Gas Prices vs. Public Transit

by Tax Guy - Burlington Accountant on July 3, 2008 Print This Post Print This Post

Gas prices over the weekend before Canada Day were hovering around 1.35 per litre (5.10 per gallon for our American friends) and I’ve started to really think about whether it makes sense to use public transit or continue to drive my car.

I live a fair distance from my place of work.  The commute is 35 kilometres (22 miles) and 45 minutes one way.  That is 350km (220 miles) and 7.5 hours per week.  My car is an older car and I have been averaging about 9.1L/100km gas mileage (or 26 miles per gallon).  My cost of insurance is $838 per year and I have an automotive maintenance budget of $1,000 per year.  Since I own my car outright, there are no monthly loan or lease payments.

I have three options: (1) keep my car and continue to drive to work, (2) keep my car and drive to the transit station (5km north of my house), and (3) get rid of my car and just take public transit the whole way there.  In the options where I am taking public transit, I have included the transit pass tax credit of 15% of the transit pass cost.

Option 1 – Status Quo

I estimate that I would consume 1,656 litres of gas costing me $2,236 per year.  Including insurance and maintained the total bill would be $4,074 per year or approximately $78.35 per week.  In terms of efficiency, the total travel time is roughly 70 minutes.

Option 2 – Drive 7.5km To The Local Transit Station

Because of the distance to the transit station and the fact that my wife would not be able to drive me, keeping my car and driving 7.5km north to the station is one alternative.  Presumably I would use a lot less fuel and the time to the office should be about the same as driving all the way there.

The monthly transit pass to get me from my city to where I work is $2,412 per year ($201 per month) but I receive a tax credit of $362 for a net cost of $2,050.  I estimate my fuel bill to be $475 and when maintenance and insurance is added the total annual bill comes to $4,363.  This is almost $300 more than driving all the way there and taking the same amount of time.

I was a little surprised that this option was more than just driving.

Option 3 – Sell The Car And Take Only Transit

No fuel, no insurance, no maintenance.  Transit fare goes up and I need to add another 30 minutes each way to my trips.  But the overall annual cost goes down to $2,815 per year or $54.14 per week.

On a financial basis the last option is the best.  The annual savings is $1,259 per year.  But in reality when you break it down, the savings is only $24 a week or about $4.85 per day.  The hassle of riding two busses and adding another hour a day transit time just isn’t worth the savings.  If my car dies for good, perhaps I’ll reconsider.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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