Hiring a Cab vs Buying a Car: The Debate

• 8 April 2017 | 1537 Views | By Mint2Save

Transportation is a need for everyone nowadays. Without transportation, we cannot go to the store, go to work, visit friends, or go to the hospitals when essential. Irrespective of how economic we find it, but it does take a good part of our monthly budget. Be it a public or be it private, transportation is one of those evil necessities.

In the recent decade, we have seen the emergence of cab intermediary companies. Uber, Lyft, Meru, Ola , etc., are a few much hyped and venture capital loaded startups in this division. They seek to disrupt the day to day convenience problem as they want the urban to adapt themselves to the concept of cab. Their idea is pretty much on bull’s eye as convenience of a top class vehicle is now available with just a tap of the phone. 

However, issues such as surge pricing, unfriendly behaviour by cab drivers, and several operational and customer care issues have created the opinion that cabs are not a replacement for a car. In this article, we would weigh the two sides that whether you should buy a car or go ahead using the mobile app based cab service.

A Meru Cabs CEO, Siddhartha Pahwa shares an interesting data. Three years before, they did a survey of taxi users and asked people would they find more economical by using personal car or of using substitute of personal cars with cab service, only 15% said they might consider the option of cab. No one said they were ready for it. When the same survey was done a few months back, 30 % were willing to consider the cab option.

So, comparing owning a car or hiring a cab could be explained by calculating the cost of both.

Cost including in buying a car involves:

     a) Cost of the car

     b) Cost of maintenance that includes inspection, quarterly servicing, accidents and repairs,EMIs and    parking.

c) Cost of insurance.

     d) Cost of license, taxes and registration.

     e) Number of miles travelled, fuel, parking and cost if possibly keeping a driver.

If you are thinking of purchasing Rs 6 lakh car with a Rs 4 lakh loan by putting Rs 2 lakh of your own money, which has your costs of ownership for Rs 6 lakh car, the interest payment   average would be around 4000 per month. In four years, your car would have resale value from Rs 6 lakh to Rs 3 lakh (depreciated value) assume as Rs.2261. Another average monthly cost of another is Rs 1,500 for insurance and servicing costs and your monthly costs of car ownership are already Rs 7,761.

Now add fuel and parking charges by assuming that you have travelled 20 km a day for 25 days a month and the car averages 12 km depends on city driving conditions. At today’s petrol prices of Rs 70 a litre roughly, you will pay Rs 2,916 for petrol and Rs500 as parking. So, your monthly cost of owning a car and by driving it yourself without driver is around Rs 7,761 plus Rs 2,916 and Rs 500 for parking and the total cost is of Rs 11,177 per month. If you hire a driver for your car it will cost another Rs 12,000 a month.

New gen taxi services companies like Uber charge around Rs 10 to13 per km, Ola around 13 to15 per km, and Meru around Rs 18 per km.

For 20 km a day i.e. 500 km in a month for 25 days then Uber will cost you in the range of Rs 5,500-7,000 per month. But when you call for cab, your monthly costs will not exceed Rs 7,000-8,000 for the distances mentioned. Compare this with your ownership cost of over Rs 11,000 a month.

Now, it might be clear that hiring a cab would be more economical than buying a car. But i believe that there no much differences between the amounts calculated above because owing a car includes petrol price which keeps on changing and other costs. So the benefits of using both are:

Benefits of Buying a Car!!

Rights: Buying a car gives you the sense of ownership or possession and nothing quite compares to the feeling of buying and caring for your own car.

Convenience: Owning a car does not involve hassle of booking and waiting for the cab. A cab cannot match the on the spot access to your own car.

Emergencies: At the time of emergencies to rush for the doctor or for weekend road trips then definitely it is easier to have own car.

Security: As you can see many cases of misbehaviour by drivers it is safer, especially for women, to drive on their own vehicle.

Benefits if you hire a cab/choose a taxi service:

Easy usage of time: If you don’t have a car then the cab can help you to save your time by catching up on your office mails and calls.

Long commute: In metros, where traffic roar can be a nightmare, it is best not to be behind the wheel, particularly during peak hours.

Direction-finding: If your sense of direction is insignificant, then for navigation purpose it is easier to call a cab. Most taxi services have GPS installed with traffic based direction system that finds the easiest and least crowded route.

Undoubtedly, only some people calculate the real cost of car ownership. Time they did.

Comparisons and costs merely depend on distances travelled, but the judgment might then in reality worsen for car ownership if the distance travelled is extra as depreciation is quicker, petrol cost increases day by day and drivers may also be required to find the necessary parking.

This doesn’t mean that the people should stop buying cars, but the reason for owing them has to be related to convenience, status and other things, not just only the cost-benefit. Eventually, the success of cabs will take more cars off the road. So, It depends upon the individual to choose the best option as per as their suitability.