Owning a car vs taking a cab: The real costs explained

Warning: This article is not meant for those who simply love the pleasure of driving a car. This is for those bean counters – the ones who look at getting value out of every rupee spent. Here is a look at the actual economics of owning a car, compared to hiring a cab to get around town. We’ve even thrown in the costs of taking the bus or using an autorickshaw in this comparison.

The findings

* For 1,000 km a month, it is cheaper to drive a petrol premium hatchback than a diesel
* It is much cheaper to own and drive a Tata Nano Twist than to take an autorickshaw
* The total cost of ownership of a diesel premium hatchback are not significantly different
* Owning a car does not make sense if you drive only 500 km a month, it is cheaper to hire a cab

The Real Cost of Owning a Car

First the real cost of owning a car. For this example, let’s again take one of the most popular cars in the market, the Maruti Swift – both in petrol and diesel form for those who want to choose between either fuel. And to make things interesting, let’s also look at a very basic car to travel in the city, the Tata Nano. We have taken the top-end variants of all three cars for the purposes of this calculation, as these cars provide AC, power steering and other creature comforts (the Swifts also include safety features).

Basis of calculation

We have also assumed that you would be buying a car with a loan (for 85% of the total on-road price). Add to that the service costs, maintenance costs and insurance premiums and you get the total cost of ownership of a car over five years. Then add fuel costs (we have assumed diesel at Rs. 50 a litre and petrol at Rs. 61 a litre for this calculation). We have taken the average mileage of a petrol Swift at 13 kmpl, a diesel Swift at 16 kmpl and Tata Nano at 20 kmpl. (See table below)

If you drive 1,000 km a month: 

If you drive less than 500 km a month:

The results

If you were to use your petrol Maruti Swift for 1,000 km a month, in five-years time your total ownership and transport cost (including the cost of buying, running and maintaining the car) works out to Rs. 12.66 lakh. For a Swift diesel, the total ownership cost would be Rs. 13.47 lakh for 1,000 km a month. And if you were to drive a Tata Nano, you would end up spending Rs. 5.64 lakh over 5 years.

Now let’s assume that you sell your car after five years of usage. Here we are assuming that a car depreciates to 50% of its ex-showroom price in five years’ time. This is roughly the market value you can expect for your car. If you deduct the resale value from your total ownership cost, you get the total transport cost for five years.

In the case of a Maruti Swift petrol it is Rs. 9.56 lakh and Rs. 9.86 lakh for a Swift diesel (if you drive more than 1,500 km a month the Swift diesel would work out more economical). Also see: Are half the buyers of diesel cars making a mistake?

And if you were to drive a Tata Nano to get around town and then sell it after five years of using it, you would have ended up spending Rs. 4.43 lakh on transport.

The Cost of Using taxi, autorickshaw or public transport

Now let us assume that you were to use public transport. Taxis these days are pretty comfortable. You can get spacious, air-conditioned Mahindra Veritos or Toyota Etios or Maruti Dzire cabs from Easycabs, Ola, Meru and Uber.

For the purposes of this calculation, we have taken two fare slabs – Rs 18 per km (that’s what it works out to now with the fare wars) and Rs 22 per km. For this money, you get a chauffeur driven air-conditioned car, allowing you the freedom to use your commuting time more efficiently – possibly make a few phone calls or send out emails.

But does it really work out? In five years’ time you would have ended up spending Rs. 13.2 lakh using cabs to travel 1000 km a month.

Now let’s assume you find it more convenient to use an autorickshaw or even take a bus. Well, here of course, nothing beats a bus – Rs. 1.20 lakh is your total bus fare for five years if you use AC buses (this is on the higher side – it is actually a lot cheaper).

However, if you were to take a smoky, rattling autorickshaw to work every day, you would end up spending Rs. 6 lakh on commuting over five years! In such a case driving a Tata Nano is more than Rs. 1.5 lakh cheaper. (See table below)

The total cost of using a cab:

If you use public transport:

 

VERDICT

The cost of owning a car and the cost of using a cab to work every day actually add up. The conveniences of owning a car are that you have access to transport any time you need it. The downside of owning a car though is having to look for parking spaces and also ending up with unproductive time spent driving to work.

If you were to hire a chauffeur to drive you to work, you would have to factor in the driver’s salary at approximate Rs. 15,000 a month upward, which would add a whopping Rs. 9 lakh to your daily commuting cost! So owning a car and hiring a driver is not economical at all, unless your productive time during commuting can make up that amount.

If you were to use cabs travel every day, you benefit with more productive time, but you have the inconvenience of having to wait for transport. There is some unreliability here. Of course, using a bus is cheaper, but highly inconvenient and uncomfortable. And it’s cheaper and more comfortable to drive a Tata Nano than take an autorickshaw!

If you weigh the pros and cons of owning a car versus hiring one, the odds are still in favour of owning a car if you have to drive 1,000 km a month. But if you were to drop that to 500 km a month, the costs work in favour of cabs!

Of course, the pleasure of owning and driving your own car is priceless! Share your thoughts on this one.

Compiled with inputs from:
The real cost of owning a car

Is it really necessary to own a car?