Car – should you own it?
I got an email from Ola saying that I traveled 659 km using Ola. Add another 641 by other modes and it becomes about 1300 km per annum. That is not much, right? Now assume I traveled and paid Rs. 10 per km. Ok make it Rs. 13 per km of travel…and it becomes Rs. 16,900 PER ANNUM.
This compares to?
Rs. 1600 per month for INSURANCE
Rs. 1,000 per month for parking
Toll charges, parking charges, police fines, etc cannot really be quantified or guessed…but assuming Rs. 100 a trip would not be wrong.
Then there is the opportunity cost of what that money could have earned.
There is interest to be paid – a Honda City should cost about Rs. 45000 per month if there is no down payment.
If it does not make sense to me to buy a car, are we saying that the car market is heading for a recession? I guess so. The car is no longer being bought just to be parked. It also means that if an asset is used more efficiently, it is not good news for the car manufacturer.
It means the decision to buy a car will shift from the middle class guy to a company. The name of the company is either Ola or Uber. Both of these companies will have enough data to suggest which car is a best bet. So when a 22 year old wannabe driver approaches them they will suggest a good VFM car in every category. So it might be a Wagon R, an Indica, an Accent, which will sell in huge numbers. However remember that car is one of the greatest ‘show off assets’ -so 95% of the Indian population is still to enjoy the ‘ownership’ of a car. So they will buy. However, they could start off with a second hand car and then slowly got to a new car in about 5 years time. Or even longer.
A dramatic change in the sales pattern is likely to happen in the car market – not to say that it is not already happening.
How should you react to this? I don’t know. See the cars that Ola and Uber are using – those are the cars that are going to sell more. So if you find that the cars are dividend equally between TaMo, Suzuki, Hyundai and Honda – the chances are that a big part of the low end cars will be divided equally. However, that may not be enough to justify their high pe. Anyway 2 of these companies are not listed and TaMo has 90% of its revenue coming from JLR.
I am trying to grapple with this data. If everybody starts thinking about car and its ownership, there could be a dramatic change in the car buying and usage patterns. Also I forgot to add that I travel 10km a day -every alternate day – by a friends car. If I include that in my total car usage it goes up by 1900km. That is not small. I may also need to build in my airport trips, and my trips that I make by train….
Once I add up all that some of these numbers could change….
Vasantha Balasubramanian
Your points are perfectly right in metro cities. In smaller towns of C and D category, it helps having ones’ own vehicle whether it is a 2 wheeler or four wheeler. Ofcourse they too are improving in public transport like auto rickshaws due to self employment.
Pradeep
Ola and Uber doesnt come at 10/KM or 13/KM when you really need it. They charge twice or thrice the amount during peak hours. If you have a family which literally grew up travelling by car wherever they go, then Ola and Uber may not make it cheaper for you. They expect the comfort of own car and a reliable driver. But if you are talking about which car has big future, how about electric cars? Don’t you think these cab aggregators will push towards electric very soon especially if they own the cars for drivers to drive?
Ganesh
How I wish that ola and uber were as useful as they claim to be. For me the office goer, fare would show around 200₹ to go to office. I live 7km away! If it rains, or if i travel in peak hour then it goes upto 500₹! Even if I take 200+200₹ round trip 200 days a year, total is 80k₹ per year! Add to uncertainty of drivers randomly cancelling trip, avg wait time of 20 mins per trip and it is not worth it.
For my car, I pay about 7₹ per km, 9k₹ annual insurance, max 10k₹ maintenance.so total is 38.5k₹ per year. I haven’t included any other trip which intake from my car which will tilt the balance even more towards owning a car.
Prajith
Sharing my experience.
We live in one of the metros in south india. I owned cars from 2004 till 2016. After a major accident in 2016, decided to go bit slow on buying the new one (mainly because there wasn’t a model which met all our requirements and I was ready to wait for the new releases as for me this is a big ticket purchase that I would use for next 8-10 years).
Its been almost 2 years, and life goes on using OLA, UBER and occasional long driving using one of the self drive rental options.
Off topic: Recently booked a tata harrier but TaMo is not offering an automatic version so wait seems like continuing.
Coming to the Usage: We are a family of 4 (husband, wife and 2 kids). I use ola/uber extensively, for my daily office commute (using OLA share pass which comes to 39/- flat as we live within 4KM distance and no peak time charges) and other local trips. Wife also uses ola/uber for her travel needs. Usage would be roughly 70% cab and rest auto. First preference is for cab and uses auto if there is a big price difference and i am alone.
Overall I find it comfortable except those few occasions where you end up waiting to get one – so far it hasnt cause me anything big except occasional inconvenience.
Economics: Average monthly expense comes 3K-5.5K depending up on usage. While owning a vehicle my monthly average bill was around 3-3.5K (excluding insurance & services during 2016). Its true that a bit of my travel also reduced after not having the vehicle as earlier we used to roam around searching for a restaurent, but now first need to identify and then only can book the cab 🙂
Overall its working and even if the search for the next own car takes a little more time, seems we are okay with it.
Mohan
If it is a daily driver, owning the car makes sense. Using Ola/Uber daily for many years means paying indirectly for the car, the profit and the driver salary and comes with many negatives like dealing with people and customer care.
SAIKAT SARKAR
On the usage aspect, one more emerging option is to attach to carpooling app. I have a maruti ignis with daily running of about 45KM. Petrol and toll cost is around Rs. 275. If I carpool and do ride sharing with 2 people, I earn 7.5 per km after all deductions. So basically I drive for free to office if I get 2 co-rider. I earn some part of insurance/ maintenance money also, if I get 3rd co-rider. All at the convenience of having own car. I have no problem in driving 2-3 hours a day, and don’t want to haggle with OLA/ UBER on daily basis.
Look at quickride.com. This is emerging trend, and win win for many.
Ravindra
What about depreciation of car? Also interest if you deposit same money in bank (consider only 8%) and calculate again. Car is double edge sword. Value of care will depreciate every year and also you will loose interest since you spend money to buy care. If we spend 10 lakhs on a new car after 5 years car value will be 4-5 lakhs max and we loose 5 lakhs interest in five years so if you count total loss is minimum 10 lakhs… isn’t it? Is my calculation wrong? On top of it we pay insurance, Car service center always think you own a car so you are millionaire and charge you like anything.. half of the things you don’t understanding in bill.. I think car is a white elephant… asset you should not buy in any case…
Milind
getting cabs in outer areas of city can be tricky.
Houses are cheaper to buy in such areas and hence owning a car can be useful