Household spending on transportation is one of the largest expenses for American households. It influences many of their personal decisions, including where people live and work. This chapter explores three national measures of household spending on transportation:
- Personal Consumption Expenditures, which measure total national household spending on transportation;
- The Consumer Expenditure Survey, which measures individual household spending on transportation; and
AAA per-mile operating costs for new vehicles.
Personal Consumption Expenditures
Personal Consumption Expenditures (PCE) is the broadest measure of consumer spending in the American economy. It measures total national household spending on transportation-related goods and services, such as vehicles, fuel, and for-hire transportation. It also measures total national transportation spending by governments, employers, and other organizations on behalf of households—for example, employee transit subsidies. The Bureau of Economic Analysis (BEA) produces PCE using data from a range of sources, including trade organizations, the Census Bureau, the Bureau of Labor Statistics, and the Centers for Medicare & Medicaid Services. PCE measures national aggregate spending only; it does not measure differences in spending among individual households.
In 2014 transportation expenditures accounted for $1.23 trillion (10.4 percent) of PCE, making it the fourth largest category after healthcare, housing, and food (figure 6-1). Transportation expenditures increased 46.8 percent, from $838 billion in 2000 to $1.23 trillion in 2014 (figure 6-2). However, total expenditures increased by 74.7 percent, from $6.79 trillion to $11.87 trillion over the same period. Moreover, expenditure growth for healthcare (120.5 percent), housing (78.7 percent), and food (71.3 percent) outpaced expenditure growth for transportation. As a result, the percentage of total expenditures for transportation declined from 12.3 percent in 2000 to 10.4 percent in 2014.
Expenditures on Personal Vehicles
Personal vehicles account for the vast majority of transportation expenditures in the PCE—$1.13 trillion in 2014, or 92 percent of total transportation expenditures (figure 6-3). This amount includes costs for purchasing, operating, and maintaining personal vehicles.
New and used vehicle purchases account for $375 billion in expenditures, or one-third of total transportation expenditures (30.4 percent). Gasoline and motor oil purchases account for $373 billion (30.3 percent) in transportation expenditures, similar to the percent expended on vehicle purchases. World oil markets and national and regional refinery prices directly affect the cost of gasoline and motor oil. Vehicle gas mileage and congestion, which limits achievable mileage, also affect the cost. Finally, other vehicle expenses, such as repair costs and insurance, account for $384 billion (31.2 percent) in transportation expenditures. Vehicle age, vehicle reliability, pavement conditions, prices of parts, and local market conditions affect the amount spent on repair.
Expenditures on Intercity and Local For-Hire Transportation
Air passenger travel spending accounted for $52 billion (4.2 percent) of transportation expenditures; intercity bus, train, and ship fares accounted for $6 billion (0.5 percent). Local for-hire transportation services account for $42 billion (3.4 percent) of transportation expenditures. Further disaggregating local transportation shows that mass transit represents 49 percent of expenditures on local for-hire transportation ($21 billion), taxis represent 14 percent ($6 billion), and other services, such as sightseeing buses, account for the remaining 37 percent ($16 billion).
Household Transportation Expenditures
The Consumer Expenditure Survey (CE), administered by the Bureau of Labor Statistics (BLS), measures individual household spending in the United States. A nationally representative sample of households provides detailed information on expenditures, income, and household characteristics. The CE is the only Federal survey that contains information on the complete range of expenditures for individual households, including transportation.
The CE shows that households in the United States spent an average of $9,073 on transportation in 2014, making transportation the second largest household expenditure category (representing 18.0 percent of total expenditures) after housing (figure 6-4). Transportation accounts for a greater percentage of the CE than the PCE because the CE includes only direct household expenditures, whereas the PCE includes expenditures on behalf of households (box 6-1).
Average annual household transportation expenditures have increased more slowly than other major expenditures (figure 6-5). From 2000 to 2014, transportation expenditures increased by 22.3 percent, from $7,417 to $9,073, while total expenditures increased by 44.9 percent, from $34,839 to $50,494. As a result, the share of transportation expenditures declined from 21.3 percent in 2000 to 18.0 percent in 2014. In contrast, housing expenditures increased by 45.8 percent (from $11,494 to $16,763), food expenditures increased by 47.3 percent (from $5,164 to $7,607), and health expenditures increased by 110.5 percent (from $1,938 to $4,080) in the same period.
Household transportation expenditures vary by household characteristics. For example, rural households spent more on transportation ($9,102) than urban households ($8,772) in 2014, in part because rural households have higher rates of vehicle ownership and drive more miles per capita.1 In addition, households without vehicles spend lower amounts on transportation.
Average annual expenditures are a useful measure of household spending on transportation; at the same time, however, spending for an individual household can vary greatly from year to year. For example, households have much higher expenditures in years that they purchase vehicles. Year-to-year changes in gasoline prices and vehicle insurance premiums can also affect expenditures for an individual household. The CE does not capture these changes for households because it is a cross-sectional survey and samples a different group of households each year.
Expenditures on Personal Vehicles
The average household devotes the vast majority of its transportation budget (93.6 percent of $9,073 or $8,492) to purchasing, operating, and maintaining private vehicles (figure 6-6). Vehicle purchases account for 36.4 percent ($3,301) of transportation expenditures, gasoline and motor oil account for 27.2 percent ($2,468), and other vehicle expenses, such as repairs and insurance account for 30.0 percent ($2,723).
Expenditures on Intercity and Local For-Hire Transportation
Public transportation accounts for the remaining 7 percent ($581) of household transportation expenditures. Within public transportation expenditures, intercity travel represents 82 percent ($474) of expenditures—64 percent ($370) for airline fares; 14 percent ($84) for bus, train, and ship fares; and 3 percent ($20) for local transportation in other cities. Local public transportation accounts for the remaining 19 percent ($108) of public transportation expenditures.
Transportation Expenditures and Income
Households spend relatively similar percentages on transportation across all income categories (table 6-1), with the percentage ranging from 15 to 19 percent. While the percentages remain relatively similar, households in the top income quintile spent nearly five times as much per year as households in the bottom income quintile—$16,788 versus $3,555.
Higher income households spend more on transportation because they are more likely to own vehicles: 97 percent of households on the top income quintile have at least one vehicle, compared with 63 percent in the bottom income quintile. Moreover, higher income households have greater numbers of vehicles. Households in the top income quintile own an average of 2.8 vehicles per household, whereas households in the bottom income quintile own 0.9 vehicles per household.
Per-Mile Vehicle Operating Costs
The American Automobile Association (AAA) collects data on automobile operating costs annually and publishes per-mile cost estimates for new vehicles driven 15,000 miles a year for 5 years (box 6-2). Figure 6-7 shows vehicle operating costs from 2004 to 2014. In 2014 dollars, operating costs declined 15 percent from $0.68 per mile in 2004 to $0.58 per mile in 2014. The primary reason is that fixed ownership costs, which represent 70 percent of operating costs ($0.41 per mile in 2014) for new vehicles, declined by 23 percent in the same period. Fixed ownership costs include depreciation, vehicle insurance, license and registration fees, and finance charges. Gasoline, a highly salient cost to consumers because they see prices posted at every gas station, represents 19 percent ($0.11 per mile in 2014) of operating costs. Finally, maintenance and tires account for the remaining 11 percent ($0.06 per mile in 2014) of operating costs.
1 For more information on travel behavior and demographics, please see U.S. Department of Transportation Federal Highway Administration, Summary of Travel Trends: 2009 National Household Travel Survey, available at http://nhts.ornl.gov/2009/pub/stt.pdf.