Do you have a passion for writing?Join Ayra as a Writertoday and start earning.

The True Cost Per Kilometre of Your Car

If you think Uber/Ola rides are expensive, you will be surprised when you realize the true cost per kilometre of your own car.

ProfileImg
20 Feb '24
6 min read


image

People often complain about the rising costs of cab services like Uber, Ola, or taxis, finding themselves shelling out hefty sums for seemingly short distances. Personally, I have grumbled on occasion when faced with surge charges, watching the fare inflate to 1.25-1.5 times the standard rate. At those moments, the thought of driving my own car always seemed like a more economical choice. After all, isn't it simply a matter of dividing the cost of fuel by mileage (in my case, Rs 88/9, roughly Rs 10 per kilometre)? Surely, that's much cheaper than an auto or even a bike taxi, right? If you have made similar calculations, let me tell you, your estimations are way off. I am not merely referring to parking fees or tolls, which you might dismiss as minor expenses. Read on to know how using Uber/Ola/Taxi/Auto services can be significantly cost-effective than driving your own car.

If you are considering purchasing a car, read this thoroughly before deciding on the make and model, your financing options, or whether owning a car is even necessary.

Here are some assumptions and facts that I have considered while deriving these figures:

  • Average usage of 10,000 kilometres per year, with a split of 70% city driving and 30% highway driving.
  • Average depreciation at 15% per year.
  • All prices are as of 20/2/2024 in Bangalore.
  • Pricing considered is for the new 2024 base variant petrol model, with on-road prices in Bangalore minus insurance costs.
  • Insurance cost provided is the average cost of insurance over 5 years.
  • The fuel expense is based on real-world mileage, assuming 10,000 kilometers of driving per year with a split of 70% city driving and 30% highway driving.
  • Calculations are based on 5 years of ownership.

Your cost of ownership will be significantly higher if you sell the car within 5 years, especially within the first year when insurance and depreciation costs are higher. Your depreciation will be higher if you have been in an accident with your car. Your cost per kilometer or cost of ownership may vary slightly depending on your car, usage, the number of years of ownership, fuel cost in your city, and whether you use petrol, diesel, or CNG. Your depreciation will be higher if your have met with an accident in your car. However, these figures will give you a rough idea of how to calculate the exact cost per kilometre or cost of ownership of the car you are considering buying or already own.

The numbers don't vary significantly if you are financing the car through a car loan. You might be surprised to see that the cost of ownership of a car is only slightly higher compared to self-financing. This is because you're not paying the principal amount or the total cost of the car upfront. Instead, you're making monthly payments, and that money, if invested, can also yield returns. In fact, it may be more advantageous to invest in the stock market or property rather than self-financing the car and taking out a loan for the remaining amount, as your returns could surpass the interest you pay on the car. However, investing in property and the stock market isn't suitable for everyone, and returns aren't guaranteed. If you're considering investing in fixed deposits or similar options, it's better to self-finance and not take out a car loan.

After reviewing all these numbers, have you realized the true cost per kilometre of your car? If you believe that owning the car for a longer period will reduce the cost of ownership, consider that while it may decrease the overall cost to some extent, maintenance costs will increase from the 6th year onward – including expenses for tires, battery, brake pads, air conditioner compressor, suspension, camshaft, engine, and cylinders, among others.

If, after seeing the numbers, you decide against buying a car, let me share my experience with relying on Uber, Ola, taxis, or auto services for commuting to work daily to cut costs. While it was economical, it was neither optimal nor reliable. Here are the challenges I faced during my brief period of relying on cabs for daily commuting before deciding to purchase a certified used car:

  • Non-availability of cabs/autos during peak hours and late evening.
  • High cancellation rates.
  • Extended wait times due to non-availability and cancellations.
  • Delays in reaching from point A to point B.
  • Difficulty arriving on time at times.
  • Time wasted trying to book cabs across various aggregators.
  • Lack of flexibility in scheduling.
  • Entrusting your safety to others.

Ultimately, owning a car is not solely a financial decision; it is also about convenience and emotion. The joy of driving your own car, especially when traveling with family, creates lasting memories that far outweigh the costs. If you are a daily commuter or have regular travel needs, relying solely on cab services may not be ideal, even if the cost per kilometre or cost of ownership appears low for your usage. Convenience is paramount.

 Additionally, if you have young children, toddlers, or elderly individuals in your home, cabs may not be suitable due to potential delays and uncertainties. On the other hand, if you rarely commute or have access to reliable public transportation like the metro or bus, foregoing car ownership and relying on cab services when necessary, could be a viable option. For commuting out of town occasionally, you can consider Ola/Uber's outstation options. Alternatively, if you are okay with driving, you can also check out renting self-drive cars from companies like Zoomcar or Avis, etc. These options could be economical and convenient.

If you are considering buying a car and want to reduce the cost of ownership, consider exploring certified used cars, which can significantly lower expenses. Buying CNG car is another option to lower your fuel costs, particularly beneficial for those with longer commutes exceeding 2000 kilometers per month. However, the higher initial cost of CNG vehicles, along with the higher maintenance expenses compared to petrol cars, will offset the savings from fuel consumption unless you average at least 70 kilometers of driving every day. You can also explore electric cars if your commute is high and your budget permits, as the cost of electric cars has significantly decreased recently. These options may work better economically. 
Lastly, if you are a corporate employee and your company provides the option of leasing a car, you can explore that avenue as well. It often proves to be more economically advantageous than self-financing or obtaining a loan externally, as you receive pre-tax exemptions on payments for the car lease, chauffeur, and fuel. 

If you found this article useful, please consider liking and sharing it with your friends and family. If you have any questions or feedback, feel free to leave a comment in the comments section.

Category : Automobile


ProfileImg

Written by Prasad B Y

Foodie, Coffee Lover & Techie