps bicycle maintenance.

The main situation where driving really gets competitive with the train in terms of financial costs is if the traveller gets free or heavily subsidised all-day parking. That’s evidently not the case for Ms Costa or for the great majority of CBD workers.

However many suburban workers (and most jobs in Melbourne are located in the suburbs) do get free parking. But in their case the time and convenience advantages of cars over public transport are generally so great that the price of fares, much less a 5% real increase, is not the key issue.

As an aside, I think the fact that commuters can readily find parking on the edge of the CBD for $10 a day, as Ms Costa reports, is an important issue. That’s worth discussing another time.

P.S. I was right about the PTUA taking support from Ms Costa’s article – see letter to The Age on behalf of the PTUA from Tony Morton.


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14 Comments on “Does it cost less to drive to work than catch the train?”

  1. David Allen says:

    Car pooling? How does that alter things? I car pooled for a while and I can say that it’s a lot more satisfying than driving solo. 1. You drive your own car only on alternate days. 2. You have company. 3. Parking cost is halved. 4. You feel only half as guilty for driving at all.

    I did take the train for most of my years in Melbourne but I had to drive 4km to the station anyway (where parking was free incidently).

    • Alan Davies says:

      If the average occupancy of cars could be increased significantly, say to 2.5, a lot of the car vs public transport arguments would be turned on their head. The fact is, though, car pooling hasn’t been very successful in Australia. One of the key attractions of cars is privacy and being in control – car pooling dilutes both of those.

  2. You’re certainly right about the costs Alan, but like so many aspects of life perception is as important as the truth.

    A considerable amount of public transport users are ‘borderline’ cases. They’ll drive some times, take public transport others, perhaps even bike on others depending on the weather. However if they perceive that its now actually cheaper to drive than it is to catch public transport, that might be enough to push a lot of people away from it.

    As I said on the last article, I’m not someone that believes fare increases shouldn’t happen, but I am aware that if they’re big enough it might be enough to push some users away from the service.

    • Alan Davies says:

      The increase in public transports CBD mode share in recent years supports your contention. Although the mode shift numbers were very small in terms of the overall number of trips (and work trips) in Melbourne each day, they were enough to use up the seemingly limited spare capacity that existed in Melbourne’s public transport system.

      The key issue with the fare increases is whether any drift is big enough (1) to seriously undermine the revenue gain from the increase and (2) to significantly reduce PT’s mode share relative to the significance of the revenue gain. If the figure the Minister reportedly gave to John Faine ($30 m p.a.) is correct then I expect the fare rise has it.

  3. Daniel says:

    CBD parking costs give PT a pretty good advantage for a lot of people.

    But one has to ask: how many workers in Melbourne commute to the CBD? Surely the vast majority of people in Melbourne do not go to the CBD on a regular basis, and are probably not having to pay for parking at suburban destinations.

    • Alan Davies says:

      Indeed, see my last three or four paras. In fact only 10% of all jobs are in the Hoddle grid and 72% are in the suburbs i.e. > 5 km from the Town Hall. But as I note above, in the suburbs “the time and convenience advantages of cars over public transport are generally so great that the price of fares, much less a 5% real increase, is not the key issue”.

  4. John Burke says:

    I have read the results of a study from Europe, which I can’t find at this present time stating that on average people underestimate their car expenses to the extent of leaving out fully 60% of real direct costs if surveyed. Parking is one easy example of those kinds of costs.

    They don’t really love cars as much as here. The worst thing about public transport is not pecuniary but social. We might be confronted by a social indiviual happy to chat.

  5. Russ says:

    This is an interesting comparison, because it looks at a particular type of trip that is both a) under-priced, given the levels of congestion (on both p/t and roads) and the cost of increasing it and b) is very costly for both alternatives.

    As you noted in your later paragraphs, if you take out parking, assume that the car still exists for other purposes (which is a reasonable assumption in most households), and are making a an average commute (10km) then the marginal cost of a single zone p/t trip ($4-6) is above the cost of the car ($3-4). If you look at non-work trips – the ones with the lowest marginal cost for the service provider – where average car occupancy is often 2 or more, then the car is far cheaper even before time is considered.

    Which raises an interesting question. The assumption of no-car means that a household has no car for any trip, not just work. If the person commuting has a monthly/yearly pass then their marginal non-work trip cost might be zero, but it will be more for other household members. Work trips are less than half of total trips, if I remember correctly, so it is a fairly considerable factor. How do these comparisons work out if they are done for whole of households, with various configurations?

