MINNESOTA: Variabilization of Fixed Auto Costs
The Minnesota Department of Transportation and its consultant team led by Cambridge Systematics have completed a demonstration of how drivers change their travel behavior when some of the fixed costs of owning and operating a vehicle are converted to variable costs. The pilot project simulated conversion of vehicle lease and/or insurance pricing from traditional fixed payments to payments based on actual miles driven. This demonstration may help lease companies consider structuring incentives to reduce miles driven over the life of the lease, thus improving the resale value of vehicles, and may help insurance companies better understand the mileage-based insurance market.
Study Completed
The study was completed in November 2005 and final analysis. In March of 2006, the consultant team submitted its recommendations. Project results will be posted on the research web site at the Minnesota Department of Transportation.
This project supports the notion that some drivers will reduce mileage in response to price signals, although the range of responses, variability of the data, small sample size, short experiment period, and lack of negative consequences make it difficult to come to definitive conclusions. However, if structured in a fashion where consumers see themselves benefiting, PAYD products may be able to fill a significant market niche.
The project advisory committee accepted the final reports. Part I is titled "Pay-As-You-Drive Experiment Finding" and Part II is titled "Potential Public Policy Implications of Pay-As-You-Drive Leasing and Insurance Products." In late March 2006, the results from the demonstration were reported to the Transportation Research Forum at New York University.
The complete final reports can be found on the web at:
- http://www.lrrb.org/media/reports/200639A.pdf (PDF, 1.6MB)
- http://www.lrrb.org/media/reports/200639B.pdf (PDF, 509KB)
- http://www.lrrb.org/media/reports/200639C.pdf (PDF, 228KB)
The reports are separated into experiment findings, market research, and policy implications.
For More Information Contact
Kenneth R. Buckeye
Mn/DOT
Phone: (651) 296-1606
Fax: (651) 215-0443
E-mail: kenneth.buckeye@dot.state.mn.us
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