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Buying A Car Vs Hiring Taxis Everywhere: Which is More Economical?

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When it comes to transportation in India, the dilemma between buying a car and hiring ride-hailing services like Ola and Uber is a common one. While owning a car offers freedom and convenience, it also comes with ongoing expenses, making it potentially more expensive than expected. On the other hand, ride-hailing services might seem more economical, but their costs can accumulate over time, especially with frequent use. 

In this article, we will break down the economics of buying a car versus hiring Ola/Uber for your daily commute, giving you a clear comparison to help you decide which option is more financially viable.

    Upfront Costs: Buying a Car vs. Ola/Uber

    The initial purchase price of a car is a significant cost to consider when choosing between car ownership and using ride-hailing services. Buying a car involves paying a down payment, applying for a loan (if necessary), and incurring registration and taxes. For instance, the average cost of a compact car in India might range between ₹5 lakhs and ₹10 lakhs.

    In contrast, using Ola/Uber eliminates upfront costs entirely. You pay only for the ride, and the pricing is transparent with options like ride packages or pay-per-trip.

    Upfront Costs Comparison Table:

    ExpenseBuying a CarOla/Uber
    Initial Payment/Loan₹5 Lakh – ₹10 LakhNo upfront cost
    Registration & Tax₹20,000 – ₹50,000No registration fees
    Loan Processing Fees₹10,000 – ₹25,000N/A

    Maintenance & Running Costs

    Owning a car requires ongoing maintenance costs. Regular servicing, parts replacement, and insurance can add to significant amounts. In India, on average, you may spend ₹15,000 – ₹30,000 annually on car maintenance, including routine servicing, tire replacements, and insurance. Fuel costs are another factor; with an average fuel price of ₹100 per liter, your monthly fuel bill can vary depending on how much you drive.

    On the other hand, ride-hailing services like Ola and Uber have fluctuating costs depending on the distance traveled, time of day, and demand. However, you do not need to worry about maintenance, fuel, or insurance. The fare might be higher during peak hours, but for occasional travel, it might be more economical than owning a car.

    Monthly Costs Comparison:

    ExpenseBuying a CarOla/Uber
    Maintenance₹1,200 – ₹2,500N/A
    Insurance₹5,000 – ₹20,000 per yearIncluded in the fare for Uber
    Fuel₹4,000 – ₹6,000Based on ride cost

    Convenience and Flexibility

    Owning a car offers the flexibility of traveling anytime without waiting for a cab, but it is responsible for parking, maintenance, and handling traffic. If you live in a metropolitan city like Delhi or Mumbai, finding parking can be a hassle, which could increase costs like parking fees and the stress of maintenance.

    Alternatively, Ola/Uber provides convenience as there’s no need to deal with parking or maintenance. You might face issues with drivers cancelling, but you can get a ride on-demand without worrying about traffic or parking space. However, long peak-hour waits or surge pricing might lead to delays or higher fares.

    Depreciation and Resale Value

    A significant cost of owning a car is depreciation. On average, a new car loses about 20% to 30% of its value in the first year, and the depreciation continues as time passes. This means that when you decide to sell your car, its resale value might be significantly lower than its original price.

    With Ola/Uber, you don’t need to worry about depreciation or resale value. The amount you pay is purely for the ride, and there is no concern about losing money over time.

    Environmental Impact

    Owning a car has environmental costs, especially with fossil fuel-powered vehicles. From emissions to fuel consumption, car ownership contributes significantly to pollution. In contrast, ride-hailing services are increasingly adopting electric vehicles, which can help reduce their environmental impact.

    Choosing ride-hailing services may contribute to a lower carbon footprint, depending on how frequently you use these services and whether they are electric or hybrid vehicles.

    Frequency of Travel

    The frequency of your travel is a crucial factor in determining whether owning a car or using ride-hailing services is more economical. For example, if you travel long distances daily, such as commuting to work, owning a car may be more economical as the cost of frequent Ola/Uber rides would quickly exceed the cost of car ownership.

    Conversely, suppose you use transportation only occasionally or for short trips. In that case, ride-hailing may save you money, especially with options like Ola’s “Ola Select” or Uber’s “Uber Pass” offering discounts for frequent riders.

    Here’s a detailed comparison table that illustrates the costs of buying a car versus hiring Ola/Uber for different travel scenarios:

    ScenarioOla/Uber Cost (₹)Car Ownership Cost (₹)
    Daily Commute (20 km Round Trip)
    – Daily Cost₹300₹200 (Fuel: ₹133 + Maintenance & Insurance: ₹67)
    – Monthly Cost (20 working days)₹6,000₹5,666
    Occasional Long-Distance (100 km)
    – Per Trip Cost₹1,500₹791 (Fuel: ₹667 + Maintenance: ₹124)
    – Monthly Cost (4 trips)₹6,000₹3,166
    Mixed Usage (Daily + Long-Distance)
    – Monthly Commute (400 km)₹6,000₹5,666
    – Monthly Long-Distance (400 km)₹6,000₹3,166
    Total Monthly Cost₹12,000₹8,833

    Points to be noted:

    • Ola/Uber Costs are calculated based on average city fares with a conservative estimate for peak-hour surges.

    Car Ownership Costs include fuel, maintenance, and a proportion of the annual insurance premium based on car mileage (15 km/l) and fuel prices (₹100/liter).

    Additional Costs for Cars: Depreciation, loan EMIs (if applicable), parking, and unforeseen repairs could add to the total ownership cost.

    Conclusion

    From a cost perspective, renting a taxi is often more economical. It also saves time since you don’t have to worry about driving or finding parking. However, depending solely on taxis has its downsides. In critical situations, such as during a pandemic when cab services might be unavailable, accessing essential places like hospitals can be difficult without a personal vehicle.

    Moreover, ride-hailing services like Ola or Uber may not be readily accessible in all areas, or their availability could be limited during certain hours. Conversely, owning a car offers greater comfort and flexibility. A personal vehicle is often necessary for large families or those living in remote areas. However, some individuals may overextend their finances to buy a car that is beyond their means.

    In such cases, car ownership becomes more burdensome. Therefore, assessing your travel needs and evaluating the cost-effectiveness of owning a car is important. If your travels are short-distance, using taxis might be more economical than owning a vehicle.

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    FAQs

    1. Is owning a car cheaper than using Ola/Uber for daily commuting? 

      Owning a car can be cheaper for daily commuting if you travel regularly over longer distances. The monthly cost of fuel, maintenance, and insurance can be lower than the cumulative daily fares of Ola/Uber, especially if surge pricing frequently applies.

    2. What factors make Ola/Uber more expensive in the long run?

      Ola/Uber can become expensive due to surge pricing, long-distance charges, waiting fees, and additional costs such as tolls and night fares. These factors accumulate over time, making frequent use costly compared to owning a car.

    3. How does car ownership save money on long-distance travel?

      For long-distance travel, car ownership typically incurs only the cost of fuel and a slight increase in maintenance. In contrast, Ola/Uber fares for long trips are significantly higher due to per-kilometer rates and potential additional charges, making car ownership more economical for frequent travelers.

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    I’m Archana R. Chettiar, an experienced content creator with
    an affinity for writing on personal finance and other financial content. I
    love to write on equity investing, retirement, managing money, and more.

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