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 ..
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 | Cabs |
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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…..