Maths: Ride-hailing Services vs Owning a Car

FM Nirmala Sitharaman recently attributed the slowdown in the automobile sector due to millennials preferring taxi-hailing services like Ola or Uber, as against buying a car and/or paying up EMI on the same. This came under sharp criticism with Twitteratti exploding with trending memes i.e. #BoycottMillennials.

Let's do the math of owning a car vs hiring Ola ride services to explore the reasons, if this was indeed true. This article of mine is loosely based posts by The Hindu and News18 along with my own inputs!

Case 1: Ola vs. Buying a Car (using own's money).

a. Maruti Wagon R LXI Opt – On Road Price, Mumbai - Source: Zigwheels.com

b. Taking Olacabs site fare ride costs for a micro car, my calculation averages to be (₹14 per km x 30) i.e. ₹460 per day. Thus the travelling cost of 30kms for 22 days per month for 5 years, effectively comes to ₹ 6.07 Lacs.

Assuming that Wagon R gives mileage of 12 kmpl with petrol at ₹78 per litre, it works out to ₹6.5 per km i.e. ₹195 per day (6.5 x 30). Thus the travelling cost of 30kms for 22 days per month for 5 years, effectively comes to ₹2.57 Lacs.

Toll charges haven't been included in this working, since it would be applicable on both.

e. Resale value of Dec-2014 Wagon R LXI is at ₹3 Lacs [Source: CarDekho.com]

On the onset, the Car owner would be happy to know of actually saving ₹0.44 lacs, along with the social status of owning a car. But is that really so? Ask a financial wizard, and s/he will really differ on that, here's why!

Case 2: Ola vs. Buying a Car (on loan) with apple-to-apple comparison.

b. Loan on Rs. 4,40,000 (based on 85% financing at 9.25% for 5 years, with no processing charges). EMI is ₹9187, and thus total interest amount works out to be ₹1.12 Lacs.

I'm ignoring the opportunity cost of investing the same amount in a fixed deposit, if one chose to not buy a car. And the parking as well as cleaner's charges.

Hopefully, the FM really gets the message as to how financially smart the millenials really are vis-a-vis Generation X and Baby Boombers!