a car A house. And a fat bank balance. That’s what aspirations are all about, at least for most people. And in these days when the preference is for personal mobility, having a car certainly makes sense. But with inflation eating into your savings and fuel prices continuing to rise almost daily, one question remains. Should you buy a car or get around with ride-hailing apps like Uber and Ola? This answer largely depends on these factors: How much do you travel daily and how much are you willing to spend on the new vehicle? And, is it cheaper to have a car than a taxi ride?
a car A house. And a fat bank balance. That’s what aspirations are all about, at least for most people. And in these days when the preference is for personal mobility, having a car certainly makes sense. But with inflation eating into your savings and fuel prices continuing to rise almost daily, one question remains. Should you buy a car or get around with ride-hailing apps like Uber and Ola? This answer largely depends on these factors: How much do you travel daily and how much are you willing to spend on the new vehicle? And, is it cheaper to have a car than a taxi ride?
Buying a car has a huge initial cost. If you take out a loan, you’ll also need to consider the amount you have to pay the lender in equalized monthly installments (EMI). Then you have to factor in the costs of maintaining the car, its insurance and fuel costs. More importantly, you will have to pay more if you use a driver.
Buying a car has a huge initial cost. If you take out a loan, you’ll also need to consider the amount you have to pay the lender in equalized monthly installments (EMI). Then you have to factor in the costs of maintaining the car, its insurance and fuel costs. More importantly, you will have to pay more if you use a driver.
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However, you have another option: continue with your ride-sharing apps instead of buying a car. There are problems with that too. The rate per kilometer is usually high and this can increase sharply during peak times (also known as surge pricing). You may also not get a taxi on time, this depends on the availability of drivers in the area. And, in many cases, they are simply not available at night.
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Now it’s time to choose one of the options. Still not sure? If so, let’s break down the cost of owning a car over a seven-year period with a round trip of, say, 40km per day and a fuel efficiency of 12km per liter in city traffic . While many people keep their cars for longer periods, seven years is a good average, especially for millennials and GenZs who upgrade their cars regularly. So what exactly are the costs of owning a car? Here it goes.
Down payment and EMI: A typical high-end hatchback or mid-size subcompact SUV costs around ₹10 lakh. Assuming a down payment of 30%, or ₹3 lakh, and the remaining loan interest in the range of 7-9% with a processing fee of 1% and a tenure of five years, the total EMI comes out to ₹14,000 per month and the full financing of the property a ₹11.5 thousand
Fuel: Assuming annual fuel inflation of 8%, fuel alone would burn a hole in the pockets of almost ₹11 lakh for seven years. (Base price = ₹100 per liter)
Insurance and maintenance: Third-party and self-damage coverage would set you back around ₹15,000 a year. You will need to reserve an additional one ₹5,000 a year for repairs and services. As the car ages, insurance premiums fall in line with the decline in Insured Declared Value (IDV), although maintenance costs tend to accelerate.
Parking fees: As this varies significantly by user and location, we have not included them in our calculations. However, if you don’t have free parking at home or at the office, you can make an approximate addition. For example, if you are a resident of Delhi, assume a typical working day of 8 hours, the Municipal Corporation of Delhi (MCD) charges around ₹10 per hour Over a period of seven years, this will set you back by another ₹1.3 thousand
Opportunity cost: If the down payment had been invested in a long-term bond fund, returns after indexation and taxes (loss of interest) would have been 7%. ₹1.8 lakh approximately.
After seven years, if the vehicle is sold for 30% of its original cost, the total cost of ownership comes to approx. ₹22.6 thousand
Some people, however, prefer using an Uber or Ola to buying a car. “With Ola or Uber, I don’t have to worry about finding a parking space. Also, it’s more convenient than driving during peak hours, and I easily use the commuting time to complete my daily tasks,” he said. said Hardik More, an associate product manager based in Mumbai.
We now break down the costs of using these taxis over a period of seven years, with a round trip of 40 km per day and for 20 days per month.
Basic brand: This is a fixed amount that must be paid regardless of the distance traveled (usually in the range of ₹50-60).
Distance rate: The figure of the stadium in metro is ₹9 per km in off-peak hours.
Travel time rate: This is the rate charged per minute (does not vary during peak hours)
Peak hour rates: Fares increase in multiples of non-peak charges (1.5 times assumed in a trip or day in our calculations).
GST: 5% of the total sum of all the above.
After seven years, for our base case, the costs of using Ola and Uber will be close ₹24 lakhs. That’s at least ₹1.4 lakh more than you spend on owning a car.
However, if you hire a driver for your car, the numbers become skewed in favor of transport companies. Assuming a salary of ₹15,000 per month (conservative estimate), with annual salary increases of 10%, the cost of owning a car increases another ₹17 lakh for seven years.
Using Ola or Uber, instead of owning a car, would be marginally cheaper over a seven-year period if your average daily commute is less than 20 km.
However, if we had to travel more distance per day, the benefits of using the services of appeal apps start to diminish. With a round trip of 40 km or more per day, owning a car is more economical. There are also questions of convenience. “Taxi drivers always ask for cash, often cancel trips without explanation, and often deviate from the recommended route shown on the map. This not only increases travel time, but also increases fares. As as a result, on numerous occasions I have reached my office late. As a result, I have been avoiding these services of late,” said Govind Goyal, Gurgaon-based commissary specialist.
Car ownership still has aspirational value, and so for many people it can be more than just a financial calculation. It can also be economical compared to Uber/Ola if you share the car and its costs with several family members.
Some smart tips to save costs
Buy a used car: A new car can lose up to 20% of its value in the first six months. Depreciation is one of the biggest costs that the public ignores when deciding to buy a car. Let’s say you buy a used car ₹5 lakh with a down payment of ₹3 lakh and a loan of ₹2 lakh, then using the same assumptions as our previous calculation, the total cost of ownership of the car over seven years falls to ₹19 lakh, lower than the ₹24.5 lakh cost of using Uber/Ola.
Negotiate a better loan deal:Negotiate with your lender for a lower interest rate and try to increase the principal amount repaid as a percentage of your EMI. (This reduces the interest payment over the life of the loan).
“Buying a car will involve a total purchase cost, but there will be flexibility in terms of personal transport. When you use transport services like Ola/Uber, the car purchase amount can be invested to earn a return, besides avoiding depreciation, insurance and other maintenance costs associated with car ownership. In most cases, ridesharing works better than ownership, and it’s the same here. But we also have to consider non-financial aspects like the flexibility of having your own transport,” said Ravi Saraogi, Sebi-registered investment advisor and co-founder of Samasthiti Advisors.
Ultimately, the choice is yours. If you’re buying a car for its comfort and aspirational value, a slightly higher cost might not move the needle. Likewise, if you travel a lot (more than 20 km a day), having a car is cheaper. On the other hand, an Uber/Ola saves you the hassle of driving in traffic and maintaining a car. You can use our calculation to guide your decision.
