Own Car vs Cab Renting

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In the age of cab renting facility like OLA and UBER, it becomes super simple to book a car and go where ever you want to go. Within few minutes of booking a cab, it will come to your place, you can go where ever you want to go at any time. So when there is good cab service available, do you really need for buying own car? In this article we will contemplate between buying own car vs cab renting in full details and come to the conclusion that who needs own car and why?

Buying own car vs cab renting

In this article, we will discuss on the two major factors.

  1. Financial aspect of buying own car – Quantitive factors
  2. Safety, Security & Parking issues – Qualitative factors

For doing this comparison, we will need to have a common measure on which the comparison can be done. The easiest way to compare between buying own car vs cab renting is deriving the per km. cost for both the aspect.

If you check the website of OLA and UBER you can easily find the per km. rate for renting a cab. it is around Rs. 15/ km.

Now let’s calculate the same of own car. For doing so, we will check two type of cost.

  1. Running cost – Fuel cost
  2. Maintenance cost – car servicing, insurance, parking etc.

For this example, I have assume certain things as below:

  • The buying cost of the car is 6 Lakhs
  • Car loan of Rs. 5 lakhs for 5 years
  • Interest rate on car loan is 11%
  • Mileage of the car – 14 km/L (Petrol)
  • Petrol Price – Rs. 70/L
  • Cab pooling or sharing is not considered in this example
  • Inflation is not considered as it affects both the scenario
  • Driver cost is not taken – assuming most of the people are self driving

The running cost of the car at the 14 km/L average, per km running cost would come to Rs. 5/km.

So against the cost of 15/km of cab renting we have got one aspect of running cost of Rs. 5/km for own car. Now let’s calculate the fixed cost of won car.

The fixed cost of own car must be within Rs. 10/km then only it is viable to purchase own car as the total per km cost of own car should not increase to Rs. 15/-.

Now let’s calculate the fix cost of the car which will include the purchase price, insurance and maintenance cost, parking cost, interest cost and so on.

Let’s assume that you are buying a car worth 6 lakhs and for that you are taking a car loan of Rs. 5 lakhs for 5 years @ 11% interest rate. At this rate the total interest payment for 5 years would come to Rs. 1.5 lakhs.

Below is the calculation for own car for 5 years, 10 years and 15 years.

Car Life—->5 year Life10 year Life15 year Life
Car Price600000600000600000
Resale Price3000001000000
Cost/Year600005000040000
Maintenance / Year150001700020000
Insurance / Year150001200010000
Loan interest / Year300001500010000
Fixed cost / Year1200009400080000
Fixed cost / Month1000078336667
Monthly Running
500 km2015.66613.334
700 km14.3011.199.52
1000 km107.8336.667

Now we have the fixed cost amount for month. we need to know how much is the car running per month. Let’s take three scenario of 500/700/1000 km per month and divide the fix cost/month with this running km/month.

On doing so, we will get the exact fixed cost per km on various scenarios. As you know that the fixed cost should not increase Rs. 10 as it will not be viable for . us to own a car if the fixed cost is higher that Rs. 10/km.

If your car is running 500 km/ month, it is not viable to own a car as the fixed cost is higher than Rs. 10/km. in all the 5 years/10 years and 15 years scenario. So don’t even think to buy own car if your usage is not more than 500 km/ month.

Second scenario, if your car is running 700 km/month. then for 5 years and 10 years it is again not viable for own the car. for 15 years it is breakeven. But you are not benefitted of having your own car. So I think here also it is not advisable to own the car even if your monthly running is 700 km.

Third scenario, where your car is running 1000 km / month. There your fixed cost is well within the desirable limit of Rs. 10/km. So here it makes sense of owning a car if your running is 1000 km/month.

So there are two scenario where owning a car makes sense.

  1. Monthly running of 1000 km and the life of a car is 5 years
  2. Monthly running of 700 km and the life of a car is 15 years

In other words, if your daily running is less than 20 km, then car renting is better option than buying your own car.

Now let’s discuss qualitative factors of own car vs cab renting. Buying a car is not just a financial decision, you need to consider dozens of other parameters like safety, security, luxury, privacy, parking issues and so on.

Advantages of own car

  • You will get more safety and privacy in your own car as compare to cab, especially for ladies travelling during the odd hours
  • Immediately available
  • Cost effective if your running is high
  • Handy for short planned trips
  • Better luxury and customisation
  • Leave your luggage in your car

Advantages of Cab renting

  • You don’t have to drive on your own
  • No tension for parking space
  • Cost effective for less running
  • No issues of break down or car servicing
  • No hassle of traffic rules
  • No waiting at the fuel stations
  • You don’t have to pay for car parking space

Conclusion:

So before taking car buying decision, please have a look at this calculation and check which scenario fits your car usage. Based on that take the decision of buying your own car.

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