    • Dudley Horscroft says:

      From what I remember (long time since I checked) estimates of fare elasticity are around minus 0.3. However, for peak travel it was around -0.1 and for off-peak travel about -0.5 down to -1.0. That means if fares are increased by 10% in the peak, 1% of patronage will disappear. So the revenue increase is 9.9%. For off peak the revenue increase could be low, zero, or even negative. So peak fares should be increased, leaving off-peak fares virtually unchanged. Some of the “lost” peak travellers will shift to off-peak if feasible, so will not be totally lost.

      Add ‘shoulder fares’ and the loss is minimized, some will be willing to pay 10% extra, some change their time and pay 5% extra, some change their time even more and pay nothing extra. (And if traffic is heavily directional, perhaps peak charges in reverse direction are unchanged.)

      If the shift from peak is sufficient, then the ‘limited’ spare capacity returns! All to the good.

      For a heavily peaked system, such as VR, peak charges should be very high, with a lower shoulder fare, and still lower off-peak fare.

    • Dudley Horscroft says:

      Biggest change will be made in the 2, 3, or 4- car family! The car used for just the work trip to the CBD (or other place on the PT Network) can be foregone, while “Mum’s Taxi” remains in use. Major benefit to family finances.

    • Alan Davies says:

      Interesting way of looking at it, Russ. Home-based non-work journeys make up around four fifths of all journeys in Melbourne according to VISTA, so this is an important question. Non-work trips are shorter on average, so some could be walked or biked. They also tend to be more discretionary than work trips, so some would simply not get made.

      Imagine a two parent, two child family. If they’re students, both children are eligible for the annual concession fare on all their travel, about $450 each. If both parents buy a Myki Annual Pass that’s an all up cost of circa $5,000 for the year, still well ahead in financial terms of owning one Hyundai i30.

      Older children who work would generally pay their own transport costs anyway rather then being dependent on their parents. Grandparents living with the family would get concession fares (anyone 60 or over is eligible for a Seniors card). AIUI, so would anyone who’s sick or unemployed.

  6. Roy says:

    I’m confident I’ve saved money using my own car for transport, petrol costs for my 1.6L 4cyl Nissan were much lower than train fares, over the 4 years I owned it the only money I spent was servicing every 6 months ($50) and a replacement starter motor which I installed myself ($35). I saved a small fortune using this car instead of public transport.

    I was lucky however, the job sites I worked at always had free or in house parking, the savings would have been eaten up if I had needed to pay $15+ a day in parking fees. That’s where the real money comes into it.

  7. Greg says:

    Unfortunately the NRMA pricing includes depreciation as part of the cost and this depreciation is not separable.
    The depreciation assumes that you keep the car for 5 years.
    One Problem is that this is not a good figure, a rudimentary analysis of CarsGuide Advertisments show that year three, and year eight are the more likely years for a sale (places where the tangent is above the curve) – with all other years offering a steady decline (except maybe 4) (I assumed 1 year old to be 2010 model in Jan 23 2012 figures).
    The second problem is that the depreciation figure is an estimate (a good one, but really an educated guess)
    The third problem is that the depreciation figure is not listed in any way that allows you to take it out of your calculation. (included with maintenance in WOL figure)
    This analysis also assumes tyres and other maintenance/repair items are needed at the same frequency for each car.
    Fuel consumption is also based on manufacturers claim, which does not include load (for example a passenger in a 7 seat wagon).

    I have asked NRMA if they will consider separating the depreciation figure so that a real calculation can be done.

    • Dudley Horscroft says:

      Five years is probably a good average life – providing you are being very slipshop. Consider that public service vehicles (cars, not buses or trams) tend to be changed at one year, or three years at the outside, while taxis and rental hire cars are much more like 18 months at most.

      But private owners, who are not being provided with cars by their employers, especially if retired, are much more likely to change cars from 10 – 15 years. We have just replaced our Mazda 323 at nearly 12 years old with a Mazda 2 Neo. The car was in good condition, and problably would still be ours if my wife had not come into the service agents with me. Only one large problem in that time, replace a clutch at about 55 000 km.

      So I would suggest that depreciation should be based on 3 years for ‘fleet’ cars, and 12 years for ‘non-fleet cars’.

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