Posted on: February 16, 2017

Buy a Car or Book a Cab?

buy a car

The advent of app-based cab services has revolutionised the way people travel. There are several cost benefits that can be availed when using cab-based services as you can travel through the heavy city traffic at reasonable costs, without facing the hassles of driving, parking and related inconveniences. However, does the availability of app-based cab hailing services make owning a car redundant? Read on to learn more.

When is it wise to invest in your own vehicle?

When you decide to purchase your own vehicle, you must weigh your choices and the expenses associated with the purchase. Presently, some might even argue that with the presence of app-based taxi services, it is cheaper to simply hire a cab than to buy your own vehicle as you can avail all the benefits of owning a car without the associated hassles of maintenance.

However, there are quite a few arguments in favour of having your own car. If you are living in a large city and have to travel longer distances for work on weekdays, it might make more sense to invest in purchasing your own car. The best method to choose the cheaper option is to weigh the costs against each other. Take the charges per kilometre and compare that to the cost of fuel, loan charges, parking charges etc. For app-based services, you must leave room for taking into consideration the surge pricing charges that are levied at times as well as higher ride time costs due to traffic issues.

Can you wholly rely on app-based taxi services?

In case you only occasionally need to hail a taxi or travel only short distances, it might actually be cheaper to use the app-based services. Also, the introduction of cheaper price segments for smaller cars (such as Ola Micro) has brought down the per kilometre rates of app-based services, making travelling short distances quite economical.

However, this might not completely take away the need to buy your own car. There may be availability issues, especially during rainy days or times when lesser cars are plying (such as the in case of strikes). Along with this, there will be times when your app based taxis will be on surge pricing such as during festive occasions and if you are travelling longer distances, you might have to shell out a substantially larger sum of money, which takes away the key benefit of travelling economically.

If you are not willing to take the risk of facing the uncertainties of relying on a cab service, it is definitely a better idea to invest in your own car.

Let’s do the math here. Suppose you travel a total distance of 50 kilometres for work every day, this is how much you would be spending per month on transportation.

Table1. The following are the schedule of charges using a phone-based taxi app*:

Criteria Costs Incurred
Per Kilometre charges Rs. 8 per kilometre
Ride Time Charges Rs. 1 per minute
Approx. Ride Time (average 30km/hr.) 100 minutes
Distance Charges (for 50 kilometers) Rs. 400
Ride Time Charges (100 minutes) Rs. 100
Total commuting charges per day  Rs. 500
Commuting charges per month (20 working days) Rs. 10,000
Cumulative Annual Commute Cost Rs. 1.2 lakhs
*The figures are indicative and liable to change periodically. Taxes have been excluded for simplicity.




The above calculation does not take into account the possibility of surge pricing or cab availability issues due to strikes, bad weather conditions, festivals etc. Also do remember the fact that when in a city you cannot discount the possibility of traffic jams, which will result in higher ride time charges.
The alternative:

Instead of shelling out the Rs. 10,000 monthly for your commute costs, the alternative obviously is to get your own car. So assuming an EMI of Rs. 10,000 (Rs. 9986/month in fact) for 5 year tenure, you can easily apply for a car loan of Rs. 4.7 lakhs for a new car. Moreover, in case you make a 20% down payment on your car a hatchback will be well within your price range. These figures, however, do not account for cost of fuel and car maintenance charges which can be substantial. However, the surge pricing and traffic jam impact (of cabs) when taken into account might easily be equal to those costs. That said, in life balance is essential and while in some cases, your car can be the best form of transport, hailing a shared cab from time to time might just be the greener option.
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The best option for heavy car users

If you not only travel on a daily basis for your work, children’s school etc. but also go places over the weekend, nothing can compare to the joy of investing in your own vehicle. So if you live in a city where public transport is not a viable alternative, it makes more sense to buy your own car. Also, it gets more economical when you can drive yourself around and do not have to rely on the services of a driver.  

The final word

Deciding to invest in your own vehicle is a key decision for most of us. However, with the rising levels of pollution, traffic congestion in large cities and problems with car parking, people are gradually preferring to leave their own vehicles to travel by other modes of transport. The trend of app based cab services becoming more popular in major Indian cities are expected to continue for the foreseeable future. You must, however, keep in mind the fact that owing your own vehicle definitely has its own perks. Alternately, you can opt to use shuttle or car sharing services for your regular commute, while using your own vehicle for days when travelling a longer distances. This way you can get the best of both worlds!

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