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

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. Finance or purchase today 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 – in case of buying the gearheads.org type of a vehicle its price should jump up too.
  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 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 (especially by the Insurance Revenue program), 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 in 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.

Step 4: Get your first ride free – on me – worth upto Rs. 300.00

Just because you have read this post so far, your first Uber ride is on me. The coupon for the Rs. 300 off is: ubersaurabhj

Download the App on your phone (search Uber on the App Store, Google Play Store or Windows Phone Store), sign up (most debit cards and all credit cards work), hit Menu > Promotion and enter this coupon.

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 :)

Comments (13)

  • Milan Balakrishnan 3 years ago Reply

    Very interesting… Saurabh you are making me rethink my first car..

    saurabhj 3 years ago Reply

    That’s awesome Milan! That was my intention as well (a couple of my other friends in Pune are thinking about purchasing cars as well which egged me to write this post).
    Typically, I feel that if you have made do without a car till this point – you don’t need to buy one and can simply Uber around. However, Pune being a smaller city, I feel Uber cars may be easier available compared to Mumbai. However, Mumbai has more Radio cab options (Meru for instance) which have the same level of service (phone apps, rates, drivers) as Uber does and probably much greater density – so it can be a very viable option. Especially if you are thinking of taking a loan.

  • Milan Balakrishnan 3 years ago Reply

    In Mumbai things get worse on your own car…There is bookmycab which gives you a normal cab at a cheaper price..parking is 10 lakhs..You get Traffucked

  • Abbas 3 years ago Reply

    I think an option of owning a bike in combination of Uber/Wings/FastTrack + company transport is an excellent solution and working well for me in Pune and Chennai.
    But Saurabh you just touched upon the mathematical calculation and convenience part of it.
    Owning a car has its own status symbol which cannot be put into calculation.

    saurabhj 3 years ago Reply

    I totally agree a 100% with you on that one Abbas. We were just discussing and realized that you should have atleast one mode of transportation for emergencies and times you need to go close by. But otherwise, if you have access to services like Uber, a second car becomes a money pit.

    You are spot on about the status symbol as well. This post will not make any sense to a person who wants to buy a car for status symbol. Then there are people who love to drive and would hate this idea as well. So this does not apply to many people.

    Thanks for taking time out to share your fresh perspective on my take 😊

  • Adhunika 3 years ago Reply

    Apart from all the brilliant points already covered, it’ll also help in decreasing the number of cars that’ll be added to the already inundated roads.

  • Nacho 3 years ago Reply

    you forgot about the money you get back when you sell the car… that is a major chunk don’t you think?

    saurabhj 3 years ago Reply

    Hi Nachiket – that’s an excellent point and I did not think about that. You are correct.
    Considering you did around 70K – 1L kms in an Indica Vista (the car I considered) which would cost you 5.5L to buy – you could possibly get back 80K – 1L after 7 years (This again I feel is a best case scenario).

    So if you subtract the 1L from the 8.6L cost of ownership, it would still cost you 7.6L to own a car compared to the 4.6L you would spend on using Uber.
    If you take in account the inflation – 1L today @ 7% inflation (http://www.tradingeconomics.com/india/inflation-cpi) is worth Rs. 62k 7 years from now (http://www.buyupside.com/calculators/inflationjan08.htm).
    Again, these numbers vary – but ditching the car for a cab is still winning :)

    Thanks for taking the time to comment on this post. I am encouraged do an excel sheet with more accurate calculations – in which I will consider the cost of selling the car as well.

    Bikram 3 years ago

    Nice piece and agreed. I was convinced about this some years back by a couple who used to travel by Meru to and from work everyday (they did own a car but chose not to drive it which sort of threw their calculations out the window but still). They hadn’t explained the cost breakup in as much detail, given it was a verbal conversation, but what clinched the argument for me was that they did not have to spend 3 hours ploughing through horrible traffic and instead spent 3 hours of quality time with each other engaged in conversations. Helps if both work in the same general locality but that skeletal framework had me convinced that a car in Bombay made less sense.
    I still ended up buying a car though. The material joys linked with owning one somehow outweighed the rationality of the savings of not owning one would imply. What can I say? We’re less rational and more emotional. Or maybe egotistical.

    Mayank 3 years ago

    Only two arguments not considered. …status symbol cars ….and for the single guys…. chick magnet cars 😜.

    saurabhj 3 years ago

    @Mayank: If Status Symbol Cars and Chick Magnet cars are considered, then this will not make sense at all. If I am buying a 50L car tomorrow, I am not being rational to begin with which makes this post “not appropriate” for me :)

    saurabhj 3 years ago

    @Bikram: Thanks. Actually for your couple friends – if 2 people are sharing a cab – then its even cheaper by 50% right? So it’s a good idea even if Meru is more expensive. But you are right about the rational bit – human beings can be quite irrational most of the times :)

    This would appeal to Vulcans probably.

  • Gaurav 3 years ago Reply

    A similar post at http://blog.samaltman.com/uber-vs-car-ownership and more importantly, a very useful discussion at https://news.ycombinator.com/item?id=8100101

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