Team-BHP - Economics of car ownership in light of the new services (Uber, Ola, Zoom)

http://www.firstpost.com/business/ub...p-2317118.html

From the article -

Consider the costs and benefits of owning car.
#1: You are buying a depreciating asset. This is a cost few buyers take into account while buying a car
#2: You have maintenance and related costs: quarterly servicing, accidents and repairs, loan servicing costs (EMIs), parking and annual insurance.
#3: Then you have running costs: you have to pay for the fuel, parking (both at home and where you work), and possibly keeping a driver.

A few months ago when me and a few friends visited Bangalore, we decided to leave the car behind and use Ola to commute. We had a lot of pub hopping to do, and driving was out of question. And then, who wants to drive in the mad traffic.

Everything went okay until we decided to do some shopping and after that we decided to do one last visit to monkey bar before heading home. We got there in an Ola only to realize that we were looking like fools with all the Shoppers Stop bags in our hands. If we had a car, we could have thrown it into the boot.

Truth is, a car is a quarter of a home. You can carry along everything you need everywhere you go. All the essential stuff is there, and you can throw in whatever you buy and then get it whenever you want. That convenience is never available when you hail a cab.

George Clooney did a good job in Up In The Air convincing us how not having have to own things gives you peace of mind. But NO, some things have to be owned to be fully utilized.

Hiring a cab might make economic sense than owning one, but there is much more in life than saving money. You can derive pleasure looking at the swelling bank account, or you can derive more pleasure draining it.

Quote:

Originally Posted by Cowardly Lion (Post 3741805)

Your car won't turn your commute request down! (Unless it is unwell)

This should be merged with the thread for the new gen app bases cab (Uber Ola etc) thread

Private taxi services can Never replace the car ownership.

A car ownership is not just means of transport from point A to point B.

Its a instrument of freedom and flexibility. Freedom to go wherever you need to and whenever you need to, with whatever you need to.

At most, the private taxi services, provide a cushion for situations where you can't take your vehicle out (example late night travel, or a need for more luggage space etc., or simply to avoid self driving fatigue).

Well, economics is just one part of the equation of owning a car. And compared to a taxi, the per km running cost of even a petrol car in B/C segment works out to be around 30-50% cheaper. But there are other decision factors.

There is convenience (as civic-sense mentioned). Be it shopping bags or going where you want when you want (think booking a cab in peak office hours) or running any errand anytime.

For us there is also the not-so-small matter of driving enthusiasm. I would like to be the driver in a Nano rather than a passenger in an Innova. Also driving to a destination is rather more pleasurable to most of us than even flying - just look at the number of 5-6k kms driving travelogues we have seen recently.

Next, there is also the issue of safety and peace-of-mind. Case in point, I always feel tensed when a cab driver is pushing his car to the north of 60-70 kmph in rains. I am apprehensive of the health of tyres on most cabs and seat-belts at rear are not always available. Having said that, the new app-based aggregators are using more modern and safer cars.

Finally, there is also the pride of ownership which comes associated with vehicle ownership.

So economics is just one part of a complex decision making funnel. But I agree, taking a cab has become a more enjoyable experience than earlier except during surge pricing window ;)

Quote:

Originally Posted by civic-sense (Post 3741844)

Truth is, a car is a quarter of a home.

A very apt description of a car. Thanks for a good one.

A car is an extension of ourselves. To most of us it is a family member. Just refer to the way in which your kid describes your car. It symbolizes status, freedom, convenience and the purchase is often a dream come true.

Of course in certain circumstances, it can become a liability. In a very crowded city or when it drains away our hard earned money or when driving is difficult we may curse our car.

I think the ideal situation is to be chauffeured around in ones own car on all week days and go for that drive on the week end. However to ordinary mortals like me that will remain a pipe dream.

Driving a car for pleasure is beyond economics. It is only when you need transportation for traversing B2B traffic or late at night, that cabs offer viable alternative.

Most of the problems associated with point-to-point cabs are resolved if you hire a cab on full day basis. The plus points are
. The operator has a lot of cabs, hence one going off the road is of little consequence
. The operator has a number of drivers, so if one goes on leave another takes over
. Maintenance is operator's head ache
. If you book cabs regularly from the same agency, you get discounts and better service

All these work perfectly if you do not commute daily, that is you use the cars for personal transport at random times. In my case I use the car mainly for short distance travel within a radius of 2 km. When I travel longer distances, it is for parties, mostly at night, and there if you take a cab, you can be free to enjoy the party. In case of shopping trips to distant markets; especially in crowded markets; a cab is heaven sent, as it drops you, and waits where ever it can find a parking place.

