The real cost of driving to work

Traffic jams. We have all been there, stuck bumper to bumper and awkwardly shifting between neutral and first, painfully riding the clutch, throttle and brakes. Should you dare wait for a decent gap before crawling forward, you are sure to be relentlessly honked at from behind, or cut off by ferocious lane switchers either side of you.

This article is written to convey the real cost of commuting and traffic jams, in terms of the time, monetary and risk costs that often go unnoticed by the vast majority, who usually just equate motoring to the price of fuel.

Traffic Jams

It is not a nice place to be, and I don’t know about you but it sends my blood pressure skyrocketing. I just cant fathom how traffic design engineers, city planners and governments could let this happen. There are many examples of very well designed cities throughout the world which don’t experience this excruciating grind to a halt of their traffic flows, yet the traffic jam is an increasing phenomena, even in newer cities.

Ultimately, the traffic jams come about due to population expansion and poor city planning, as well as a generally lazy and affluent society that can afford motorcars. These can be exacerbated by off-design conditions through, like traffic accidents or even public holidays.

During my time in Asia, I have also experienced traffic jams – but of a different kind. Thousands and thousands of mopeds, motorbikes, rickshaws and bicycles swarming around pot holes and other obstacles on the road. It feels like chaos, but somehow everyone gets to where they want to be.

Any which way I look at it, traffic sucks. Perhaps its the engineer in me coming out again, but I hate the inefficiency of being stuck in a little metal box. To make it less painful, I tune into podcasts or phone friends and family using my hands-free bluetooth set up. But nevertheless, there I am, burning dinosaurs and sitting on my arse. Its one of the worst things about living in Sydney, Australia’s biggest city. It feels so wasteful.

Commuters cause traffic jams

Part of why our traffic problem is so bad here is due to the ridiculously un-affordable housing in the city. The median house price in Sydney is well over $1 Million – and mind you that figure encompasses a very very wide urban sprawl away from the CBD. Closer to the city, your looking like perhaps double or three times this figure!

Because the majority of the jobs are in the CBD, yet people cant afford to live there, they commute. I work with some people who commute nearly 3 hours every day; an hour and a half each direction. This just seems crazy to me, because the hidden monetary and time cost of commuting is very high

The cost of commuting

Commuting has a number of costs, and they all add up. things you need to consider are the;

  • Time cost of commuting
  • Monetary cost of commuting
  • Risk of commuting

The time cost of commuting

For someone who works a standard week (8 hour days, 5 days a week), commuting these 3 hours per day is equivalent to almost an extra two whole days of working. So by adopting this commute, your effectively giving an amount of time equal to your weekends, and sentencing yourself to a 7 day work week!

Not everyone takes such a long commute, but the average figure for Australians is one hour per day; that is 30 minutes each way. Those who work in the capital cities but live in the surrounding suburbs are the worst, and have average commute times much higher than the national average.

Even one hour commuting per day almost adds up to an entire days worth of work, turning your 5 day work week into more like a 6 day week, or when expressed as a percentage of your wage, chewing up 20% of your earning capacity. For someone earning the average wage of $82,000 (2020), this is a hefty $16,400 in lost productivity alone, time that is instead spent unproductively and at risk behind the wheel of a motor vehicle.

Monetary cost of commuting

Then we take the actual physical cost of commuting into account. In Australia, we on average drive horrendously inefficient vehicles. Average sales and emissions data shows that on average, the majority of Australians commute in a passenger car with only one person in it. The average Australian passenger car has a fuel efficiency of 10.8 L/100km. This is very crap and you should aim for an efficiency of at least half that – around 6L/100km.

Excluding the cost of the car and depreciation, the monetary cost of commuting is somewhere north of 54 cents per kilometre if you actually break it down into detail. When you include the amortized cost of the vehicle and its depreciation per kilometre, this figure of course increases.

The Australian Tax office estimates driving to cost 76 cents per kilometre when you are deducting work related driving costs against your income for your tax return, and the Royal Automotive Club of Victoria estimated even the cheapest car, a small 4 cylinder petrol Kia Rio, would set back the average commuter 80 cents per kilometre.

We know due to traffic jams, this average commute is not spent efficiently cruising on the highway, but rather spent in a combination of highway, arterial, suburban and city roads among traffic jams. According to the Australian Bureau of statistics, the majority of Australians are commuting under 20 kms, with the average being 15kms each way. That means we are collectively travelling at a mind numbing 30-40kph pace during out daily commutes.

