New financial services start-up MyTreasury.co.za, says that it has crunched the numbers on whether it is cheaper to own a car or rely on taxi-app Uber to get you around on a daily basis.
MyTreasury.co.za, which launched several months ago, enables savers to compare options online to ensure they get the highest interest, based on their individual requirements.
According to 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.”
He provides a breakdown of his analysis:
Owning a car:
- Depreciation – Owning a car is expensive and depreciates over time. Although a car is technically an asset, it’s not an investment.
MyTreasury.co.za said it 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, it said, taking 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.
- Parking – 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.
- Insurance – 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.
- Cleaning – If you wash your car once a month, at an average of R150, it costs around R1,800 a year.
- Licences, fines, tolls – these typically amount to R2,000 per year, said MyTreasury.co.za.
- Petrol – 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.
Putting all these numbers together, the annual cost of car ownership for the average South African driver works out to R111,000, said MyTreasury.co.za.
Taking an Uber
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,” said Kransdorff.
“Any sound financial analysis doesn’t only consider what you spend but also takes into account what you gain.”
MyTreasury.co.za said that the benefits of taking an Uber include freeing up time to organise your life: make calls, send WhatsApps and clear your inbox.
MyTreasury.co.za calculated this is worth about **R2.50 a kilometre.
“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,” it said.
“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,” said Kransdorff. “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?
MyTreasury.co.za calculated 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,” it said.
* Petrol calculated as follows: The petrol price is currently R12.79 a litre in Gauteng. The average fuel consumption of the Corolla is 7 km per litre. Thus the average cost of petrol is R1.83 per kilometre. The Road Traffic Management Corporation estimates that South African car drivers drive on average 14 575 km per year. Assuming drivers are operating in standard urban traffic conditions, MyTreasury.co.za estimated this will result in R27 000 spent on petrol a year.
** Time saving calculated as follows: MyTreasury.co.za assigned a numerical value to this time by considering the hourly rate of a R320,000 annual salary. That comes to R150 per hour. Being conservative and assuming only half the commute time is productive, the rest of the time is spent gazing wistfully out the window or making small talk with the driver, an average South African driver would save 485 hours a year using Uber. That’s a very significant 40 hours per month.