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Is Uber cheaper than owning a car?

What’s the price of convenience?

My car is 11 years old this year. I’ve looked after it well, serviced it regularly, and only ever had one major mechanical issue.

However, I use it very little. Since I work from home, I have only clocked a little over 6 000km in each of the last few years.

Given that I still have to pay the full amount on my car insurance and the cost of an annual service, I began to wonder if it makes economic sense to keep the vehicle. Living in Cape Town means I can use Uber anywhere I need to go.

Making the comparison

So I set myself a task. I wanted to calculate whether it would be cheaper to keep the car, or to sell it and use the ride-sharing app to get wherever I might need to go.

For next year, Uber has raised its rate per kilometre to R8. That sets the benchmark.

The first and simplest calculation is to compare that against the rate per kilometre that the Automobile Association (AA) quotes on my car. The association provides a vehicle rate certificate specific to your vehicle, giving you a fair sense of what it costs to run that particular car.

The AA’s calculation, which also takes into account how much I use the vehicle, is that the total rate of running my car is R8.87 per kilometre. That is marginally more expensive than using Uber, so the first found goes to the ride-sharing app.

However, I also wanted to get a specific calculation for how much it was actually costing me to keep the vehicle. I keep track of all my car expenses for tax purposes, so I know exactly how much I have spent over the last year.

The one factor that isn’t definitive is depreciation. I assumed 20% depreciation on the value of the vehicle in the first year, and then 10% every year thereafter.

The table below consolidates all costs incurred so far this year (just 10 days short of a full 12 months):

Comprehensive vehicle costs for 2018
Petrol R7 029.00
Insurance R5 180.00
Service & maintenance costs R12 328.00
Licence R768.00
Depreciation R7 283.50
TOTAL R32 588.50

That’s a fairly considerable figure for a car that I use so little. However, it works out to be R5.43 per kilometre, which, even at Uber’s current rate of R7.50 per kilometre is noticeably cheaper than using the ride-sharing app. In total, if I had used Uber for 6 000km this year, it would have cost me R45 000.

It’s also worth considering that the car was due for a major service this year, which considerably increased the maintenance costs from 2017. I also replaced the battery. Next year, I would anticipate total service and maintenance to therefore be lower.

There is, however, always the risk that something unforeseen happens. Having to replace a gearbox or overhaul the engine could suddenly make paying for Uber seem like a more appealing option.

Cash in hand

The other consideration, of course, is that if I sold the car I would have that cash. The vehicle is not worth much, but I have received an offer of R60 000.

That’s where this gets interesting, because if I invested that money the return I earn would be cancelling out some of the difference. At a theoretical 10% per annum, compounded monthly, I would earn R6 282.78 in the first year. That would still place me at around R6 250 underwater by using Uber.

By year eight, however, I would be seeing a return of over R12 500 per year. At current costs, I would therefore be breaking even. From that point onward I would be saving more by using Uber.

This is, of course, using the assumption that the difference in cost between owning my own car and using Uber would stay constant over this period. It’s difficult to know how accurate that assumption might be, given that future costs are unknowable. However, it doesn’t seem to be a wildly unfair position to take given that an ageing car would also likely become increasingly expensive to maintain.

This all makes for a very interesting conundrum. Even more so when one also looks at non-financial considerations, particularly the question of convenience. How much is it worth to have a vehicle available to take my dogs to the vet or go on holiday? Conversely, how much is it worth to have someone drive you everywhere and not have the stress of dealing with Cape Town traffic and inconsiderate road users?

Do those cancel each other out? It’s difficult to know.

For now, I’m keeping the car. The next time it costs me money, however, I might rethink that position.

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COMMENTS   15

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You are entrusted to write articles about major corporate events and possibly influence decisions or perceptions of many readers and you come up with this? Moneyweb has lost the plot.

Proving once again that you can please some of the people, some of the time, but…
Good article.

I beg to differ. Car ownership has to be one of the biggest hurdles to wealth creation. I see almost every day. Articles like these are critical to initiate thinking about where your money is going on daily basis. Not only is it an 11yr vehicle but he still assessing if there are cheaper alternatives. Unlike my little bother with his fancy, brand new double cab and that repo man hounding him. The opportunity cost of a new car is astounding. Well done Moneyweb, more articles on upping your savings rate is critically needed in our country

The problem IS when most people need a new car, they FINANCE it. They should continue saving that payment. they no longer have, and then when it comes car time, they may be ahead of the financial ball????? But most people apply it to their lives. IF they would put the payment into the home bond, the would save a TON of interest and be much farther ahead of the game!!! Dr. Debt

…for sure, it just proves how VERSATILE Patrick is as journo, covering a wide range of topics.

I’d be interested to know what car you have? R1000pm maintenance seems pushing it – even if for an older car.

It doesn’t sound like you’re having the benefit of running a Toyota? I’ve had most makes of cars, and my best experiences – by far – have been with Toyota. Worst? Fiat and Nissan. Never again with those two!

And is your car insured separately? Not bundled instead into an an all-in one Contents-of-House insurance etc with say, Santam?

Good article. Have often thought about this myself – especially with service, insurance and licence fees increasing far above inflation. Driving a jalopy to work sort of makes sense, but if that return commute is more than (say) 20km one has to factor in the difference in safety technology between the jalopy and a more modern vehicle – even if the latter is an order of magnitude more expensive. And then we get to SUV’s and double cabs: If you only go on (say) two trips per year to off road destinations, it would be much cheaper to buy and drive a sedan and simply rent the 4×4 for the two or three weeks per year when you actually need it.

Interesting article and calculations. Very informative. I believe a lot of city dwellers are weighing up all the options like you did.
Unfortunately SA still lacks decent public transport outside cities.
Also depends on your lifestyle.
Say, if you want to go to hermanus for the weekend.
What do you do without a car?

Thank you – a useful article.
A key factor putting me off going the Uber way is their surge pricing. Often I end up unavoidably travelling in Uber’s self-declared surge pricing times which results in a fee far beyond the normal rate.

Against a 2nd hand vehicle with low insurance premiums you might come ahead. Comparing Uber to a new car (and if you use any form of financing, interest etc), Uber comes out way ahead in terms of pricing if you do 500km a month.

Also, no issues really on breakdowns/theft/flat tyres, you just get a another Uber.

Good article .The actual choice depends very much on your personal circumstances . I take my bicycle , surfski and tent regularly in my Suv for a few days vacation . Uber would simply wont fit my needs then .
Also , the Uber tariff must cover the total replacement of their vehicle , plus the living costs of the driver , in addition to fuel etc .Uber,s kilometre rate therefore must , over time , exceed your own vehicle tariff cost .
Only if you make a few , short ,local trips , every month , in a city where Uber is allways available , would it be better to use Uber .

Excellent article. I have to sort out transport for my son to varsity next year. Do I a) buy him a car, or b) let him Uber? Think he’s going to Uber….

Another factor to consider: If I have to finance my son’s car, it negatively affects my credit rating. If he uses Uber, no long-term finance commitment against my name.

With the brilliant new (‘2019’) SUZUKI JIMNY recently launched, who in their right mind is still going to consider Uber…?

(*lol* Having said that, Uber has a place in society: for those evenings after the office party, or during the night out to town without having a ‘designated driver’ in your group, and you realise after HALF a beer, you’re already THREE TIMES over the legal limit… 😉

This could work for a person doing 6,000 km’s a year, what if you doing
30,000 km’s a year it kinda falls flat.

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