Pros & Cons - Weighing Car Ownership vs. Ride-sharing Subscriptions

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Up to 95% of a car’s life will be spent… just sitting there. While many cities are choked with traffic, most cars sit parked most of the time. And if you’re paying down a loan on that car, plus insurance, plus maintenance — it all adds up fast. Does buying a car make sense when it spends most of its life sitting stationary?

Many Americans are starting to realize that their cars are not smart investments at all, and never really were. Car companies are starting to realize this as well, and are bracing for a new wave of “owners” who don’t own the entire car, but instead share the car with others. Taking a cue from subscription-based businesses that have effectively killed off other businesses — think Netflix and Blockbuster — ride-sharing companies are offering monthly subscriptions for their services.

So is “sharing” a car for you? Or does it make sense for you to put your money into owning one?

Owning a Car: First, the Hassles

First off, let’s be clear: There’s a big difference between buying a reasonable hatchback hybrid and a giant truck, or an electric car versus a high-end sports car. The up-front and longer-term maintenance costs will vary greatly depending on what you buy.

For example, if you find a Toyota Corolla with 155,000 miles on it for $6,000 and you know the engine was replaced two years earlier, that’s obviously going to be cheaper up front. But when you add in the cost of maintenance later down the road, plus insurance, things add up fast. Also, what’s the gas mileage? This changes as a car gets older. (Well, for combustion-engine cars, at least.)

It’s pretty simple to tabulate the likely costs. Figure in the cost of a car payment, plus gas, plus insurance, plus estimated maintenance.

Estimated maintenance is broken down in the car’s manual. At certain intervals, things like oil changes and tire rotations have to happen. Of course, beyond 100,000 miles, things get more expensive, and major parts may start wearing out entirely. Though modern cars are built better than ever, you can count on things like belts, hoses, brakes, batteries, and tires to wear out and need replacing. Budget at least $50 a month toward these costs, even if you don’t anticipate needing anything in a given month.

Let’s say your monthly car payment is $200, your monthly insurance premium is $50, and you’re setting aside $50 a month in maintenance costs. By now, you’re up to $300 — which is right around the price point where ride-sharing subscriptions start.

But hold up, because this $300-a-month cost is before we add in the cost of gas. That will range from zero to who knows, given your needs. Still, it’s yet more cost to add into your cost-benefit equation. And did we mention parking costs?

The Sweet Freedom of Car Ownership

Yet there are reasons to own a car, of course. Like if you routinely haul kids around, or need to be at many meetings in many places during an average day. Or maybe you’re a dog-walker who needs a way to take the pups to the park. Or maybe you just drive out to the mountains every Friday to relax. In any of these situations, public transport or walking aren’t always feasible.

All this to say, there’s obviously a certain freedom provided by owning a car. That freedom is hard to replicate when you’re having to wait on a car to pick you up, possibly share it with others, and plan ahead to be on time.

The Pros and Cons of Subscription Transportation

It’s possible shared vehicles are the future. But is the future here yet? Let’s break it down.

Lyft’s $299 a month service sounds like a great deal compared to modest car ownership costs (especially if you finance). But there are caveats to Lyft’s offering, and Uber’s Ride Pass is more about price protection than capping your fees.

With Lyft’s subscription, you 30 get rides per month. Each one is covered up to $15, which is on par with what most people pay to get from, say, downtown to their home or apartment. Even getting “across town” is a good bet for that price, and you can of course opt to share your ride with others to further lower your price. The problem is, if you take a cheaper ride, it’s not like the difference is added to your account. You just lose the difference. If you go beyond 30 rides, they’re discounted by 5 percent.

In other words, it all adds up to a deal only if you live in a city where you also have the option of public transport, or you don’t go out very often. Looking at AAA’s estimates of driving costs, a small sedan would cost you around $6,700 per year. With that figure in mind, paying less than $3,600 a year for Lyft sounds like a deal, right? Except that the radius of miles covered by Lyft doesn’t stack up to the distance covered by an owned car. AAA estimates you’ll drive 15,000 miles per year. That’s 1,250 miles per month. No way you’re doing that with Lyft and staying under $15 per ride!

That said, if you only use cars to get to the airport or far-flung friends’ homes once in a blue moon, it could be worth it. The price protection and convenience is nice, but you pay a premium for it.

Currently, a ride-sharing subscription is going to appeal to a relatively small sector of the population. But that sector will grow over time. In addition, it’s possible that Lyft and Uber will adjust rates or offer different incentives.

The Possibilities, They Are A-changin’

Most likely, owning a car or buying a ride-sharing subscription won’t be your only options for long.

It’s possible that car companies will start “renting” cars to “subscribers.” So-called subscription services already exist from some forward-thinking automakers. For example, Volvo’s Care program rolls up the various costs of car ownership (things like insurance and maintenance) into a nice bundle, helping you streamline your payments — and presumably your life.

In addition, there’s already a market for car owners to rent their cars out short-term, also known as peer-to-peer car sharing. If a car is costing you money while idle, these are opportunities other people are willing to explore. We’re just in the early stages of that exploration.

All this to say, the pros and cons of car ownership versus ride-sharing subscriptions will vary greatly depending on your unique circumstances. The bottom line? If your car spends most of its time sitting idle, it may be worth your while to at least consider other options.

Sticking with your car for now? Use Covered’s fast, easy-to-use online quote tool to make sure you’re getting the right auto insurance coverage at the best price!

Cover Photo by Thought Catalog on Unsplash