How To Decide If You Should Avoid a Toll Road

Google Maps gave every driver in America a powerful choice whether or not to avoid a toll road. Gone were the days when a tourist would mindlessly choose the toll road while locals took advantage of free back road options. Now, all you have to do is type in your destination and Google will give you toll or no toll options and calculate the difference in arrival time for you. Sometimes I am grateful I was born in the ’90s just so I can tell my kids one day that I helped my parents navigate with paper maps on our family road trips around the country. So now that America’s drivers are extremely well informed about their options, how would you go about making the decision?

The New Yorker’s Dilemma

I will use my friend as an example of the time cost you have to figure out when deciding Toll or No Toll. He typed in his friend’s address out in the ‘burbs and got two results. The first was the toll road option, which would cost $7. The second was the free back roads that had a few stop signs and traffic lights. Google Maps estimated that the toll road would be about 10 minutes faster, and the back road distance was 2 miles longer.

This kind of example is easy to analyze because of the similar distances involved. The main cost is time lost. Since 10 minutes is 1/6th of an hour, it makes sense to convert this $7 extra toll cost to an hourly figure. Essentially, we are trying to figure out what is your hourly wage because the decision here is if you want to trade time for money. $7 times 6 is $42, so our after tax hourly wage where we should be indifferent between the two roads is $42 an hour. However, it takes a lot of pre-tax money to produce after tax money in New York City. If you are an “Average Joe” office worker, making a solid 5 or low 6 figure income puts your local tax burden at around 10%. Add in a federal effective tax rate of around 20% plus Social Security and Medicare taxes of around 7.5% and your total tax burden might be around 37.5%. So to get $42 an hour after tax in New York City, you would need to make around $67.20 an hour. Under a 52 hour a year work calendar with two weeks of paid vacation, that’s equivalent to about $140,000 a year.

This example gives us a great rule of thumb to use for the time savings toll roads provide. For each $1 the toll road charges for 10 minutes of time savings, you should make $20,000 a year to not care about which route you take. So say you are going to the airport and have to pay a $4 toll to save 10 minutes. If you make more than $80,000 a year, it makes sense to take the toll road. If you make less than that, it probably makes sense to go on the free back roads.

What About Gas Savings and Lower Wear and Tear from Highway Driving?

In my friend’s example from earlier, the difference between the two routes was two miles. That would account for about a tenth of a gallon of gas for most vehicles today, which would cost less than 20 cents with today’s gas prices. That level of savings is so low it is unimportant for the analysis. If the back road alternative route is really out of the way, that will show up mostly as a time cost.

You can also assume that the higher impact to the vehicle from wearing on the brake pads and transmission would have some cost. However, so could stopping suddenly on a highway at high speed, so I think that factor does not need close examination.

Are There Other Considerations Why You Might Want to Take a Toll Road?

In a harrowing example of why taking a toll road is not always a time cost analysis, I had to wake up early one morning to take my girlfriend to the Orlando airport. At that time of day, the traffic would be smooth on the toll road or the back roads, so we chose the back roads, because I run a financial website celebrating frugality. I was afraid some of you might have been tracking me to catch any unnecessary spending and expose me as a free spending fraud.

Google Maps ended up being very confusing. We were driving through some back roads next to warehouses and commercial aircraft hangers and the trip was taking longer than expected after I made a wrong turn. She got to the airport with about an hour before the flight was to leave, but I underestimated the huge volume of passengers that flow through the Orlando airport. The TSA backs up so bad it looks like Black Friday at Circuit City in 1999. Anyhow, she barely makes the plane that she rescheduled to make it back in time for a work obligation. If she had missed it, the next one out would have got her back too late.

I was thinking about the problem the right way, but I made a critical error. You need to take into account the hourly wages of ALL of the occupants of the vehicle, not just the driver. Now that I am an early retiree, my hourly wage that makes me indifferent between free back roads and the toll roads is very low. However, my girlfriend is still working towards financial independence and needs to play by the rules of the working world for several more years, so her hourly wage of indifference is probably very high. She is very easy going and agreeable, so she was fine with going on the back roads even though it was the wrong mathematical decision.

Other reasons you would want to consider taking a toll road are safety, quality of the back roads, lack of smart phone navigation, and the reason you are driving. If the back road is through a high crime area and it is late at night it might make sense to pay the extra money. If there are tons of pot holes in the back roads, $7 of savings might need to go to your $250 repair bill for bent rims. If you do not have a smart phone, then the clearly marked signs on the toll road will probably be worth the money. Finally, if you are driving to an important work meeting or special event, you probably want to be early anyway so the value of time savings goes way up and lowers your point of indifference between the two road choices.

Hopefully you have enjoyed this random analysis of toll road decision making. If you ever actually run the numbers as I outlined above, I apologize because I did not include the cost of the time it takes you to decide whether or not you should go on the toll road.

Random Fun Fact: When I was a municipal bond trader, we heard an investor presentation from the New Jersey Turnpike Authority. If you haven’t heard, the State of New Jersey’s finances are a horrible wreck. They basically spent a lot of the meeting justifying why the Turnpike tolls could skyrocket and people would still pay it, so do not be surprised if you’re in Jersey and your tolls go way up over the next five to ten years.

Ever have a toll road horror story? What about a trip down the back roads gone horribly wrong? Comment below!