For 13 years, I lived in New York City and did not own a car. Not once did this present a problem. For most journeys, I could walk. For longer trips, I could take public transportation. (This was in the halcyon days before subway floods and eternal delays.) And for the occasional odyssey into the wilds of upstate or New Jersey, our family could rent a car or use Zipcar. For everything in between? Taxicabs and ride-hailing services such as Uber or Lyft.
This was convenient, and better yet, cost-efficient. Owning, maintaining and storing a car in New York City just doesn’t make sense, considering the cost and hassle of parking in the city. This is true in a few other American cities — San Francisco, say, or much of Chicago. But what about the rest of the nation?
After moving to Austin, for example, our family almost immediately bought a car (a lovely Mazda CX-5). I resisted getting a second car, but then reality set in: My wife and I worked in different parts of town, and it also seemed like a good idea to have a second car in case of an emergency with our kids while one of us was away with the other car.
Relying on Uber didn’t make sense to us at the time. Now that I primarily work from home, it would be something to consider … if we didn’t already own that second car. It did get me wondering, though: If we were starting again, would we really need two cars? And could we save money by relying full-time on the rise in ride-hailing services? After all, that seems where the trends are heading: According to a 2018 Pew Research Center study, 36% of adults said they had used Uber or Lyft, up from 15% of people just three years ago. It’s not hard to see that increase leading to people bypassing car ownership entirely.
Research on ride-hailing versus car ownership
Could you actually save money by selling your car and relying on Uber or Lyft instead? Motoring and leisure travel organization AAA has already done the research for you. And, well, let’s just skip to the conclusion from the 2018 study: “Ride-hailing services are a popular and convenient transportation option, but a new AAA analysis shows they are not a cost-effective replacement for vehicle ownership.”
Why’s that? Even the average city-dweller drives nearly 12,000 miles a year. Replacing those miles with ride-hailing would set you back differing amounts based on your city. In Austin, it would cost me $19,821, according to AAA. In the other urban areas AAA evaluated, costs ranged from $16,944 in Dallas to $27,545 in Boston. However, even the most expensive form of vehicle ownership – owning a new car – is just $7,321 a year for about 11,000 miles of travel, according to AAA. (See AAA’s city-by-city estimates here.)
Keep in mind that those are averages. Depending on what the commute is like where you live, you might be able to save by ditching your car and switching to ride-hailing services.
Applying the data to your situation
I drove considerably less last year than the average driver does, in part because I only commute part-time. The kids’ daycare is within walking distance – so is our favorite place for takeout and an excellent public park with a pool. All told, I drove my car roughly 3,000 miles last year. Based on AAA’s per-mile estimate of $1.65 for Austin ride-hailing, that equates to $4,955.25. (And even that includes short trips to the coffee shop where I could probably just walk.) Given that AAA estimates the annual cost of car ownership as $7,321 for standard mileage, my annual 3,000-mile usage would be more like $1,830, so it might make sense to sell the car. Plus, AAA estimates that my car loses $3,000 in value every year just by aging.
Another factor: Mental health. Letting someone else drive you allows you to focus on other things. And you can avoid some of the stress that comes with wondering how much it will cost to replace those squeaky brakes. According to Lyft, 54% of people who ditched their car as part of a recent promotion said their lives were easier during the challenge. Along the same lines, 53% of the people in the study said they loved ride-hailing, while only 23% said they loved their car.
Finding the right answer for you
Not sure where that leaves you? Not to worry. The U.S. Department of Energy, in partnership with the University of Texas and Oak Ridge National Laboratory, has created an online tool at Rideordrive.org to calculate whether you should own a vehicle or commute using ride-hailing services. Simply enter the terms of your auto loan (if applicable), how often and how far you drive, and how much you value your time, and it will tell you which option is better for you. And guess what? It recommends that I rely on ride-hailing services because they will save me $40,000 over the next 10 years.
A little surprising, but it does raise a question: Anyone interested in buying a gently used 2014 Nissan Versa?
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Louis Wilson is a freelance writer whose work has appeared in a wide array of publications, both online and in print. He often writes about travel, sports, popular culture, men’s fashion and grooming, and more. He lives in Austin, Texas, where he has developed an unbridled passion for breakfast tacos, with his wife and two children. This article is sponsored by Haven Life Insurance Agency. Opinions are his own.
The post Should you sell your car and rely on ride-hailing services? appeared first on Blog | Haven Life | Life insurance & Personal Finance Tips.
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