The Average American Spends This Much on Transportation — See How You Stack Up
Written by
Crystal Mayer
Edited by
Jenna Klaverweiden
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Transportation is considered an essential expense in most people’s budgets. In fact, it often consumes a large portion of their monthly spending, second only to housing. Transportation generally encompasses things like your car payment, auto insurance and gas. But you should also include things like vehicle repair and maintenance, the cost of public transportation, and parking or toll fees.
GOBankingRates researched how much the average American spends on transportation and how to cut back if necessary. See how you stack up with your transportation spending and determine whether you need to adjust your budget.
What Does the Average American Spend on Transportation?
Based on data provided by the U.S. Bureau of Labor Statistics, as of 2022, the average American spends approximately $72,967 on expenses each year. The average American’s budget includes annual housing expenses of $24,298 and annual food costs of $9,343.
Food and housing aren’t the only necessary expenses that make their way into the budget of most Americans. Transportation is also a top cost. Research shows that people spend $12,295 a year on transportation expenses. This means you can expect to pay over $1,000 each month in transportation costs.
What Else Do Americans Spend Money On?
In addition to necessities such as housing, transportation and food costs, the average American’s budget also includes a substantial amount of discretionary spending.
Discretionary spending includes apparel, personal care products, entertainment and other services. On average, Americans spend nearly $2,000 on apparel and services.
How Much Should You Spend on Transportation?
If you follow the 50/30/20 rule, which advocates allocating 50% of your budget to needs, 30% to wants and 20% to savings, then transportation would fall into the 50% category. But how much can you realistically afford to spend on your vehicle and its expenses?
The Bureau of Transportation Statistics reported that the average American household spends approximately 15% of its total budget on transportation. It is often the second-largest expenditure, second only to housing. However, lower-income households frequently spend more on transportation. In some cases, double the average.
While there is no set amount of money that you should spend on transportation, it is important to examine your budget as a whole and ensure that your total spending on needs (housing, transportation, utilities, etc.) is close to the 50% mark, if possible. If your costs exceed that amount, you may want to consider ways to cut back, including renegotiating new terms on your loan or even renting your vehicle out.
How To Cut Back on Transportation Expenses
If your transportation expenses are far exceeding the average each month, you might want to reevaluate your spending. First, you will want to write down all of your income and expenses to determine exactly how much money you are spending in each category. For transportation, you need to include your car payment, auto insurance, repairs, maintenance and parking fees.
To reduce your car payment, you can try to renegotiate the terms of your loan or seek a refinance. Sometimes, just getting a better rate can help reduce your payment by $100 or more each month. If the payment is substantially more than you can actually afford, you may want to consider selling your car or trading it for a less expensive model.
Auto insurance is another area where you may be able to reduce your spending. You can contact your current provider and ask to have your mileage or coverage reviewed to see if you are paying more than you need to. Or you can shop around to find more affordable rates.
Other Ways To Cut Back on Transportation Costs
Renegotiating the terms of your car loan or shopping around for a new auto insurance policy are not the only ways to lower your transportation costs. Public transportation is an often overlooked but sensible alternative to a hefty car payment. Depending on where you live, owning a car may not be a necessity. While not all cities are easily traversed via railway or metro bus, many are connected through some sort of mass transit system.
You can also try biking to work or school or look into ride-sharing with other commuters. If you really want to think outside the box, you can make your car work for you. Peer-to-peer car rental services can be utilized to turn your vehicle into an income-generating machine.
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