Buying vs Renting a car – Which way to GO?
This week has been one of the most controversial for the right (or wrong) reasons. With the hashtag #BoycottMillennials becoming popular, it has raised many questions and eyebrows, putting the onus on the young workforce. The BURNING question of the moment is this: Should you own a car or should you use car rental services like Ola and Uber? Everyone is divided on this – from auto industry to millennials!
Everything has 2 sides – the good and the bad. We list down the facts whether you should go ahead and use/ buy your own car or rely on the cabbies in a simple, no-nonsense way so that you can go head and decide what is best suited for you.
Owning a Car – Is it worth the cost?
First, let’s talk about cars. A car is a package deal where you not only pay for the car, but you also pay for add-ons like fuel cost, insurance, maintenance and other small expenses. Most of us buy a car using EMI options, while paying a down payment. The first car that any young working professional buys is somewhere in the 4-6 lacs bracket.
For the sake of assumption, let us take the average cost of a car in India to be ₹6 lacs. The scrap value after using the car for 6 years would be ₹1 lac. Scrap value, as the name suggests, is the remainder value that you get at the end of the life-cycle of any commodity. For vehicles, the scrap value is determined only after 10-15 years.
So, the effective price of the car is ₹5 lacs. If you drive your car every day for 6 years straight, it would roughly be 2,200 days.
So, after laying down these basic facts, the expenses can be divided in the following ways:
- Cost of buying just the car – ₹230/day
- Tyre & Battery (usually after 3 years) change charge – ₹23/day
- Interest loss on Car buying amount at 8% on ₹ 6,00,000 – ₹131/day
- Cost of Annual Insurance (₹15000/year) – ₹41/day
- Daily Fuel expenses (minimum) – ₹ 100/Day
- Regular servicing & annual maintenance cost (₹9000/year) – ₹25/day
Add all of these expenses and the daily expenses after buying a new car sums up to ₹850/day.
As seen from the above expense breakup, owing a car is quite a task. Considering all these costs, a lot of you might get discouraged. But, consider these facts – having your own car is a matter of pride for any owner as you have worked very hard to get this. A car is a valuable asset, and any asset, when sold, gives good returns, even after years of usage. For those who love cars, there is nothing greater than the joy of driving. Owning a car gives a sense of security, comfort, independence and reliability to the owner.
All the other expenses like battery change and tire change are not frequent. You have to change it once and be worry-free for at least 3-4 years. You can save more money if you buy the tires and the battery under an exchange scheme. You can’t put a price on safety and convenience too, especially if you have kids or aged parents. You also wouldn’t have to rely on cab drivers, especially during odd hours.
During the times of an emergency, having your personal car is crucial as you wouldn’t have to rely on anyone and wait for the car to arrive at your place.
Renting a Cab – Savings all the way?
The popularity of renting a cab online has risen in the last 4-5 years, with the entry of big players like Ola and Uber. They stormed the market with ‘affordable’ cab rides for anyone and everyone with a basic internet connection in their smartphones.
To explain the scenario in a better light, let’s take a scenario. You use a cab 2 times a day (one to the office, the other to your home). The total daily commute is 25 kms. Since most of us go for the cheapest option available to save a few bucks, the cost for a day would be ₹400. You have office 5 times a week, so that would be 260 days a year.
Laying down these facts, the total cost that you would incur would be:
- Daily cost – ₹400/day
- Expense for a year – ₹1.04 lacs
- Total expense for 6 years – ₹6.25 lacs
All the above prices are considered without including any miscellaneous expenses like the occasional traffic, price hikes, cab drivers’ strikes, and other factors. You don’t have to pay for the overhead expenses like insurance, fuel, and other small and big expenses.
Just like everything has a good and a bad side, booking cabs also has its downfalls. There are several well-known factors that can dissuade you from booking a cab. They are as follows:
- Lack of reliability, especially during peak hours and during calamities like floods
- The inconvenience of waiting till the cab arrives
- The lack of trust on cab drivers during odd hours
- The sudden unexpected price hikes during a time of crisis
In the end, it is up to you to decide whether you would want the feeling of owning a car or having to rent a car for your daily commute.