The fuel cost of commuting

If we account for this fuel consumption at the average 30kms per day commute, that is 3.24 L of petrol used per day, and maybe a little more to account for the excessive idling and stop-start when stuck in traffic jams. Adding 10% to account for this gives us a cost of 3.5L, and at the 2020 average petrol price of $1.30 per liter this is $4.63 per day (or up to $7 per day if you unnecessarily drive a car that requires premium fuel or you erroneously put it into a normal car). The fuel cost alone is 15.4 cents per kilometre.

The maintenance cost of commuting

As a quick rule of thumb, I have found for my car that every dollar I spent on fuel, is a dollar I spend on maintenance. I have come to this figure after over a decade of driving and logging expenses in spreadsheets, which I don’t bother doing anymore.

That includes oil and filter changes, new tyres and brake pads as the most common items. Long term, you also need to consider the more expensive but less common things like timing belts, spark plugs, brake rotors and clutches – money I keep tucked away in my emergency fund for when these expenses spring up.

I can only get this maintenance cost so low because I do my maintenance myself, so this is conservative and the average commuter is likely spending more. At best, this is another 15.4 cents per kilometre bringing the running total up to 30.8 cents per kilometre

The registration cost of commuting

Next to consider is the fairly easy cost of road registration, which in Australia varies from state to state depending on the size and type of car, but is around $750 per year for a standard passenger car. This includes road registration and compulsory third party medical insurance Again, based off our 30km daily commute and working a 48 week year, this comes out to 10.4 cents per kilometre, bringing the running total up to 41.2 cents per kilometre.

The cost of insurance for commuting

The next expense is of course is insurance; motor vehicle accident, collision and theft insurance. This is separate to compulsory third party medical insurance which covers the health insurance aspect of an accident.

You can purchase cover for comprehensive insurance to cover all parties, or third party only which just covers the other party (and not your car) in the event of an accident. The Average cost for full comprehensive insurance in Australia is $900 per year, and I pay only $200 per year for third party only. This works out to be 12.5 and 2.8 cents per kilometre, respectively.

The cost of depreciation for commuting

With the Average Australian commuting around 30kms every work day, or 7200 kms per week for purely work related activities, this usage creates wear and tear on the car that lowers its value outside of regular routine maintenance (which we have already budgeted for).

We know that cars depreciate the most heavily the day they are driven out of the show room (about a 10% instant write off, and then 20% per year thereafter), so savvy drivers will opt to buy a second hand car that has been looked after and is in good ‘nick.

The average new car in Australia in 2020 cost consumers $74,000! A new car is a stupid decision and usually out of the question for anyone on the path to Financial Independence – especially when you can get an amazingly reliable second hand car with usually under 100,000kms on the clock for well under $5,000!

The Royal Automotive Club of Queensland found that on average, Australia’s best selling car (Toyota Hilux) cost their drivers an estimated $100 per week in depreciation alone! That adds up to over $5,000 per year, or a staggering 70 cents per kilometre on the standard commuting figures!

Of course, these are average figures but are much higher in the first few years of ownership, and using the rule of thumb of a 20% depreciation per year (ATO figure), and the average new car price of $74,000, this works out to be a mind boggling $2.05 depreciation per kilometre in the first year of ownership. Holy Shit! No thanks!

Of course, your average commuter car is probably something more like a Kia Rio, with a much more respectable price tag of around $20,000 on road. The depreciation on this car is somewhere around 55 cents per kilometre in the first year of ownership, and tapers down from there.

Is it starting to make sense now why new cars are so toxic to your finances? Especially when people insist on trading-in their car every few years or so for the latest model.

If you drive a car like mine which is worth under $5,000, the depreciation is a more reasonable 14 cents per kilometre.

The cost of buying a car

Repeat after me… “I will never take a loan for a car”. Good. Now say it again 100 times and write it on your bathroom mirror.

Personal and consumer debt for stupid things like cars is at an all time high in Australia, and commuters sacrifice huge chunks of their paychecks, just for the priviledge of being able to commute to their jobs. Hang on, wait up a moment. So we are paying for the priviledge of going to work? Does that sound a bit backwards?

On average, Aussies spend around $6500 per year on car repayments. Yes you heard that right. Put another way, the average commuter spends 90 cents per kilometre on commuting to work. Incredible. Indirect costs of car loans can include expensive insurance, maintenance and fuel card requirements. Similar costs are incurred when leasing a car, as well as large balloon payments at the end of lease term.

Even if you do the responsible thing and choose to purchase a car outright, there is still an opportunity cost because you could have had that money invested instead. Some die hard FI fanatics might argue that so long as your car loan interst, fees and charges are below your taxed return on investments, you would be better off to get a loan.

