Should I drive or bus into work?

 

Should I drive or bus? A brief look at the cost of these choices from Langford to Victoria.

Suppose on a given day you are left with the choice – Do I drive from Langford (we will say happy valley area) to downtown Victoria, or do I take the bus? Let’s evaluate the cost of each mode of transportation for a given day.

Implicit / Time Costs

From the happy valley to downtown Victoria it is approximately 22 km, and according to google maps if you were to drive to arrive by 9:00 am this trip would take you between 26 and 60 minutes, let's take the midpoint and assume that on average this trip will take 43 minutes. Google maps report a similar time commitment for your commute home (arrive by 5:00pm) Thus the decision to drive by car will result in approximately 86 minutes of daily commuting.

This same trip by bus, direct, one bus, is estimated to take 43 minutes for the commute in, and 52 minutes for the commute home for a total of 95 minutes according to google maps. While some may argue that this is unfair, but the choice to commute by bus will require i) time spent waiting for the bus and ii) time spent walking from your residence/work to the bus stop. Let’s presume that this is 15 minutes. Thus, the decision to commute by bus will result in approximately 110 minutes of daily commuting.

If we presume that you value your time at a constant $15/hour we can compute an implicit time cost of commuting for each mode of transportation such that we arrive at a daily cost of $21.50 for driving versus a daily cost of $27.50 for taking the bus.

Explicit / Actual Costs

While this time cost is an implicit cost we can also work out the explicit or actual cost faced before utilizing both to determine to the total cost for each mode of transit.

Driving by car is a distance of approximately 22km in each direction for a total of 44km daily. According to the US EPA, the average fuel efficiency of vehicles in the US works out to 9.3 L/100km. As we have no reason to assume a difference between the US and Canadian average, we can utilize this value as well, scaling it up by 10% to recognize that most of this commute time is in traffic and thus not at optimal fuel efficiency. Thus, we will presume a rate of fuel usage of 10.19 L/100km. Given the distance of 44km a day at this rate, driving would cost the average commuter $8.02 a day

 The explicit cost of taking the bus is relatively easier to determine – If you were to buy a day pass, the current price of this is $5.00. Thus, bussing would cost $5.00 a day

Total Costs:

                At this point working out the total cost is as easy as summing the implicit and explicit costs – doing so we get the following total costs for each mode of transportation:

                Thus, we see that for the average commuter, the daily cost of their commute is the cheapest by driving oneself via personal vehicle. If the average commuter sees the only benefit as arriving at work and arriving home, then there is no difference in benefit, and thus cost minimization will result in the optimal choice, driving.

Sensitivity analysis:

                This analysis is subject to several assumptions. The two primary assumptions evaluated are the cost of time and the fuel efficiency of one’s vehicle. Thus, it is possible to obtain differing results by varying these values.

                With respect to the cost of time, at a rate of $7.55/hr, a commuter would be indifferent between taking the bus or driving. As one's cost of time drops below this, bussing becomes the better choice, while as one's cost of time rises above this value driving becomes the better option.

                With respect to fuel efficiency, at a rate of 13.97 L/100km a commuter is indifferent between bussing or driving. As fuel efficiency drops below 13.97, driving becomes the optimal choice, while as fuel efficiency rises above 13.97 bussing is cheaper. 

                Finally, if we presume constant average fuel efficiency, a gas price of $2.455/L is the indifference point between bussing and driving, with prices above $2.455 resulting in bussing being optimal.

                Of note, or concern for transit advocates, is that with the increasing electrification of vehicles, the impact of this is two-fold in that i) Fuel efficiency drops to 0 L/100km, and ii) electric commuters will not need to worry about fuel prices. Thus, with increased electrification, only the implicit, time cost, enters into the decision framework. Thus for public transit to win out over personal electric vehicles, either the unit cost of utilizing one's vehicle would have to increase in other forms (paid parking?) or the time cost of public transit would need to decrease through more frequent and direct routes.

                Of final note on the sensitivity analysis – this was conducted for a fairly direct route that only involved one bus that was able to utilize rapid bus lines. If one were to repeat this analysis for other routes IE Happy Valley to Uvic, one finds even greater separation of costs in favor of driving as a mode of transportation given the increased time associated with bussing as well as the transfers. 

