Mar 212017

[Disclaimer: This is not a sarcastic post]

For starters: Ubering means to use Uber. Uber is an app based taxi service. It’s essentially an on-demand taxi service where a user can call for a taxi by using the Uber app. Apart from Uber, this kind of service is also provided by Ola in India. To learn more about the cost and comparison between these two and with other transport service, read this.

With the rise of Uber and Ola, the ease and affordability of hiring a taxi has gone up significantly. This change triggers an important question- “Is it better to hire Uber or Ola instead of owning a car?”

The answer to this question, similar to the answer to “Buying vs Renting House“, requires a bit of calculation and a bit of qualitative reasoning.

So, first let’s look at what the numbers say.

First of all, see this to learn about the actual landed price of a car or On Road price.

Here’s a comparison of cost between owning the most basic car and hiring an Uber (UberGo specifically).

Buying vs Hiring Car_Alto

Buying vs Hiring Car_Alto

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The conclusion is clear. If one is going to drive car by oneself then it makes sense to purchase a car rather than hiring a taxi. However, to make the comparison Like for Like it’s important to consider driver’s salary in “own car” option. In this scenario Uber is the clear winner, atleast at current rates in India (it would hold even with 40% increase from current rates).

A more realistic comparison would be to consider a mid range car with general accessories- for example a Maruti Swift. Here’s a comparison.

Buying vs Hiring Car_Swift

Buying vs Hiring Car_Swift

In this scenario the “own vs hire” decision is neutral when one doesn’t consider driver’s salary.

This goes against the general wisdom of hiring a taxi vs using own car. The reason is that people generally dont make this calculation at the time of purchase of car. And once a car is purchased the incremental cost of running is generally perceived to be the fuel cost, which is what the taxi fare is compared against. The less obvious but more relevant cost of running- purchase, maintenance etc. are generally excluded from the calculation.

This numeric analysis clearly shows that hiring a taxi (Uber, Ola) is much economic then owning a car (and hiring a driver to run it).

The qualitative factors of comparison, listed below, also favor hiring vs owning:

  • Ownership vs Upkeep: While owning a car is a matter of pride, the upkeep of car is a cumbersome task. Apart from paying for a parking slot in society apartments, there is hassle of routine cleaning, getting frequent maintenance, mending the puncture (flat tyre).
  • Convenience vs Availability: One’s own car is always available for use, for any destination. While a taxi may not be available on-demand (Uber and Ola are trying hard to bridge this, with good success). Also, a taxi may not be available for any destination (Inter-city, long vacation drive). However, specially in city, it’s more convenient to hire a taxi given that one doesn’t need to toil to find parking space.

In the end, it looks that both quantitatively and qualitatively hiring a taxi is much better than owning a car, personal pride aside!!!