Why Are Transit Buses So Expensive?

by Randall O’Toole, The Antiplanner, February 16, 2026

One argument against rail transit is that rail vehicles cost a lot more than buses, even when adjusting for numbers of seats and vehicle lifespans. The transit industry is trying to fix that — by spending more on buses. As shown in the table below, table 24 of the American Public Transportation Association’s vehicle database says that an intercity bus costs less than $300,000, but in 2023 and 2024 transit agencies spent an average of more than $1.1 million for 40-foot buses to use for bus rapid transit.

Ordinary 40-foot transit buses cost an average of more than $900,000, while 40-foot commuter buses cost nearly $1 million. Admittedly, the under-$300,000 intercity bus isn’t necessarily 40 feet — APTA describes it as “>32’6″” — but standard 40-foot intercity buses of the type used by Greyhound and Peter Pan generally cost around “$440,000 to $455,000.” So why are transit buses so expensive?

Average New Vehicle Costs in 2023 & 2024

Harvard economist Edward Glaeser and several of his colleagues examined that question in a recent report published by the American Enterprise Institute and Brookings Institution. They found three issues responsible for the high cost of transit buses.

First, buy America requirements limited the number of bus manufacturers able to bid on transit agency bus orders. Less competition means higher costs. Second, transit agencies spent too much money customizing buses to their own specifications. Finally, many bus agencies bought buses in small lots — the median order was for just five vehicles — when they could have saved on each vehicle by buying more.

I’m not convinced by the limited competition argument. While I don’t support buy America requirements, the National Transit Database lists at least four major manufacturers of 40-foot buses (the most common size), Gillig, New Flyer, Proterra, and MCI, plus a lot of minor companies.

Glaeser et al proposed to increase competition by letting foreign manufacturers sell 100 buses a year in the U.S., but I’m not sure that would make any difference. The Chinese electric vehicle maker BYD has certainly worked the system to sell ridiculously expensive buses to U.S. transit agencies.

Glaeser also proposed tinkering with the formula the federal government uses to fund buses — it covers 80 percent of the cost of ordinary buses — to limit the amount agencies spend so that, for example, agencies might get to use federal funds to cover 80 percent of the cost of buses up to a certain amount, but be responsible for 100 percent of the cost after that amount.

That’s all well and good, but I can’t help thinking that Glaeser and his colleagues missed an important point, which is that federal funding of most of the cost of buses has divorced agencies from the need to be cautious in their spending. This is most visible in the purchases of electric and other alternative fuel buses.

Until 2022, the federal government covered 80 percent of the cost of Diesel buses but 85 percent of the cost of electric or compressed natural gas buses. That meant that an agency could buy a $1 million alternative fuel bus and their share of the cost would be the same as a $667,000 Diesel bus. Not surprisingly, U.S. bus manufacturers typically priced alternative fuel buses much higher than Diesel buses, whereas in other countries electric buses cost about the same as Diesel buses. A major reason transit buses have cost so much lately is that so many agencies have been buying alternative fuel buses.

This demonstrates that transit agencies regard federal dollars as an unlimited pool and the only dollars they try to spend effectively are the local dollars they must come up with to match the federal funds. Glaeser’s proposal to tinker with the funding formula won’t help; all it will do is lead bus manufacturers to tinker with their prices in order to get the maximum amount of federal dollars per bus.

This also demonstrates my contention that the real problem with transit is not a shortage of funds, but too much money. Transit is no longer about moving people; it is more about moving dollars from taxpayers’ pockets to interest groups such as vehicle manufacturers, rail construction companies, and union transit employees. Buying electric buses is just a form of virtue signaling anyway; in most parts of the country, the fossil fuels used to generate the electricity needed to power electric buses produce about as much greenhouse gases per passenger-mile as Diesel buses.

Farebox recovery ratios (the percentage of operating costs covered by fares) are typically around 100 percent in Asia, and are often above 50 percent in Europe, but are down around 20 percent in the United States. Rather than not spending enough on transit, as transit advocates claim, we are spending way too much.

Instead of tinkering with funding formulas, Congress should just get rid of all the percentage match requirements. While I don’t believe the federal government should pay for transit or any other form of transportation, if it is going to, it should just give a lump sum to each transit agency. That lump should be proportional to the fares the agencies collect so that agencies have an incentive to increase ridership rather than to work the system to increase their share of federal dollars.