To drive or not to drive…

I was catching up with a friend who has been using cabs (OLA, Uber etc.) for his commute and was wondering if he should buy a car instead of using cabs. We did some back of the envelope calculations to look at the economics of the decision.

Calculations ..

Car Ownership - Slide2

One interesting thing that comes out of the calculations is that yearly cost of ownership of a car is about 25% of the price of the car. Some other points are in the picture below.

Car Ownership - Slide3

 

Car ownership Cabs
  • Convenience of on demand usage·
  • Safety (alternate modes of transport not available or are not safe enough)
  • Makes financial sense when average usage is high
  • Status symbol
  • Fulfills the passionate for driving
  • Convenience of not driving·
  • Saves time – (time saved while not driving and parking)
  • Better use of capital for both the cab driver as well as the individual who uses the cab
  • Provides livelihood for cab drivers

 

If one is a having short commute (just to work and few errands) and the car remains idle for a large part of the day (used for less than 2 to 3 hours a day) – then cabs make more economic sense for individuals.

Cabs and alternate modes of transport make economic sense for individuals and the society as long as there are enough measures taken to provide passenger safety and convenience.

We are not economic beings, we are emotional beings, and life is not measured out with coffee spoons. Economics can only tell about cost of something and not its value for someone.

If one is passionate about driving then pennies don’t matter. The economics presented here may not make material difference for many as their expenditure on the car is a tiny fraction of their income. This article may be useful to someone who is not a driving enthusiast, whose commute is short, and who is considering purchasing a car only if it makes economic sense.

Happy investing… err.. I mean Happy motoring…..


 IndusWealth:Making your money work for you

About Praveen Reddy

http://in.linkedin.com/in/praveenreddyinduswealth

3 Comments

We would like to hear from you.. Leave a Comment

  1. Suresh Natarajan says:

    Thanks Praveen. I always had the same question in my mind. This clears it all from the economic perspective.

  2. Selvam Swaminathan says:

    Wow! awesome insight

  3. Albin jenner says:

    Its great annalist for understanding and take the decision to the people who are planning to buy (like me, usage of car-1 month per year ) new car, going to using bellow average against as minimum required .
    Thanks, Mr. Reddy

Leave a Comment

Pl let us know your thoughts on this post..

Time limit is exhausted. Please reload CAPTCHA.