Is owning a car still worth it?
With the rise of ride-hailing apps like Uber and Lyft, it’s an open question
Every day there’s more news about the inevitable arrival of autonomous vehicles. At the same time, more people are using ridehailing and ride-sharing apps, and the percentage of teens getting their driver’s license continues to decline.
Given these technologies and social changes, it’s worth asking: Should Americans stop owning cars?
We’ve conducted an analysis of the all-in cost of car ownership, and we found that mobility services such as ride-hailing and ride-sharing apps — which few people today would consider their main mode of transportation — will likely provide a compelling economic option for a significant portion of Americans. In fact, if the full cost of ownership is accounted for, we found that potentially one-quarter of the entire U.S. driving population might be better off using ride services versus owning a car.
FROM DREAM TO BRUTAL REALITY
America’s love affair with the car and individual car ownership took off after World War II, aided by inexpensive fuel, a rising consumer class and a vast national network of highways. A new generation of young professionals moved away from the urban core to the suburbs and abandoned mass transit for transportation enabled by personal car ownership.
This shift transformed the modern American landscape, triggered a new approach to city planning and enabled urban sprawl. Cities that blossomed before WWII — New York and Boston, for example — already had and continue to use their mass transit systems. By contrast, cities whose growth mostly occurred in a post-war boom like Los Angeles, Atlanta, Houston and Denver were built and effectively designed around car ownership.
But for many people, the 1950s concept of driving as an expression of personal liberty has been replaced by the brutal reality that driving is often a tedious chore. With an average price of $35,000 apiece in the U.S., cars are used about 4 percent of the time, during which drivers are often subjected to congested traffic.
WEIGHING COSTS
To answer this question, we built a comprehensive calculator that includes the costs of car ownership and compares it with an alternative of using mobility services, such as ride-hailing and ride-sharing apps, fulltime to replace personal car ownership. The results might surprise you.
The costs of traditional car ownership go far beyond the price tag: There is also interest paid on car loans, insurance, taxes, fuel and maintenance. Some expenses are nonobvious, such as parking, property taxes and construction costs for home garages, and the value of our time.
The average American spends 335 hours annually behind the wheel driving over 13,000 miles. Add in the hours we spend maintaining, cleaning and managing our cars, and it becomes clear that America’s focus on personal car ownership is costing us a significant amount of time, arguably our most precious asset.
How much would you pay to avoid the stress of driving around town? How much would you pay to use that time more efficiently, such as catching up on email, reading a book or taking a nap? What if you could do work-related tasks while riding? Some professions are more suited to using time riding in a productive way: It’s probably easier for a lawyer to clock billable hours while riding to work than a plumber, for example.
When these costs are included, mobility services might be the economically preferable option. To be clear, this analysis is focused on full replacement of personal car ownership in which an individual would shift to using ride services for all trips, rather than purchase a new vehicle.
OUTPRICING HUMAN DRIVERS
The rise of autonomous vehicles used for carpooling and ridesharing services could make mobility services even more compelling, particularly when you consider the economics from the service provider’s perspective.
Assume for a moment that you operate a fleet of vehicles that provide mobility services. Let’s also assume you can purchase the vehicles in bulk for $20,000 apiece and that they will operate full-time for five years (the average age of a New York City taxi was 3.6 years in 2015). The median annual pay for a taxi driver is approximately $25,000. This means that it will cost you $145,000 to purchase the car and pay a driver over five years of operations (ignoring fuel, maintenance, registration and other miscellaneous operating expenses).
Using common accounting practices, we calculated that if you could buy an autonomous vehicle for less than $114,000, a service provider would be better off never hiring a driver.
For the average customer, a price tag of $114,000 is unimaginably high for a car. But, for a company like Uber that might someday operate a fleet of autonomous vehicles, a price tag north of $100,000 might look like gold when compared with paying drivers, a major contributor to operating cost.
F. Todd Davidson is research associate, Energ y Institute at the University of Texas at Austin, and Michael E. Webber is professor of mechanical engineering and deputy director of the Energ y Institute at the University of Texas at Austin. This article was originally published on The Conversation.