You know you should question everything, right?
Motoring costs – oh the huge manatee
“Motoring Costs 117% Higher Than 25 Years Ago” reads the headline. In the article (which is basically regurgitating content from the Daily Mail) is an oft-touted refrain:
Drivers are some of the hardest-hit taxpayers in Britain, said Tory MP and transport campaigner Robert Halfon, as quoted by the paper. Motorists continue to suffer from law-makers’ “trendy, anti-car green policies,” he added, urging the Chancellor to slash both vehicle excise duty and fuel duty to support cash-strapped drivers.
Really? Let’s Numberwang.
First of all, we need to know the inflation between 1987 and 2012, to normalise our figures (the figures in the article already account for it, so that 117% rise is over and above inflation). The Bank of England’s calculator says £100 in 1987 equates to £238.20 in 2012: in order to compare a 2012 price with a 1987 one, we’ll have to divide it by 2.38.
Good. Now we can get cracking.
Vehicle Excise Duty
First figure under the scope is the cost of VED. The article says:
the average annual bill a driver pays for vehicle excise duty now stands at £490, against just £100 in 1987
That’s a big increase. Even after inflation, it’s a 106% increase. VED has doubled.
But has it? Let’s double check.
According to the Department for Transport, “there were 34.5 million vehicles licensed for use on the roads in Great Britain“. And, although a “horse’s mouth” figure for total VED revenue for the 2012-13 financial years so far eludes me, the Institute for Fiscal Studies estimates it at £5.9bn. Let’s be generous and round that up to £6bn.
So, 34.5 million taxed vehicles, raising a total of £6bn. That’s an average of £174 per vehicle.
£174 is somewhat different to £490. That’s more than just a margin of error.
You only have to look at the VED tables (for cars, motorbike and LGVs, and HGVs) to see that the only vehicles for which you can actually pay more than £490 on a 12-month disc are band K-M vehicles which have been registered that year (after the first year they fall to £490 or below) and HGVs in bands E-G: unquestionably a tiny minority of vehicles.
The idea that £490 can possibly be the mean level of VED is utterly absurd.
So, £174 to tax a vehicle, on average. In 1988 prices? That’s £73. Or, to put it another way, VED has fallen by 27% in real terms in the last 25 years.
Let’s see what the article says about insurance:
Insurance, which cost an average £280 a quarter of a century ago, now has a price tag of £652 for fully comprehensive cover and £1,057 for third-party, fire and theft, the Daily Mail reported.
Oddly enough, only yesterday I took a look at insurance. Note that the figures in there suggest an average policy premium of £440 (derived from the insurance market value and the number of insurance policies), although this is averaged across all policy types. The AA’s figures for fully-comp and TPF&T policies are £595 and £820 respectively.
The cited figures, however, appear to be the same as these published by Confused. (Note that, although significantly higher than in 1987, the article points out that policy premiums are in rapid decline, falling 24% in the last two years.)
If we take figures from the Association of British Insurers – and these happen to be for 2011, when insurance premiums peaked at around 130% of their current levels – they say that motor insurance premiums raised £13.3bn from 23.8 million vehicles. That’s an average premium of £559. (And if it’s since gone down by 24% then the overall average would be £425, which is actually lower than my derived figure from yesterday.)
As an aside, it’s interesting to note that motor insurance yielded a £0.5bn loss in the same year, thanks to the high costs of payouts. Never mind taxation, even the market sometimes can’t cope with the costs incurred by driving.
So, what to take as our average policy premium? We could use £425, £440, £559, £652, or we could approximate an average by way of some other logic. Let’s take a figure which, given the range, seems most likely to back up the “rising costs” claim: we’ll use £652.
In 1987 prices, that would be £274; £6 less than the £280 cited. So insurance has fallen by 2% in real terms in the last 25 years.
