Friday, April 25, 2008
The real price of commuting is $57K
I was thinking this evening about the cost of gas. After a few glasses of cheap red wine I came up with this analysis. Disclaimer, this is for entertainment purposes only!
With gas knocking on the door of $4 a gallon how much extra is that house in the OC worth for us commuters? Let's face it a large percentage of the IE workforce commutes into the OC or LA to work. We all know the reason, those areas pay more. But with the price of fuel going through the roof is it still worth it to drive 100 miles a day?
For arguments sake, let's say you have a 50 mile commute each way. That's 100 miles a day you are driving. The average MPG of the average vehicle is probably 25mpg. That means the average car is burning 4 gallons per day. At $4 a gallon that is $16 a day just in fuel. That works out to $336 per month on fuel. I'm not factoring in wear and tear on you car which probably adds another $50 a month. And god forbid you use the Fastrak lanes on the 91fwy, that can add another $200 a month easy.
The difference in the price of house you can buy is about $57,000. You can buy $57,000 more house if you live close to work and have the same monthly expenses for Mortgage and Fuel. Of course you are still probably going to have to drive a little bit. It's amazing to see how much difference it can make living close to work. ( I check the numbers on loans from $300k to $500k at 6% and its roughly $57k difference in the loan amount with a $336 payment delta).
Another way of looking at it is that you can take a job in the IE, close to home making $2.00 and hour less and end up with the same amount of money at the end of the month. And a whole lot more free time!
The only problem is that homes in the OC/LA are WAY more than $57k higher than IE homes of equal size. So it looks like the commuters will still be making the daily trek....