Re: BOB2: What Do You Recommend to SMART?
Author: BOB2
Date: 08-13-2018 - 09:34
Despite the cost of over 80 cent per mile in depreciation, most folks significantly underestimate the cost of driving which is why you have to "discount" it, somewhat and not make a "head to head" comparison. So NO people don't factor many of those costs, and make costly decisions, without much regard to those very real costs.
Human behavior is not at all "rational" when it comes to these types of economic decision making. Short term "rewards" are almost always valued much more, than even much greater, long term rewards, making "assumptions' of rationality dangerous and often wrong. Humans also tend to discount "sunk costs" of vehicle ownership (once you own it, you're stuck with those perceived high fixed costs, and thus the "marginal cost" of use, is perceived of as "low")
Folks perceive many of these costs of auto ownership as "fixed", once you own the car, and once having bought it, your "opportunity cost" for using fall, the more you use it. Thus, many folks perceive only the most direct usage costs (like fuel) as the "marginal cost" of vehicle use. Now, with pay as you drive or "mileage" based insurance, there are more costs which can be "avoided" by limiting use. And thus, the more you can make costs "variable" with the amount of the use of the vehicle, the closer the "marginal cost" becomes to the "average", and the more rational the driver decision-making will become.
If I get the nature of some of your posts, you are in commercial transportation, and costs per mile are quite real costs in the marketplace, which are harder to "discount" when the truck wears out and you need a new one.