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Why owning a second car doesn't really make much sense ...

Why owning a second car doesn’t really make much sense …

by Saurabh Jain 6 min read

Assumptions

The title of my post says it all… Before we start, there are some assumptions to this statement. The assumptions are as follows:

  1. Your are living in a Tier 1 / Tier 2 city in India which has decent Uber / Radio Cab connectivity (Have heard good things about Meru as well See Update 2 below).

  2. You use your car as much as an average person does - say about an hour or so a day.

Let’s pull out our calculators for this one…

Step 1: Determining the cost of ownership of a car in India

  1. Some used or new car (average make): Rs. 5,30,000.00 (A).
    This, again, depends on what kind of car you are looking for.

  2. Lifetime of a car: 7 years (pretty decent estimate)

  3. Fuel expenses (considering diesel without inflation): Rs. 2,000 per month (on the lower side) Cost over 7 years: Rs. 1,68,000.00 (B)

  4. Car Auto Coverage Insurance (considering Rs. 10k avg per year): Rs. 70,000.00 (C)

  5. Car Maintenance / Servicing: (Rs. 10k avg per year): Rs. 70,000.00 (D)

  6. Change of tyres (twice in 7 years @ Rs. 3,500 per tyre): Rs. 28,000.00 (E)

Let's add all this up: Rs. 8,66,000.00 (T = A+B+C+D+E)

Cost of owning this car / day over 7 years: T / (365 x 7) = Rs. 338.94 per day.

Please note that these are fairly conservative estimates. The cost here will be somewhat higher due to:

  1. Rise in the cost of fuel over the years.

  2. Not considering the amount you may need to pay for parking in your society (going rate in Pune is 1.5L - 2.5L per spot)

  3. Not considering the loan that you probably need to take to buy a car @ 15% pa. (you will end up paying an additional 2L interest over a 7 year loan period).

  4. You may not want to get an average car but a more expensive one. (Add the difference in costs accordingly.)

(Adding these expenses will take up the cost of your car to about: 8.66L + 1.5L parking + 42K fuel inflation @ Rs. 500 extra pm + 2L for loan = Rs. 12.58L or Rs. 492 per day over 7 years)

What this means is that everyday your car is sitting in your garage, you are wasting Rs. 340.00 - Rs. 492.00 per day.

I am going to consider the case in which you need a second car for your spouse to go to work.

(My office is around 8 km from home and hence my fuel costs are Rs. 2k per month approximately. If it were further, fuel costs would go up accordingly)

Also, most folks I know - use their second car even more sparingly than this particular use case.

Step 2: Let us consider the alternative:

Uber / Ola Cabs / Meru / Other Radio Cab Services

(See Update 2)
This is what I would pay one way to travel from my house to work.

Uber - Pune 2014-10-08 00-02-17

So: Rs. 120 one way. Rs. 240 both ways per day.

Assuming that I don’t need to use my car to travel on the weekends (Sat, Sun) my expense turns out to be:

  1. Per week: Rs. 240 x 5 = Rs. 1,200.00 (W)
  2. Over 7 years: W x 52 weeks x 7 = Rs. 4,36,800.00
  3. Cost of travel per day (over these 7 years): Rs. 170 per day i.e.
    I will be saving 340 - 170 = Rs. 170 per day just by not buying a car and using Uber instead.

In addition to this, the benefits of Uber / Similar services (over driving your own car are):

  1. You don’t have to drive a car.
  2. You get a nice, air conditioned, chauffeur driven mini-sedan (UberX has Sedans).
  3. No worries of filling up fuel, getting your car insured every year, PUC, serviced and maintenance.
  4. No more driving around for hours - looking for parking.
  5. No worries about someone hitting / denting / scratching your car while driving / parking.
  6. You can use your travel time to catch up on that extra level of Candy Crush instead of cursing those taxi and rickshaw drivers.
  7. With a little pre-planning, you can use your other single car between yourself and your spouse for most occasions. Saving on money and the environment by carpooling.
  8. The extremely satisfying feeling that you get when you press a virtual button on your phone and a car magically appears in front of your door cannot be beat. The magic of technology!
  9. Let someone else worry about getting you through that rush hour traffic - while you sit comfortably behind playing Candy Crush.
  10. Did I mention you don’t have to drive a car anymore?

Isn’t this all worth it?

Not only do you save 170 bucks a day (Rs. 62,000.00 per year), you pay only when you travel.

So if your travel needs are more infrequent - say for example, you need a second car only 2 - 3 days a week, your costs will come down even further - to about 80 - 100 bucks a day (or 60-70% cheaper than owning a car).

Step 3: So what is the hold up?

Sigh… There always is a catch isn’t it? In this case, there are a couple of them:

  1. Uber isn’t as widely available as I would like it to be - and this will still be in only Tier 1 / 2 cities for sometime.
    Most of the times, it takes me between 10-15 mins on an average to get a cab (after pressing a button on my phone). Depending on your address in Pune, it could take you longer (20-25m).

    So a little pre-planning is required. However for the popular areas (camp / Viman Nagar / Kalyani Nagar / Koregaon Park / Aundh / Station / Airport / etc. - cabs arrive in between 5 - 8 mins which is not bad at all).

  2. You would be dependent on public transport / rickshaws - incase Uber cars are not available tomorrow. So you cannot depend on them a 100% yet - but with a little pre-planning, you can get around it.

In the end, I believe it is a lifestyle choice - something that we are very interested in trying.

The economies make sense and the convenience makes so much more sense. If only the service grows and has enough drivers - then we’ll be talking.

Update 01 - 08-Oct-2014
Gaurav pointed me to two interesting resources related to my blog post:

  1. An interesting discussion on hacker news.
  2. A blog written by Sam Altman (in SF) with an excel sheet having the same thoughts as me.

Update 02 - 08-Oct-2014
I have added Meru as a viable option in my posts assuming their rates are at par with Uber. But I was quite surprised to see them substantially expensive.

In Pune for example, their minimum base fare is 200 bucks compared to UberX’s 90 bucks.

Also their price per km is 20 vs UberX’s 12. That won’t hold up to my earlier calculations.

Disclaimer:

This post may seem that it has been sponsored by Uber - but that isn’t the case. The level of service and convenience that these guys offer is giving us the first glimpses of “Transport as a service” - which we haven’t seen so far.

A service which allows you to summon a ride at the push of a button gives you the ability to dream about getting rid of that vehicle you rarely use anyways and use your hard earned money smarter.

We are actually very serious about selling our second car and converting to Uber - so if you see any flaw in my plans / calculations, please leave me a comment so that I can rethink! Thanks :)