Cost of car ownership

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 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.

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. Although he got his car almost for free, he still had to spend at least $4k+ per year.

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. 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 average 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 is 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!

Beyond the numbers

But even this is likely 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 exponentially 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 lanes³. 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. See how parking destroys cities.

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. Every person switching from a car to other modes means less traffic. 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 just 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 roughly $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 would argue that many of “you” are probably overestimating the difficulty of going car-light, 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.