If you are looking for ways to save in 2017, you might want to consider tossing your car and Ubering instead. My Treasury.co.za, which helps South Africans find the savings account with highest interest rates, crunched the numbers to see when it makes financial sense to own a car or to Uber.
“My Treasury.co.za is committed to using data analysis to help South African consumers make more informed financial decisions and the answer is actually really simple,” says Michael Kransdorff, chief economist and co-founder of MyTreasury.co.za, “If like many South Africans, you drive less than 50km a day, using an Uber will save you money.”
Owning a car is expensive and depreciates over time. Although a car is technically an asset, it’s not an investment.
MyTreasury.co.za based its calculations on a Toyota Corolla, the most common car used by UberX drivers – the 1.8 Exclusive sells new for R300 900. The car’s depreciation and financing costs are around R61 000 per year. This takes into account that you are able to finance the car over five years at prime and sell it at the average market price after five years.
Insurance is the most significant added cost of car ownership. One of SA’s largest insurers gave a quote of R1 500 per month (R18 000 per year) for comprehensive insurance with a minimal excess.
The bane of a driver’s life is parking fees. If parking at home and at work is free, parking fees were estimated at R1 560 a year.
If you wash your car once a month, at an average of R150, it costs around R1 800 a year.
Licences, fines, tolls
Licences, tolls and fines typically amount to R2 000 per year.
“Insurance, parking, cleaning and licenses are your fixed vehicle costs,” says Kransdorff.
Petrol costs depend on your driving patterns, but MyTreasury.co.za worked out a standard of *R27 000 a year for the average South African driver.
Total cost of owning a car
Putting all these numbers together, the annual cost of car ownership for the average South African driver works out to R111 000.
Cost of taking an Uber
Says Kransdorff, “By comparison all your Uber costs are variable. You only pay for what you use. The cost of taking an UberX is R7.50/km + 75c/minute. At average urban traffic conditions, we calculate an average cost per km of R9”.
“Any sound financial analysis doesn’t only consider what you spend but also takes into account what you gain.”
What are the benefits of not being stuck behind the wheel? As an Uber rider, you’ve freeing up time to organise your life: make calls, send WhatsApps and finally clear your inbox. MyTreasury.co.za calculated this is worth about **R2.50 a kilometre.
The bottom line
The money saving benefit of using Uber comes down to how much you drive. With your own car, the less you drive, the higher your cost per kilometre. That’s because of the high fixed costs of car ownership. By contrast, with Uber your cost per km is constant.
If you drive less than 50 km per day (that’s 1 500 km per month or 18 000 km per year), selling your car and using Uber will save you money. There is the loss of instant convenience of car ownership – you might have to wait 5 minutes for your Uber – although it takes many people that long to find their car keys.
How much will you save?
“We calculate that the average South African, driving 40 km per day (14 575 km per year), would save as much as R14 000 per year by ditching their car and switching to Uber. The real winners are those who live close to work. For these commuters, Ubering would translate into even bigger savings.