Ride-hailing vs. car ownership: For many, the car is still king
With a ride from Uber and Lyft practically around every corner, city or suburban-dwelling car owners may be tempted to ditch the responsibilities of car ownership entirely.
Just imagine being free of oil changes, gas prices, insurance, tire problems and tune-ups.
Not so fast, though. According to recent studies, whether you’re better off owning a vehicle or solely using ride-hailing apps and rentals depends on who you are.
The case for car ownership
If you’re an average Joe (or Jane) with a job to get to and places to go, going carless is probably not going to make financial sense, according to a recent a study by the AAA Foundation — even with the advent of ride-hailing apps.
“With the average American city-dweller driving nearly 11,000 miles per year, a personal vehicle is still the more cost-effective choice,” says John Nielsen, managing director, automotive engineering and repair for AAA.
Take the average of 10,841 miles per year and ring up the cost of using ride-hailing apps, and you’re looking at more than $20,000, according to the AAA’s annual Your Driving Costs study. On the other hand, let’s say you’ve bought a new car — the costliest form of ownership. Your annual cost for those same miles, according to the same study, is $7,321.
Even if you work downtown and throw in premium parking fees, ride-hailing apps are still more than double the cost of car ownership.
“For those who travel a very limited number of miles annually or have mobility issues that prevent them from driving a personal vehicle, ride-hailing can be a viable and important option,” Nielsen says “But, for everyone else: The car is still king.”
When sharing makes sense
On the flip side, car ownership might not be the best financial choice for everyone.
The cost of maintaining your own vehicle vs. ride-hailing can change dramatically if you don’t have a daily commute. This may include living in dense, urban areas where public transit is readily available, or in a mixed-use suburb where employment centers and residences are within a pleasantly walkable distance. Technology, also, has created opportunities for many to work from a home office.
In this case, examine how much you travel and then crunch your own numbers to compare them to your car ownership costs.
In addition, there are also a few techniques to keep travel costs down:
- Avoid “surge” pricing. When everyone wants the same service at the same time, prices go up. These times include three-day weekends, holidays and bad weather. If you are dead set on getting to a popular concert or festival, this may not be avoidable. But many times, you can avoid surge pricing by planning.
- If you’re going to a popular spot, there are “pool” apps through which you can split the cost with others who are going the same direction. Or you can split the ride costs with friends.
- Don’t forget about public transit if your city has it. Just because there aren’t fancy apps doesn’t mean they aren’t good ways to get around.
- You can always rent a vehicle. This makes sense if you’re planning a road trip weekend or longer journey.
- Use promo codes. You can also earn free rides by referring friends.
A word about insurance
If you’re doing the math for your own ride-hailing vs. ownership comparison, don’t forget to factor in your car insurance policy.
In 2019, the average cost of car insurance was nearly $1,000 per year, according to the Insurance Information Institute, but this can vary a great deal depending on manythings, including your driving record and state. Thus, if you live in a state with high premiums and you’ve had the misfortune of some at-fault mishaps or speeding awards, that’s going to be a plus in the ride-hailing column. You can also factor in age, marital status and sometimes credit history to paint a more precise picture.
Say you do switch to ride-hailing as a sole means of transportation: What about some uninsured motorist or personal injury protection?
The good news is that non-owner policies are usually inexpensive and provide basic coverage such as medical payments, personal injury protection, uninsured or underinsured motorist liability insurance and rental car liability coverage.
The average annual cost, according to AAA, in 20 major cities of solely using ride-hailing apps:
- Atlanta ($17,741)
- Austin ($19,821
- Baltimore ($19,917)
- Boston ($27,545)
- Chicago ($22,020)
- Cleveland ($20,091)
- Dallas ($16,944)
- Denver ($20,434)
- Los Angeles ($17,951)
- Miami ($17,339)
- Nashville ($26,397)
- New York ($21,279)
- Philadelphia ($23,201)
- Phoenix ($17,436)
- Pittsburgh ($18,940)
- Salt Lake City ($18,866)
- San Diego ($17,315)
- San Francisco ($21,972)
- Seattle ($23,951)
- Washington D.C. ($21,093)
So, while car ownership is typically the most cost-effective way to get around, there are some cases in which it makes more sense to rely on ride-hailing. Make sure you factor in all the costs involved in order make the most economical decision that works best for you and your own personal circumstances.