Well incidentally many a times while going to the airport I wished that Pune airport had secured overnight parking facility. I could avoid hassle of hiring a cab. Yes as rightly expressed in the OP, that one does have the convenience of not having to drive in the madenning traffic. Still more often than not, I would prefer the convenience of having a vehicle specially for those emergencies which often come unplanned. And when they do come, I am not at the mercy of an app that may or may not get me a cab when needed.

What about those weekend trips? Yes one can hire a cab on those occasions too, but I would again prefer not putting my life in the hands of a cab driver in an ill maintained cab whose driving skills are again unknown.

On top of it all, whatever be the economics, what point of having money in the bank if you dont intend to use it?

There's no doubt at all that app-based taxi services are making me ask the question posed in the original article: is it even worth it buying and maintaining a car when such a simple alternative exists? And it's got nothing to do with the pricing strategy adopted by some of the new players like Uber either. Even if you consider the official taxi rate as the standard, it still works out economical to hire a cab rather than buy a car.

This was always the case but the sheer pain involved in finding a cab to go to your desired destination always deterred me from using them in the past. Uber and its me-too's have changed all that.

At the very least it is making me seriously question the need for a second car in the house. In a typical urban family, with both parents driving and the car typically needed at home for chores like shopping or dropping the kids off to dance practice, a daily commute using a reliable taxi service can certainly be considered. On those days when you just absolutely need the car to go to work, the other parent has the option of taking a cab. Outstation trips are also handled well by the likes of Zoomcar.

We actually managed without a car very well in Singapore where the dial-a-cab system is excellent (even pre-Uber) and public transport even better (if you can sacrifice some time involved in waiting etc.) Cars being prohibitively expensive to buy and run there, the economic incentive to not own one was tremendous as well.

People in the suburbs have been taking advantage of cabs for a loooooong time. Most of them are self employed and have little need for commuting daily by car. Shopping trips are walking distance.

Two wheeler takes care of convenience.

The cab drivers are from the local community and responsible and own their own cars.

Most local businessmen I know can easily afford Innovas, but they just hire one when they need to go on a weekend trip, religious tourism, airport, to receive relatives, marriages etc.

But in cities, it's practically a requirement these days. But buying a small car for commuting and hiring a cab/self drive for a long trip makes sense. I use cabs more often on long trips as I'd rather spend the time reading than negotiating traffic.

Why consider just the app cabs? We now have booming self-drive rentals as well. If you are not averse to driving yourself, keeping that 2nd or 3rd car for occasional use may be completely unnecessary. For a particular day that you may need 2 cars, you can pay upto 2-3k and get a decent sedan/hatch as per need. No need to foot the EMI/Insurance/Fuel/Service costs for the whole month!

My only wish is they start doorstep delivery/pickup of self drive rentals as well (maybe for an extra fee) - that would eliminate the need of even stepping out till their office.

I am consciously delaying my decision to replace my ageing Alto and evaluating all such options as the monthly running of a second car has reduced drastically.

EDIT:

Another benefit of using cabs/self-drive rentals. In light of the recent happenings in KA, biggest advantage is no headache of roadtax payment/refunds!! :D

Quote:

Originally Posted by Dry Ice (Post 3741964)

Why consider just the app cabs? We now have booming self-drive rentals as well.

Agree completely. In fact I have a hunch that self drive rentals will be next to boom in the transport related business after radio taxis.

Another advantage is ability to rent a car which you might otherwise never own. For example Zoomcar has SUVs as well as premium cars like A-class, 320d, etc which are better used on highway runs to extract most out of them while you own a good city car for daily commute.

This model is already successful in developed world. On a recent trip to Europe I was able to get a chance to drive two different SUVs (Tiguan and Mokka) within a week. Much better than getting stuck with one car on all your trips.

Some things are priceless. Having a secure means of transport that is available anytime, anywhere, any weather, any destination with on-the-fly route change, storage and security is invaluable at times (imagine not being able to get an Ola to go to a job interview / exam / hospital -- none of those tens of thousands saved will matter in such cases). Even having to wait inordinately once for an Ola is enough to make you regret not having your own vehicle. Well maintained, well branded cars also give a status bonus, whether we like it or not.

On economics, these intangible benefits of having your own car are quite significant and it's a pity that Firstpost has not taken those into consideration. I also feel using a Rs 5 lakh car as an example is inappropriate. A better example would be a Rs 2.5 lakh Alto. Any expense more than Rs 3 lakh is what we pay for a feel-good factor.

The FP article raises valid arguments against owning a car, but there are also equally valid arguments for owning one. The biggest argument for car ownership is related to self-sufficiency and independence. Not having to depend on taxis or autorickshaws and their associated problems (late, no-show,...) is a huge confidence booster.

It's easy to estimate the cost of ownership as the FP article author has done but it's much harder to estimate the intangible price of freedom and independence.