The Oil Drum: Local

Yes, but it isn't just the owner who decides how long the car lasts.

You are exactly correct.  My 1999 Hyundai Accent is a great car - been absolutely reliable, it's fun to drive, and it gets around 36mpg (mostly highway) even though I drive it pretty fast.  But with 65000mi on it, it is almost worthless according to the insurance and trade in values.  But so what?  It works great, and there are 4 years or 35000mi left on the powertrain warrenty!  And because it isn't worth anything, I've cancelled the collision part of the insurance.  

Depreciation only matters if you sell it.  

If I wrecked it now, I'd buy a used car though.

Yes, This is an average. If anyone can find a further breakdown, please send it in.

But logically, if you move away from the mean on the higher end like the Luxury autos, depreciation is higher and gas prices are lower as a percentage - these folks may be less price sensitive (assuming they make more money) and those with older cars will have to spend more on maintenance and gas a percentage and will probably be more sensitive.

And I guess you could say that people that lease their car pay their implied depreciation every month.

But I guess the main issue is that once you own or lease a car, you incur a lot of fixed costs that are not dependent on how many miles you drive - except gas.

Even at 20mpg and $3.50 gas driving a mile only costs an incremental 17.5 cents. Most mass transit costs $1-2 for any trip, so the breakeven analysis of a car trip for a car owner is pretty high. And in economics, the marginal cost is all that really matters in the short term.

"Finance charges don't apply if you save and pay cash."

If you save and pay cash, that you are not paying interest or finance charges but you ARE forgoing the interest you might earn if you put the money to some modestly better use, such as a bank CD.  Interest at 5% per annum on the purchase price of $20,000 comes to $1,000 per year.

The number seems like a reasonable average to me.

This all seems like a strange way to look at the costs.  Here's an alternative:

The truck/car itself is like a house.  There is a long-term commitment to pay $x99 per month (x depends on the level of status symbol you want to convey), which includes the finance charges.  You can get rid of the truck/car at any point, but there are steep charges if you do, so most people stick it out for two or more years.  That means that the $x99 is a sunk cost commitment, like the house payment, paid in monthly installments.

Next, people pay for insurance just like house insurance.  There's some price for a year, but they pay either semi-annually or monthly.  I would guess that most pay monthly.  So there's another sunk cost commitment payed in monthly installments.

Next, there are repairs, maintenance, and everything else but gas, parking, and tolls.  These are fairly random events that just happen, or they're so cheap (like oil changes) that they seem that way.  They get mentally filed in the "stuff happens, and there is nothing you can do" category.

I suspect that for most people, most parking is just another monthly installment sunk cost.  They generally expect, and get, free parking (AKA paid by everyone else.)

So, finally, there are variable costs, such as gas, tolls, and metered or not-prepaid structure parking.  People resent these costs because they compete directly with their limited discretionary income.  A portion of these costs are probably mentally filed as fixed installment costs as well.  For example, people might expect to fill their tank once a week and pay $20 to do it.  However, anything beyond that is an un-mentally budgeted cost that takes away from other fun things.  

They resent it even more because they have already mentally budgeted $20, so it just isn't supposed to cost $40 instead.  They feel ripped off for the remaining $20.  Behavioral economists have found that people really hate getting snookered.  Gas is only supposed to cost $20 per week, so that extra $20 has to be some kind of theft; "must be corporate greed or something."

A corollary of the mental budgeting, which we have recently seen in action, is that people adjust their mental budgeting over time.  So millions of Americans adjusted their idea of the proper amount to pay for a truck/car over the course of the 90s to say that an SUV was a reasonable expenditure.  In the short term, people squealed when prices went up to $3 per gallon last summer, but then they calmed right down when prices dropped after that.  They had adjusted their mental budget for the higher prices, and felt better when they came back down.

The big problem is still coming.  That's when people attempt to reconcile their mental budgeting with their financial budget and realize that they can't make ends meet in the long run.  So far they seem to be just adding to their credit/housing debt. I suspect the real budget picture will become clear at about the same time they conclude that gas prices really aren't coming down much.

The AAA analysis is for a shopper, looking at a new car.  For the average driver, it's just wrong.

AAA clearly assumes a new car. The average vehicle on the road is 10 years old. So the average depreciation is maybe $750, not over $3,000.

For the average person, gas prices really are a big % of their cost!