Automotive Life Cycle Economics and Replacement Intervals

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In the United States, the predominant mode of personal transportation is the automobile with over 90% of all passenger miles traveled in 1997 (Davis and Diegel 2002). Similarly, total passenger miles traveled annually in the U.S. have been growing at nearly three times the rate of population over past two decades. With transportation contributing more than 25% of global carbon dioxide emissions (WBCSD 2001) and personal vehicles accounting for 14% of U.S. energy use (Davis and Diegel 2002), the critical role of the automobile in sustainability challenges is clear.

The development of meaningful sustainable mobility solutions requires detailed understanding of the relationships between vehicle economics, vehicle performance, individual behavior, emissions, and more general societal and community factors. This study provides a framework for understanding overall vehicle economics and key economic variables in relation to individual ownership costs, operating decisions and replacement intervals. In combination with a parallel study of vehicle emissions and the implications for retirement (Kim et al. 2003), a more comprehensive view of the complex economic, environmental, and social system surrounding automobile use in the US is possible.

This study of automobile ownership economics and replacement intervals was carried out in two phases. Phase I considered the specific example of a single vehicle operated over a long period of time by a single owner while Phase II applied learning from Phase I to the study of a generic North American sedan operated under various sets of conditions grouped into scenarios. Phase I examined actual operator records and owner experience for a 1991 Model Year (MY) Ford Escort wagon. The framework developed to support the Escort analysis was then applied to the more general case of a generic sedan operated under typical or national average conditions.

For both studies, results were considered in terms of annual ownership costs, total life cycle ownership costs and optimum replacement intervals for ownership over the period 1985-2020. In addition, the generic vehicle results were considered in terms of used vehicle ownership costs and premiums associated with non optimal replacement intervals. Standard economic calculations and simple spreadsheet models were used for cost analysis, and a dynamic replacement model was developed to analyze the economic implications of vehicle replacement.

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Spitzley, D.V., T. Gruhl, D. Grande, J. Bean and G.A. Keoleian. 2004. Automotive Life Cycle Economics and Replacement Intervals. University of Michigan: Ann Arbor: 1-46.
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