Cost of car ownership: the million-dollar decision you're not thinking about

One day, a PhD student mentioned the unexpected high cost of car repair—often over a thousand dollars, regardless of how cheap your car is. This got me thinking: how much have I actually saved by replacing a car with an e-bike?

I did a back-of-the-envelope calculation. Even though I thought I already fully appreciated the cost of car ownership, the result was eye-opening. Replacing my car with an e-bike was probably one of the most impactful and best financial decisions in my life.

People don’t see the true cost of car ownership

Here’s the quick calculation. I take the average number: the average cost of owning a new car in the US is, according to AAA, roughly $12,000 per year or $1,000 per month¹. If you have never thought about it, this may sound crazy. You may be confident that you are paying way less. But, note that car-related spending is usually the most underestimated category of spending. We tend to only pay attention to the fuel and not to other costs like insurance, registration, tax, and depreciation.

Why do we underestimate car costs so badly? First, people pay a big upfront cost that fades from memory. Depreciation is even harder to feel—your car quietly loses value every day, but you don’t see that depreciation. Second, we tend to unconsciously replace “driving cost” with fuel cost, forgetting everything else. Third, irregular expenses like repairs, registration, and taxes are infrequent enough to feel like surprises rather than actual, predictable costs of ownership. And then there’s parking; many of us pay for parking passes, meters, or garage fees so routinely that we stop even noticing it as a car cost. For instance, you pay somewhere between $400 and $1200 for parking garage access at UVA (vs. you can get $400+ incentive if you forgo the parking pass).

The result is that we massively underestimate how much we spend on cars.

My case: calculation

tl;dr: ~2 cars x $10k/year x 5 years ~ $100k. Cost of e-bike ownership is a rounding error.

I bought my e-bike in 2020 and sold an old car. If I followed the American lifestyle, I could have purchased a new car instead. If we think about 5 years, I’d have spent about

$12,000 x 5 = $60,000

to own a car. For an ebike, I’d use $100-$300/year. This includes depreciation, other equipment and accessories, maintenance, etc. You may be wondering why this is so low given that some ebikes are $2,000+ or even approaching $10,000. But the cost of owning an ebike is heavily concentrated in the purchase price. After buying one, you don’t really have much to spend on.

Although those expensive ebikes may be more visible, you can buy decent ebikes around $1,000 these days. In my case, I bought a Rad Runner Plus under $2,000 and sold it around half of that price. So, annualized depreciation was less than $200. Maintenance is just once or twice per year at less than $100 each time. The accessories and other equipment are also not too expensive; I still use many of the accessories that I bought. And the price of “fuel” is simply too cheap to be meaningful—maybe several dollars per year.

So, at the five-year mark, with $200/yr, the total cost for an ebike is really a rounding error at around $1,000. The difference would be

$60,000 - $1,000 ≈ $59,000

But that’s just one car. In the US, it’s totally normal for a household to have two or three. I could have also bought a car for my oldest as soon as they were old enough to drive.

$59,000 + $12,000 x 2 ≈ $83,000

If we had replaced the other old car with a shiny new car, we could have spent maybe an additional $2,000 per year.

$83,000 + $2,000 x 5 ≈ $93,000

That’s close to $100,000 right there just in 5 years!

Compared with car ownership, an ebike is practically free.

The cost of purchasing an ebike (remember, you’ll still retain lots of its value after several years) is roughly a single major car repair or maintenance you need to routinely handle.
The annualized cost of owning an ebike is just a couple of tanks of gasoline.
And then the cost of ebike “fuel” is just a cup of coffee that you drink while filling up your car, per year!

Your car may be costing you a MILLION dollars

$100,000 can be life-changing. It can mean being able to purchase a house or not—this was indeed a significant fraction of my recent down payment. It can mean a fully-paid college vs. a massive student debt. And if you invest the whole amount in an index fund (assuming 8%) for 30 years, it’ll grow to ~$1M!

In other words, choosing whether or not to own a car can literally determine whether you’ll be a millionaire when you retire. And remember, this difference can be made in just five years.

What happens if we extrapolate? After putting the initial $100,000 to work, if you forego two cars (~$24,000/year) for 30 years, the difference grows to about ~$4M!

How about used cars?

You might think: “But that’s for new cars. I drive a used car, so it’s way cheaper.” It’s true that the AAA number is based on new vehicles, and used cars do cost less, mainly because depreciation is lower. But maintenance and repair costs tend to be higher. When you add it all up, used car ownership still typically runs $5,000+ per year.

Also take a look at this video: Car ownership cost me a LOT of money. I’m done. He diligently collected most of the receipts and calculated how much he spent on his car. Even though he got his car almost for free, ended up spending over $4,000 a year. Most people buy much better (with plenty of remaining depreciation) used cars than this.

