We all see the price of gas and love to complain about the cost of filling up our tanks. What's funny though, is that we all detest paying for shipping when ordering online, but will readily drive to the store to buy something.
Driving back and forth to the store is in itself a shipping cost. Its a hidden shipping cost, where you are the shipper, picking up and delivering your own goods.
But because the cost isn't attached to the items we are purchasing, most of us don't realize how much it actually costs to drive to the store.
Forgetting about the cost of your time, we are actually paying multiple hidden fees when we drive to the store.
As this article started, the first cost which we do notice when its time to fill up our tanks, but don't attribute to individual trips, is the cost of gas.
However, gas is not the only expense. Your car has a limited number of miles it can run before it becomes it stops running all together. Therefore every mile you drive your car, costs you some of that life of the car, which thereby costs you money.
In July of 2012 I purchased a fully loaded 2011 Hyundai Santa Fe for exactly $30,000. I'm proud of that number as it was $5,000 lower than the sticker price and $2,000 lower than the (supposed) invoice price. Its tough to negotiate a price on a car that is lower than the price the dealership initially pays for the car (known as invoice price), so I'm proud of my purchase price, which took all my best negotiation techniques (which I'll post in another article sometime).
Now, lets say I drive my $30,000 car for 100,000 miles in about 8 years (typical 12,500 miles/year) before selling or trading it in.
According to the Kelly Blue book, 8 year old Hyundai Santa Fe's with 100,000 miles are currently selling for $5-8k. Lets say I'm a great negotiator when I sell and I get $10k for it, which makes my cost of ownership for the time I owned the vehicle $20k ($20k purchase - $10 sold = $20k).
Note that , if I was a bad negotiator, I may have paid $35k when I purchased the car and only gotten $5k when I sold it, making my cost of ownership higher at $30k. But for this article, I'll use the lower cost, which would ultimately give driving a better shot at being more economical than paying for shipping.
Now my $20k cost for 100,000 miles is just the cost of the car purchase. During the time I own and operate the vehicle, it needs maintenance and that costs money as well.
The maintenance plan on my Santa Fe is fairly simple having a $30 oil change every 3k miles and a $400 major maintenance (fluid flushes, adjustments, etc) every 30k miles. So during the 100k miles I'll change my oil about 33 times and have 3 major maintenance jobs performed. That comes to $2190, but lets say I get some deals and it comes to a round $2k.
So now my car cost $22k for 100k miles.
But we're not done yet, because around $50k miles I'll need new tires and breaks. Lets say I find some more good deals and get that done for just $1k (on this Santa Fe, that number is realistically closer to $2k or $3k).
So my 100k miles of driving cost me $23k.
But we're not done.
For the car to run I needed to purchase gas.
My Santa Fe gets about 25mpg on the highway and about 21 mpg in the city. We'll use the number that makes the cost lower, and doing the math, I will use 4,000 gallons of gas (100k miles / 25mpg) to drive those 100,000 miles.
Though gas prices have been all over the place for the last few years, from $3.50 all way up to $4.50 here in Vegas, lets say gas is consistently cheap at $3.50 per gallon.
Therefore, over those 100,000 miles, I'll spend $14k on gas.
So now my total cost of ownership for my 100,000 miles of driving is $37k.
But wait... we're still not done!
If I finance the car, the interest is yet another expense!
On a 4 year loan at 5%, I'll end up paying over $3k in interest before I fully own the car and no longer have to pay interest. So I have to add that into my cost of ownership for the car as well.
So the grand total, with all the expenses involved, calculates to show that I've paid $40k to drive 100,000 miles.
That means on average, and with "best case" numbers, it cost me 40 cents per mile to drive my car.
Now, back to the question as to whether or not to drive to the store or pay for shipping...
Walmart is 7.5 miles from our house, so to make a trip there and back is 15 miles. Multiply those 15 miles by 40 cents per mile, and you'll see it costs me $6 just to go to the store and back!
If I go to Walmart to get a $10 item, I'm actually paying $16 for that item. Depending on the weight of the item, I may have been able to get it shipped for only $1 or $2.
So I rarely make a trip to the store for just one single item. I try to always make a list so that its worth my $6. But often times, my list is large enough that I can qualify for free shipping from some stores, so I don't even need to waste my time driving back and forth to the store.
As an aside, but within the context of this article, and the reason I decided to write this article... I am currently selling some UV lamps that I acquired in a bad business deal. I sell them for $10 each on Craigslist. I always laugh to myself when people drive from the other side of town (40 miles round trip!) to pick up a lamp. Since their cost per mile is similar to mine, it will cost them roughly $16 to come pick up a $10 lamp!!! When I try to talk them into letting me ship it to them for just $8, they balk and complain that's too much for shipping.
People that buy items off of Craig's List are extremely cheap, so its funny to me that they don't see how much money they are actually spending to try and save a couple bucks.
As a final note, I tried to point out throughout the article, that I using numbers that led to the lowest cost of ownership and would therefore give the lowest price on cost of driving to the store.
Realistically it will cost me even more then 40 cents per mile; probably closer to about 50 cents per mile.
And in fact 50 cents per mile makes my mental calculation easier when I decide to drive somewhere. Because 50 cents is 1/2 dollar, and every mile I drive to go somewhere I have to drive back to get home, I can just use the amount of miles away something is and swap the miles for dollars.
For instance, if my destination is 20 miles away, that's 40 miles there and back, which means it costs me $20 to get there and back (40 miles X 50 cents/mile). If I drive to a store that is 15 miles away, it will cost me $15 to drive there and back.
So realize the next time you drive to the store that you are actually paying for shipping and calculate for yourself whether or not its not more economical to just order online and pay for shipping.