With today being the biggest travel day of the year, I want to solicit some opinions. Years ago, a friend suggested to me that I use the IRS’s mileage cost guidelines in determining the costs of travel by car. Currently that’s 50 cents a mile.
Using this rate often puts me at odds with people around me when discussing trips because they merely talk about gasoline costs. There’s a wide discrepancy between the two.
This mainly comes up when discussing long trips. They’ll say, for example, I’m going to drive to Tulsa because I want to save money. From Abilene, that’s roughly 400 miles, so just the trip should cost $400 roundtrip. Flying from Abilene to Tulsa currently costs about $200.
There are other considerations, of course, like transportation once you arrive, how many people are making the trip, etc. However I once heard someone say that if the trip is over 300 miles, flying is cheaper. That seems about right.
Another possibility is to rent a car. This is typically much cheaper than using your own car, unless you like to give money to the rental car agencies by buying the insurance they offer. In almost every case, the insurance you have on your car will also cover your rental (but ask your agent first!).
Anyway, what I’d like to know is if using the IRS mileage rates is legit. Or how should one calculate these costs?
Yes – the IRS mileage figure is fairly accurate. It is a Total Cost of Ownership thing. So you add in not just gas, but repairs, insurance, maintenance, taxes, etc and divide by a car’s mileage and you get something a bit more or a bit less than 50 cents/mile. I can’t remember if depreciation is factored in. As you mention, most people don’t connect the dots. When considering a trip they just look at gas and when they need to pay insurance or buy new tires they don’t look at it as a related expense to the trip.
I find it helpful to keep this cost in mind not just to compare with flying but:
– is it really worth driving 5 miles out of my way to save 2 cents per gallon on gas?
– Is it worth driving to the store 20 miles across town to save a few dollars over just ordering something online and having it delivered to my home?
It’s hard to think of a 20 mile trip costing $10 dollars. I’ve saved a lot of money on taxes just using the IRS figure. Don’t know if you could save more on taxes by doing actual accounting. I’m just not organized enough to do it.
But it’s definitely helped me to not drive too much trying to save 1-2 cents per gallon. Since my tank only holds 15 gallons that’s not much savings. And online shopping is a big saver if you can limit yourself to what you actually need.
Brian,
That’s a good point. My friend and I were both living in small towns when he made this observation to me in the context of determining when it was worth it to drive 30 miles to another town to go to the grocery.
Grace and peace,
Tim Archer