So let’s redo the math with used cars. Say, conservatively, you spend $6,000/year per car instead of $12,000. For two cars over 5 years, that’s still $60,000—and invested at 8% for 30 years, that alone grows to about ~$600,000. Similarly, starting with $60,000 and then saving $6,000 per year will get you to about $1.3M.

In other words, used cars can be definitely cheaper, but not drastically cheaper. It is still a million-dollar decision.

How about EVs?

EVs are way better than gas cars, for the environment, for air quality, and for fuel and maintenance costs. But EVs still don’t drastically change the ownership cost picture. The upfront price and depreciation are still significant, and you still pay for insurance, registration, parking, and tires. Unless you’re lucky enough to lock in an insane lease deal or something, you’re still spending thousands of dollars a year to own one.

And from the perspective of cities and built environment, an EV is still a car. It still takes up the same amount of road and parking space, still contributes to congestion, still prevents you from moving, still makes streets less safe for pedestrians, and still fuels the same sprawling infrastructure. And it probably destroys the road more than gas cars. Switching from gas to electric is a step forward, but it doesn’t address lots of negative externalities of car ownership.

Beyond the direct savings

But even this is underestimating the difference. Cycling is one of the healthiest habits you can have—an excellent low-impact aerobic exercise. Some people worry about not getting exercise on an ebike, but studies show that e-bike riders get roughly the same amount of exercise as acoustic bike riders². The reason is simple: because e-bikes are easier to ride, people ride them way more often!

It’s not just about physical health, but mental health too. From my experience, bike commuting can have enormous impact on mental health. The way it resets stress and lifts mood feels almost magical.

A report estimates that the health benefits of switching to bike commuting are about $1,000-$2,000 per year, although I’m not entirely sure whether this captures the full benefits of being healthy and happy.

And then there’s the impact on the safety of our streets—you’re not going to kill someone or destroy buildings with an ebike—and the climate crisis. These are harder to put a dollar figure on, but they’re enormous.

What this means for the cities

The benefits extend well beyond individual finances and fitness. If more people make this switch, many positive effects ripple through our cities.

Infrastructure costs can drop dramatically. Roads are expensive to build and maintain, and the damage grows exponentially³ with vehicle weight. A single truck does thousands of times more damage to the road than a bike. Better yet, bike lanes move five times more people per meter of street width than car lanes⁴. In other words, the number of people transported on a 5-lane stroad—that have been built and maintained with billions and billions of dollars—can be handled by a single two-way bike lane that costs almost nothing compared to that. Cities could redirect millions and billions from road maintenance to other priorities—or simply lower taxes.

Parking demand shrinks. Parking requirements have shaped American cities for decades, burying valuable urban land under asphalt. Constructing parking space is expensive. A single spot in a structured parking garage can cost $60,000 – $150,000 or even more for expensive places. Free parking seems free but someone always pays—usually through higher prices, higher taxes, or both. When people switch to bikes, that land becomes available for housing, parks, or businesses. And on a personal level, parking is a surprisingly concrete entry point: a university parking pass alone can run $500–$ 1,000 a year—enough to pay for a decent e-bike within a year or two.

Traffic congestion eases. Here’s the counterintuitive part: because bikes are so much more space-efficient than cars, it can trigger so-called traffic evaporation, where reduced road capacity actually leads to less total traffic. In Cambridge, MA, after separated bike lanes were installed on Garden Street, bike volumes surged over 500% with a corresponding drop in driving mode share. Across the Boston area, streets with new bike lanes saw car traffic drop 9–15% while bike trips soared. Every person switching from a car to other modes means less traffic because all other modes are much more space-efficient. If you have been to places like Copenhagen or Amsterdam, you must have seen all the quiet streets with very few cars (but with bike traffic jams). If some of those people on the bikes had to drive, these cities would have been completely choked with traffic.

The individual choice to ditch a car is already financially compelling. But when many people make that choice, the collective benefits multiply tremendously.

Conclusion

Here’s the bottom line: switching from a car-dependent average-American lifestyle to an e-bike probably saved my household up to $100k just over five years. If invested over a lifetime, that difference grows to over a million dollars.

Of course, this isn’t for everyone. Some people genuinely need cars for work, family situations, or disabilities. Some places just do not have any viable alternative to cars (~~run away!~~). I’m not arguing everyone should sell their car tomorrow. I’m just sad that our built environment, engineers, and car monoculture in North America pushes people into expensive car ownership.

But I think the most important step isn’t even about the numbers—it’s about questioning the default. Most of us never stop to ask: “Do I actually have to own a car?” We just assume we do, because everyone around us has one, because our cities were built around them, because it’s what you do when you grow up. But once you pause and genuinely ask the question, you might find that the answer is not as obvious as you thought.

I would argue that many of “you” are probably overestimating the difficulty of going car-light/car-free, while heavily underestimating the true cost of car ownership. Maybe you have never estimated the true cost, are too afraid to take the leap, or simply never imagined the alternatives.

So why not try your own back-of-the-envelope calculation? You might surprise yourself. And maybe try biking.