My retort is firstly that simple is always better, and when you follow my rule of thumb and drive a car worth no more than 5% of your annual take-home, then it doesn’t matter. The average Aussie wage of $82K translates to over $4000 for a car, which is more than enough for an awesome, reliable and fairly new car. If it is stolen or you crash it, you can easily replace it with a fortnights pay out of your emergency fund.

The opportunity cost, according to the 4% rule, on the average $74K car is almost $3000 per year, or 41 cents per kilometre. On our more reasonable Kia Rio it is 11 cents per kilometre, and if you drive a car like mine, it is 3 cents per kilometre.

The cost of toll roads for commuting

According to the AAA SGS economics report on transport affordability index, Tolls incurred for commuting were the highest for Sydney residents at an average of $4100 per annum, followed by Brisbane at $2300 and then Melbourne at $2200.

Since not every one needs to use Toll roads, and you can always opt to take the long way, I wont equate this into an average cents per kilometre since its not really a fair assumption or calculation to make, but its worth realising that the average Sydney commuter is spending around 57 cents per kilometre on tolls.

I hate Toll roads, and will happily waste hours of my life deliberately avoiding even a small toll fee. But don’t get me started on this rant… Toll roads are a nasty business, packed full of sneaky administrative fines and charges. If you want to know more, and why you shouldn’t let toll roads be built in youir area, have a read of this article by Choice which shows that toll commuters spend up to 20% of the weekly minimum wage on these costs!

The cost of parking on commuting

Whilst only really affecting city commuters, parking can also add up to be a substantial cost for some. It is difficult to get accurate information on parking costs, but some sources suggest Australia’s cities have some of the highest parking costs in world and can be up to $40 per day for full day or pre-arranged parking.

Off-street or adhoc parking in places like CBDs or hospitals however can have ghastly hourly rates, with figures like $30 per hour becoming common in Brisbane accoridng to this article.

For our city commuters, this parking cost can add up to $10,000 per year, or around $1.33 per kilometre!

The cost of road-side assistance

Most people purchase a road-side assistance plan for their vehicle, or have one included with their insurance policy or car loan or lease. However, on average these stand-alone policies cost around $100. It is a small expense, but not negligable at 1.5 cents per kilometre.

The total cost of commuting

Conservatively, Savvy Australian’s that commute the average distance will pay somewhere between 44 and 54 cents per kilometre in terms of operating cost for their cars (but probably a whole lot more).

When you add in the cost of depreciation of between 14 up to 70 cents per kilometre for the average Aussie car, or anywhere from 55c to $2.05 per kilometre for a brand new car, things start to get a little more expensive.

Further adding the purchase or financing costs we start to get a more realistic example of the actual total cost. Financed vehicles on average add an extra 90c per kilometre, and the opportunity costs for outright purchases range from 3 cents per kilometre for my car, up to 11 for a small new commuter, and 41 cents per kilometre for the average car.

In summary – my car costs me 44c in operating costs, 14 cents in depreciation, and 3 cents in opportunity cost for a total of 61 cents per kilometre after everything is said and done! This is bloody good value motoring, but it is still expensive and I can save around $150 a week purely by cycling to work and leaving the car at home! On average if I drive the full commute, I would rack up 10,000 kms costing me around $6,100.

The average Aussie however, is probably paying something like 44-54c in operating costs, 70c in depreciation and either somewhere between 11 to 90c in financing or opportunity costs; an average of $1.70 per kilometre. Based off the average 7200km yearly commute, this is $12,204, and doesn’t factor in the additional costs of tolls, parking, pleasure driving or other add-ons like roadside assistance, fluffy dice, car washes and air fresheners!

This underestimates the total cost that cars are costing Australians, with Budget Direct research showing the standard two-car household spends nearly $15,807 per year on their vehicles, with metropolitan households spending a touch more at just under $18,000.

If we wanted to equate this to an hourly rate – lets take this $15,807, add the lost productivity and then divide it by the number of hours spend driving. The simple math for the Aussie household is $15,807+16,800 / 240 = $135 per hour. Your commute is actually costing you $135 per hour, and that is before you have even considered the additional risk you face behind the wheel!

The risk cost of commuting

It is a well known fact that driving to the airport is statistically speaking, much riskier than hopping on an airplane for a flight. Driving a car a few hundred kilometres is statistically equal to flying for 10,000 kilometres! Each year in Australia there are unfortunately hundreds of thousands of motor vehicle accidents.

