The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
Unless you’ve been living under a very large rock for the last decade, you know that the sticker price for the basic Class 8 rig has increased significantlydue to the addition of mandated exhaust emission control technology – to the tune of $21,000 on average between 2002 and 2010.
That’s of course before the estimated price tag of the federal government’s impending fuel economy/greenhouse gas (GHG) emission rules get factored in, which could total $6,000 or more per tractor.
The same price increases are happening for light vehicles as well, though not to such a high degree. But what’s also happening now is that the base operating costs for light and heavy vehicles alike are starting to go up as well, and not due to the recent spikes in fuel prices alone.
Heavy trucks, for example, that use selective catalytic reduction (SCR) technology need to fill up with diesel exhaust fluid(DEF) on a regular basis, and while neither the required amount nor the per gallon cost of DEF comes anywhere close to what truckers shell out for diesel fuel these days, it’s still an incremental cost that’s got to be factored into the operating equation.
Similar trends are occurring in the light vehicle space, too. Indeed, according to AAA’sannual Your Driving Costs study, there’s been a 1.9% rise in the yearly costs to own and operate a sedan in the U.S. Down at the dollars and cents level, that means the average costs are up 1.1 cents per mile to 59.6 cents per mile, or $8,946 per year, based upon 15,000 miles of annual driving.
"The average driving cost for 2012 is up due to relatively large increases in fuel and tire costs, and more moderate increases in other areas," said John Nielsen, AAA’s director of automotive engineering and repair. "Though those increases were offset by a decrease in depreciation, overall costs increased 1.9%.”
[Nielsen discusses some of those cost trends in the video below.]
Light vehicle operating costs are up in every category by the way – for sedans, sport utility vehicles (SUVs) and minivans, each to a varying degree as indicated below on AAA’s helpful chart:
Based on Driving 15,000 miles annually
Cost Per Mile
Cost Per Year
The biggest reason for the operating cost jump, of course, is the rise in fuel prices, said Nielsen. “The cost of fuel had the largest percentage increase from 2011 to 2012, rising 14.8% to 14.2 cents per mile on average for sedan owners,” he noted. “The average cost of regular grade fuel – which is used by most of the study vehicles – rose 16.6%, from $2.880 to $3.357 per gallon.”
The fuel costs in the 2012 study, by the way, were calculated using the national average price for regular unleaded gasoline during the fourth quarter of 2011, AAA stressed.
Here’s something else to think about while we’re on the subject of fuel prices and fuel economy: the spare tire on many vehicle models is being ditched entirely, even the ridiculously small donut spare, to help automakers comply with more stringent fuel economy standards. AAA’s Nielsen explains more about that unsettling trend in the video below:
OK, back to the driving cost study. The cost of tires ranks second highest among the factors that rose from 2011 to 2012, increasing by 4.2% percent to one cent per mile on average for sedan owners, AAA noted.
The rise in cost can be attributed to higher costs for natural rubber, and the increased cost of oil used in tire production and transportation from factory to distributors across the country, Nielsen noted, while collateral factor is a trend for manufactures to equip new cars with premium-grade tires rather than mid-grade tires.
One nice surprise: vehicle depreciation costs dropped 4.9% overall, according to AAA. Though they were up slightly in 2011, for 2012, the trend shifted into reversed – a change that may be a consequence of reduced new car sales over the past few years, which has resulted in a relative shortage of good used cars on the market, driving up their value.
“This is good news for those in the resale market as their vehicles will retain a greater portion of their purchase cost,” Nielsen said.
[Here are a few tips concerning how to extend the life expectancy for most light vehicles – old hat for the experienced truckers out there, but well worth keeping in mind nonetheless.]
Maintenance costs are up slightly, though, increasing 0.7% to 4.47 cents per mile on average for sedans. Factors contributing to the increase include higher prices for oil and more manufacturers now requiring synthetic or synthetic-blend motor oils, said Nielsen.
“Although the use of these oils often comes with extended service intervals, the higher cost of the oil combined with increased maintenance operations at each service – which adds to the time require – can combine to increase overall vehicle maintenance costs,” he explained.
Finally, average insurance costs for sedans increased sharply this year as opposed to 2011, rising 3.4% percent or $33 to $1,001 on an annual basis.
“Insurance rates vary widely by driver and driving record, issuing company and geographical region, so out insurance cost estimates are based on a low-risk driver with a clean driving record,” noted Nielsen. “For 2012, this group saw a small increase that offset a decrease experienced in 2011. Quotes from five AAA clubs and insurance companies representing seven states showed across the board increases for all sedan sizes, with large cars having the biggest increase.”
Here’s a last thought to chew over. AAA has compiled and published the Your Driving Costs study for 62 years now – in other words, since 1950, back when a guy named Harry Truman was president and the name Elvis Presley meant nothing. That year, driving a car 10,000 miles annually cost 9 cents per mile and gasoline sold for a measly 27 cents per gallon.
My how the times have changed.