transportation cost ratio
The percentage of income spent on vehicle ownership and transportation — often the second largest expense.
Example
“Between car payments, insurance, and gas his transportation cost ratio had reached 22% of income.”
Memory Tip
SECOND BIGGEST EXPENSE — cars cost more than most people realise. Track the full cost.
Why It Matters
Understanding your transportation cost ratio helps you see if vehicle expenses are eating into your budget too much. If this ratio is too high, you may have less money available for savings, emergencies, or other financial goals.
Common Misconception
Many people only count their car payment when calculating transportation costs, but the true ratio includes insurance, gas, maintenance, registration, and parking. Ignoring these hidden expenses makes your actual transportation burden much higher than you realize.
In Practice
If you earn 5,000 dollars monthly and spend 400 dollars on a car payment, 150 dollars on insurance, 200 dollars on gas, and 100 dollars on maintenance, your transportation cost ratio is 850 divided by 5,000, which equals 17 percent of your income.
Etymology
Modern personal finance analysis — transportation as a percentage of budget.
Common Misspellings
Build a budget and track your spending
Related Terms
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See Also
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