Buy A Car Or Rent A Cab? We Have Some Answers

By | April 21, 2017

Buy A Car Or Rent A Cab? We Have Some Answers

On one hand, the hassle of manoeuvring through dense city traffic is pushing many people towards app-based cabs. On the other hand, there’s another set of people who value their safety and independence and therefore need to own their cars.

So the careful spender must ask him or herself the question: should he or she buy a car or continue taking cabs? What are the long-term costs of either option?  Is it worth going through the trouble of taking a Car Loan, paying the high costs of fuel and Car Insurance for a depreciating asset?

Let’s compare the cost structure of owning a car versus hiring one over a five-year period.

Owning A Car For Five Years
Car Price 5,00,000
Loan Down payment 2,00,000
Interest Rate on Loan 10%
Processing Charge 1%
A Cost of Owning the Car with loan charges in 5 years 5,85,447
B Insurance cost assuming Rs 8000/year (in 5 years) 40,000
C Maintenance cost for 5 years, assuming Rs 12,000 per year cost 40,000
x Total distance (In Km) assumed to be covered in 5 years 72,000
y Petrol Rate Rs/Ltr 67
z Mileage Km/Ltr using AC 16
D{y *(x/z)) Cost of running in 5 years (In Rs) 3,01,500
F Total cost of owning car in 5 years (In Rs) = A+B+C+D 9,66,947
G Assumed Resale Value of Car after 5 years (In Rs) 2,50,000
H Net cost of car (Self Driven): F – G (In Rs) 7,16,947
Per Month Cost of Owning a Car (In Rs) 11,949.11
Using A Cab For Five Years
Brand O Brand U
A1 Total Travelling in 5 years (In Km) 72,000 72,000
(Assuming per month car travel to be 1,200 Km)
B1 Base Fare of Brand O (In Rs) 50 42.4
C1 Time based charge per min (In Rs) 1 1.59
D1 Distance based charges (In Rs/Km) (up to 20 Km) 8 6.36
E1 Distance travelled per day (In Km) 39.5 39.5
(14400 Km per year / 365)
F1 Assumed Time taken for travel per day for round trip (In Minutes) 50 50
G1 Cost of Hiring CAB per day = A1 (2 times) + (E1xD1) + (F1xC1) 466 415.52
Brand O= 50×2+ (39.5×8) + (50×1) and Brand U = 50×2+ (39.5×6.36) + (50×1.59)
H1 Charges of Brand O Mini in 5 years =G1 x 365 x 5 (In Rs) 8,50,450 7,58,324
Per Month Brand O Mini Charges Paid (In Rs) 14,174.17 1,26,38.73

(Data valid for Delhi)

Evaluation: Owning vs Renting

Costs: If you don’t commute on a daily basis or travel distances shorter than 20 km in a day, cab hailing services could be a more cost effective option over a short period of time. In the long run, owning a car could cost you less than cabs. However, this is conclusion should only be drawn after an examination of parameters that are personal to you.

Comfort: It’s true that the competitive pricing of app-based cab aggregators is sometimes hard to beat, but when it comes to comfort, owning a car definitely gives you an edge. A hired cab may not always be in its best condition requiring you to compromise on your ride quality.

Safety: Travelling in one’s own car is safer, especially for women. Although drivers employed by cab aggregators receive professional training, there have been reported incidents of theft, molestation etc. in India. In your own car, you can travel safely around at any time.

Availability: In case of an emergency, you lose valuable time trying to flag down a cab. A self-owned car always comes handy in such cases. This is also a problem during rush hour, late at night, early in the morning, or during events like strikes.

Apart from these advantages, a self-owned car gives you a sense of belonging and it certainly is looked upon as a value addition to your status. If you are someone who likes to go on weekend getaways, having your own car would be more convenient and could help cut costs. A second-hand car could even help you go easy on your pocket. If you’re looking for funds to buy a car, you could always take a car loan.

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