Sadly, on average, 3 people will lose their lives on our roads every day. This number has dropped by more than a third since records started being collected in 1970, due to rapid advances in motor vehicle safety, but it still a tragic figure. More Aussies have died in motor vehicle accidents than our combined fatalities during World War 1, The Korean War, World War 2 and the Vietnam War!

Globally, Australia is ranked 15 out of the 31 OECD countries for having the highest number of motor vehicle deaths per year (per 100,000 population) at 5.5 per 100,000. This is nearly half the fatality rate seen in the United States, but significantly lags behind Europe where the number is closer to 3 deaths per year per 100,000 people. It is unfortunately not uniform around Australia, with the death rate nearly 3 times higher in the Northern Territory than it is in other states.

To put things into perspective, the national average is approximately one death per 250 Million Kilometres traveled. Although you should always take statistics with a grain of salt, if we do the math, if you are driving the average 10,000 kms per year (commuting plus pleasure driving) then you have a .004% chance of being killed each year you drive. Of course, there are any different modifying factors that increase or decrease your risk – such as your age, demographic, location and time (Friday evening is the riskiest time).

Injury rates from motor vehicle accidents are much more common than fatal accidents (around 27 times more) with over 110 people per day being seriously injured from motor vehicle accidents. In 2016, the cost of these injuries alone added up to over $33 Billion in total costs (disability related costs, medical expenses and out of work productivity costs) to the taxpayer.

Again, putting things into perspective, the national average is approximately one serious injury per 9 Million kilometres driven. Again, if we do the math on the average 10,000 kms per year, then this means you have a .1% chance per year of having a motor accident that results in a serious injury. That is a statistically significant number.

But what about minor accidents? Fender benders, or even write-offs that miraculously don’t cause personal injuries? Well its very difficult to obtain these statistics as they aren’t gathered by any government department, not even the Australian Bureau of Statistics. Many of these accidents even go unreported to Police anyway, and the best indicator we have is of reported serious vehicle injuries which is around 40,000 per year.

The figures for minor accident claims seem to be fairly well guarded by actuarials and insurance underwriter statistics departments. At my best guess, I would estimate in Australia this is in excess of 100,000 motor vehicle accidents per year, or one per every 3.6 million kilometres traveled. This puts you at nearly a .3% chance of having a vehicle accident each year.

The risk of riding a bike instead:

Our most current Government BITRE statistics show that there have been 35 fatal bicycle accidents per year, but it doesn’t mention serious injuries. One number I got from a bicycle advocacy group on Theconversation stated that one in five injuries on Australian roads was a cyclist. The AIHW National Hospital Morbidity database showed that in 2016, a total of 12,027 cyclists presented to hospitals with cycling related injuries, which roughly agrees with this claim, although the AIHW database didn’t discriminate about location and whether the incident involved traffic.

There is probably a lot less cyclists on our roads and paths than there are drivers, which makes it difficult to make an accurate comparison between the two activities. A number I took from Mr Money Mustache is that in the United States, the cycling fatality rate is 6.9 deaths per 100 million miles, or in the Queens English, 4.3 deaths per 100 million kilometres.

Australian roads are much safer than American roads – Their driving fatality rate is 2 deaths per 100 million kilometres whereas ours is .4, so I would presume our cyclists should at least have a similar advantage, lets call it one death per 86 million kilometres cycled.

Compared to driving then, this might make you think riding a bike in Australia would be three times as risky for your commute, right? Well its not quite that simple. You need to unpack the demographic a bit more of exactly who is riding the bike if you want to get an accurate figure for what risk you will face.

Without trying to pull numbers out of my arse, remember that a lot of cyclists are either probably fairly young with no driver training, disqualified drivers, adrenaline seeking mountain bikers, risk taking MAMILs (Middle Aged Men In Lycra – who actually make up the vast majority of our cyclist hospitalization rates) or road racers. A much smaller percentage are actually responsible adults with good driver skills commuting to their jobs.

Riding a bicycle provides a large number of health benefits – one of which is that every hour of exercise supposedly increases your lifespan by 6 hours! Mr Money Mustache has written an excellent article on this. As a former engineer as well, he has actually crunched the numbers and come up with an astonishing figure: Riding a bike is much safer than driving a car!



Driving a car is horrendously expensive, time consuming and risky to your health. If you want to reach Financial Independence and live your best life, you had best avoid traffic jams and switch your daily drive commute for public transport or a bicycle ride. If you can’t do either, perhaps you should consider moving closer to where you work, or ditching the job for one closer to home, or in a more affordable part of the country.


References and further reading[email protected]/DetailsPage/9309.031%20Jan%202018?OpenDocument

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