Cost Comparison of new vehicles

Source: https://www.popularmechanics.com/cars/g1792/12-new-cars-that-are-worth-waiting-for/

I have spent the last few days pricing out the differences in costs between the various hybrids, Plug-in Hybrid Electric Vehicles (PHEV) and Electric Vehicles (EV).

Currently, there are A LOT of options to choose from if you are interested in one of these three classes of cars, with many more set to hit the market later 2018, another round in 2019 and most producers offering full electric line-ups come 2020.

If you are willing or able to wait to buy, my belief is that through increased competition and technological advancements, over the next 2 years, we will see drastic decreases in the cost of these vehicles while simultaneously witnessing increases in electric range and capabilities.

But what exists now? Well based on a current level of driving and costs being faced I worked out the annual, 5-year and 10-year costs of ownership for each car on the market.

This is a limited study, however as it only focuses on new (2018) Vehicles because the data on these vehicles is easiest to obtain. furthermore, it does not include maintenance costs because I could not determine a reliable estimate of the new vehicle types (PHEV and EV). I would expect however that if you include maintenance costs, it would push up the price of Hybrid, and PHEV placing EVs at the lower cost spectrum in the long-run.

Without further adieu, The assumptions followed by the graphs.
Assumptions:

1. Gas is currently $1.459. over the last year, gas prices have increased by 12%. This seems aggressive to continue into the future, so I assume that gas prices will grow at an average rate of 8% a year. 
2. Electricity in BC is on a stepped system, I took an average cost of $0.09/Kwh while over the last year, electricity prices have decreased, I don't see this as a long-run trend so I make the assumption that electricity costs would increase at inflation, thus on average 2% a year. 
3. Car loans are at 5%, with any such loan being amortized over 5 years. 
4. The discount rate is 5%. That is $100 next year is only worth $95.24 today. 
5. Driving a total of 80km a day, 4 times a week (This is high for most I realize). 

Onto the graphs showing the cost by vehicle. First the cost of ownership over the first year followed by the a 5 year aggregate and 10 year aggregate cost. 

First up the annual cost of ownership. 

• Annual loan (blue) is the value of all loan payments in the first year.
• Annual gas - this guy gets a little complicated. 
• If the vehicle is PHEV and the one-way commute is less than the range then technically no gas has been used. However to include "one-off" long trips I have still included a fuel usage at 10% of total km driven. 
• Otherwise, the gas usage is straight gas usage based off of average L/100km. 
• Annual Electricity - How many Km driven versus the range of the vehicle providing the # of full charges required in a year. The Kwh required to charge multiplied by the cost yielding the electricity cost. 

At the 1 year horizon. 4 out of the 5 cheapest cars are hybrids, with one PHEV (Hyundai Ioniq EV+) making the list.

Moving out to the 5 year mark. at this point we are incorporating inflation of gas, electricity, as well as my discount rate (Future payments are not worth as much to me as present payments). As expected over this time period, the pricier cars which don't depend on gas begin to migrate to the cheaper side.

On the 5 year horizon, the top two remain constant, however, in the top 5 now only 3 are hybrids, one PHEV and one EV (Hyundai Ioniq dominates here).

Finally the ten year horizon, over this horizon the cost of gas begins to outweigh the larger purchase prices and the EV's overall begin to win out ... If you keep them, and they are not obsolete in 10 years...

Now the top 5 are made up of 3 EVs, one PHEV, and one Hybrid. over this time horizon, the cheapest vehicles are the 3 versions of the Hyundai Ioniq (EV, PHEV and Hybrid) as well as the Kia Soul and Nissan Leaf.

So if you are considering buying a vehicle, and view each vehicle as having very little differentiation, then the clear winner is the Hyundai Ioniq series of cars.

If you have a degree of preference of one model or brand over another, then you can begin to weigh your options between price and preference.

For this, I would really focus on the 5 year time horizon. Over the ten year horizon I feel that there will be so much technological change over the next ten years that the majority of vehicles bought today will be nearly obsolete in relation to the range and capabilities of the vehicles ten years from now.

This is all my 2 cents at least.

What are your thoughts? what do you think about all the new EV, PHEV cars hitting the market? Feel free to comment below.