Fuel is, of course, a major cost of motoring. The article says:
There has also been a 64% surge in petrol and oil prices in the past 25 years, with much of the cost stemming from fuel duty
The best data I can find is that of the AA: these figures cover years before 2006 whilst these cover 2006-12. In 1987 you’d have been using four-star at 37.4p a litre (170p a gallon); in late 2012 you’d pay 138.9p per litre. If we take inflation out of the 2012 figure, that’s 58.4p in 1987 prices. So in real terms, the price of petrol at the pump has risen by 56%.
But wait, the price of fuel isn’t the price of fuelling a car.
Cars aren’t what they were in 1987. One of the things that has been massively improved is fuel efficiency.
Now, to figure this one out properly you’d need to know the average fuel efficiency of a car in 1987 and the same for 2012, which isn’t feasible. Even the figures you’d need to derive a reasonable approximation are going to be impossibly hard to come by. The best I can find without too much difficulty is a statement that cars are on average 23% more efficient than they were 10 years ago. I’d like to see the working behind that figure before I could trust it, but it hardly seems unrealistic.
If we take that as representative of improvement over the 25 year period, we’d find that fuel efficiency would have risen by 68% (from which we might guess that the average could have gone from 25mpg in 1987 to 42mpg in 2012).
Now, recall that fuel has risen by 56% in real terms. A 68% rise in fuel efficiency would make fuelling a car 7% cheaper in real terms. The most pessimistic estimate – and it’s very pessimistic – would be to assume that during the 15 years not covered by the above quote, no progress was made, in which case fuelling a car would be a little under 27% more expensive in real terms.
So whilst it’s hard to be accurate, it seems quite reasonable based on available data to say that based on the available data, the cost of fuelling a car has not risen significantly in real terms over the last 25 years.
It’s a bit vague for Numberwang, perhaps, but since there are no rules in Numberwang: that’s Numberwang!
Maintenance costs, then:
car maintenance costs have also seen a dramatic surge, rising by 57% over the same period
OK, I’ve only got so much time. I’m not going to hunt down the figures to refute that. But I remain healthily sceptical. For a start, it’s worth wondering whether servicing schedules and reliability have been factored in: my first car, registered in 1988, had a 6,000-mile service interval; the one I bought and registered in 2004 has a 12,500-mile interval and so is only serviced half as often. (Both 1.4-litre petrol engines with almost identical power output.)
How much does it cost to buy a car?
The only component of motoring expenses to see a decline is vehicle prices, which have contracted by 60% in real terms since 1987.
Well, Department for Transport figures back this one up, so I’ll leave it for now.
Regardless of whether motoring costs have risen or fallen, they need to be put into context. Some things get cheaper in real terms over time, whilst others become more expensive.
To complain about motoring costs without context is much like complaining that the cost of beer has risen. It’s not wrong, but if you don’t look at the cost of other drinks then much of the meaning is lost: beer may be relatively cheaper even if it’s more expensive in real terms than it used to be.
So let’s take a look at the main competitor to motoring: rail travel.
Reliable data is rather harder to come by for rail, but if you look at this graph of the rail fares index overlaid on the retail price index, you’ll be able to colour in a rather larger area where the former is above the latter than vice versa. Safe to say, rail prices have outstripped inflation and thus risen in real terms; this is backed up by the DfT graph mentioned earlier.
Indeed, at the risk of polluting data with an anecdote, my own experience is that to own, insure, tax, fuel and service a car purely for commuting – I don’t just mean the marginal running cost of using a car I already own for general use – is cheaper than the lowest season ticket fares I can obtain for the same commute by train. It’s the sole reason I have two cars: it’s cheaper than the alternatives.
So, whilst rail fares are up in real terms; VED is down in real terms, motor insurance is down in real terms, fuel costs don’t seem to have significantly changed in real terms, purchase prices are down in real terms, and maintenance we’re leaving for another day.
With or without context, motoring’s a pretty good deal and getting better.
I wonder what those “trendy, anti-car green policies” were. Because they’re really not working.