The QMI agency published a short story in the fall with a title that caught my attention: “Taking the car cheaper than the metro, according to a Longueuil resident”.
I always click on these kinds of articles. I’ll admit it: I like to wade through complete strangers’ dirty financial laundry to get their perspective on certain money-related dilemmas.
Also, I always believed that public transport was the cheapest option after walking and cycling. Would my preconceived ideas prevent me from seeing reality?
In this case, it’s a woman from Longueuil who works three days a week in Montreal, near the Rosemont metro station, and who decided to buy a second car just to get to work.
“With the rate increase, it cost me $10.50 [en transports en commun], while parking next to my work costs me $10. It’s the same price for a lot more trouble,” she concludes.
Is she right? It is true that these two amounts are similar.
Let’s do the math.
First, a tip: always calculate our expenses over a period of 10 years. Expenses that may seem inconsequential over a month or a year become significant when calculated over a decade, a period which, as we grow older, often comes up in a lifetime.
Let’s say this worker is very reasonable and buys a Toyota Corolla for $25,000 ($28,750 with tax) and pays no interest. According to Caredge.com, this Toyota will lose about 30% of its value over 10 years if it’s not driven much, and therefore will now be worth $17,500. So depreciation and taxes will have cost $11,250.
Then, a return trip from Vieux-Longueuil to Rosemont is 16 km. At three days a week, including three weeks of vacation per year, that’s 2,352 kilometers per year, or 23,520 kilometers in 10 years.
At 7 liters per 100 kilometers, we are at $2,470 for gasoline (with a liter at $1.50) in 10 years.
In addition to gasoline, you have to count oil changes, maintenance, repairs, tires, insurance, registration… Let’s be generous and put it all at $83 per month, or 1000 $ per year. Over 10 years, it is therefore necessary to count $10,000.
It cost $23,720 to go to work solo three days a week for a decade. But, let’s not forget, we must add the famous parking lot near work, the one that costs only $10 a day. So let’s add $14,700 to our expenses, for a total of $38,420.
For the option of public transportation three times a week, it costs $15,435 over 10 years.
So taking the car is $22,985 more expensive than taking public transit, or about $2,300 per year.
But that’s not all, because, as readers of this column know, our dollars can work for us over time.
A person who invests $2,300 per year in his TFSA in a balanced portfolio and obtains a 6% annual return would have more than $32,000 after 10 years, nearly $90,000 after 20 years, and nearly $200,000 $ after 30 years.
Over a career that stretches from the age of 25 to 65, we would have $377,000 in tax-free investments in a TFSA.
All that to take the subway three days a week. And I didn’t even include in my calculation the returns on the $25,000 spent to buy the car in the first place.
Note that I used a Toyota Corolla in my example. For a luxurious car, you can double or even triple the costs. Over an entire career, it would be between $750,000 and over $1 million that this lady would give up.
In the article, the lady points out that the bus schedule to go to the metro has changed and is less convenient than before. So there is the practical side to consider in this decision.
This worker probably has good reasons for going to work by car, reasons that concern her alone. It’s his choice. But it is not “cheaper” than the metro.
Motorist friends, let’s have no illusions: our vehicles pulverize our dollars, the time we took to earn them, and the sums they could generate if they were invested.
If your financial situation or that of a loved one is not ideal, we may have just found one of the culprits. And, before writing to me that you live 72 kilometers from work, remember that one out of three workers in Quebec lives less than 5 kilometers from their place of work. Yet 78% of trips to work are… I’ll let you find the answer.