It may be cheaper to use Uber instead of owning a car.
Kyle Hill did something two years ago that most people would never dream of: He traded in his car for a bicycle.
Despite living in one of the most sprawled-out cities in America, he’s been pedaling to work ever since and relying on Uber whenever he needs to travel far distances. After two years of doing this, he began to wonder if he was saving or losing money.
So he did the math and published his results in a detailed Medium post.
How Much Does It Really Cost to Own a Car?
What Kyle discovered about owning a car is not new information – it’s expensive. Not only are car payments a huge drain on your wallet; but fuel costs, interest, insurance, maintenance, repairs, registration fees, and taxes also take a huge chunk of your paycheck.
Depending on the size of your vehicle, the yearly cost of owning it can range between $6,957 for a small sedan to $15,250 for a luxury SUV. If you drive a medium sedan like most Americans, your car is costing you $8,839 per year.
But that’s not all you’re spending.
Traffic tickets and parking rates are also attributed to owning a vehicle. Most American drivers get one $75 ticket per year and spend an average of $1,300 on parking. That’s a lot of money when you consider you’re spending less on insurance and maintenance.
But wait, there’s more!
The biggest expense of owning a car is one that often goes unnoticed: opportunity cost. Because you’re driving an average of 204 hours per year instead of doing something productive, it’s costing you $4,987 that you could potentially be earning.
When all is said and done, the average cost of owning a vehicle in the United States is $12,744 per year. If you would rather have the $1,062 a month you’re spending on your car go into your bank account, it may be possible for you to do what Kyle did.
What’s the Cost of Ridesharing Everywhere?
There are a lot of ridesharing services to choose from, depending on where you live. In Kyle’s example he used Uber because there are a lot of statistics available and it’s well-known.
The service Kyle used for his experiment was UberX, which is the cheapest Uber option available for riders in Los Angeles. The base fare of UberX is $0.80, plus $0.21 per minute, and $1.10 per mile.
The average American drives 13,476 miles per year with an average commute distance of 25.2 miles. This translates to 534 trips. Based on Uber’s rates, this will cost you $427 on base fare fees, $14,823 on mileage fees, and $2,863 on time fees. This brings the total cost of using Uber instead of driving to $18,115 per year ($1,509 per month).
This price is significantly higher than the $12,744 you’re spending on your car every year, but at what point does it become less?
Luckily for us, Kyle also figured that out for us.
Let’s Do the Math
“Averages are great, but the real point is for everyone to do this calculation on their own, using a model similar to what we created. I have condensed both models to more digestible forms below:
costs_ownership_year =
costs_payments_year + costs_fuel_year + costs_interest_year + costs_insurance_year + costs_repairs_year + costs_taxes_year +
costs_parking_year + costs_tickets_year + costs_opportunity_yearcosts_uber_year =
(miles_year / average_commute_distance * .80) + (miles_year * 1.10) +
(miles_year / average_commute_distance * average_commute_time * 0.21)Using the model we have we can manipulate some of the variables to come up with a crossover point — in this case 9,481 miles — where the costs of owning a car and the costs of using UberX are exactly the same. Assuming you have a medium-sized sedan that costs you $12,744 a year to own and maintain, and you drive 9,481 miles per year, then you should be indifferent about keeping your car.”
— Kyle Hill
So at what point should you consider trading in your car for Uber? Let’s take a look at some examples and find out:
- Example #1 (Ownership is Cheaper)
Annual Mileage: 13,476 Miles
Average Commute Distance: 25.2 Miles
Average Commute Time: 25 Minutes
Cost of Ownership: $12,744
Cost of UberX: $18,115.06
- Example #2 (Equal)
Annual Mileage: 9,481 Miles
Average Commute Distance: 25.2 Miles
Average Commute Time: 25 Minutes
Cost of Ownership: $12,744
Cost of UberX: $12,744
- Example #3 (Uber is Cheaper)
Annual Mileage: 5,000 Miles
Average Commute Distance: 25.2 Miles
Average Commute Time: 25 Minutes
Cost of Ownership: $12,744
Cost of UberX: $6,721
Is it Time to Ditch Your Car?
Unless you drive less than 9,281 miles per year, using Uber to get around town won’t be cheaper. But that doesn’t mean it will always be that way.
Driverless vehicle technology is quickly progressing and Uber foresees a future where their entire fleet will be automated. And when that happens, prices will not only be reduced, but it may become pointless to spend money on owning a vehicle.
Don’t believe me? This is what Uber’s CEO had to say about the matter earlier this year when Google unveiled their driverless vehicle prototype:
“The reason Uber could be expensive is because you’re not just paying for the car — you’re paying for the other dude in the car. When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle. So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.”
– Travis Kalanick, CEO of Uber
*Please read Kyle’s Medium post for a complete explanation of how these numbers were calculated.
Is it cheaper for you to own a vehicle or use a ridesharing service? Do you think you’ll ever rely on a driverless vehicle to get around town? Let us know in the comments below!
