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Car Ownership or Ridesharing — Which Is Cheaper?

Woman waiting for a car

It’s an attractive idea — ditch your car, and insurance, and maintenance, and gas — and just catch a ridesharing service everywhere you go. And while taking an Uber or Lyft everywhere you go sounds like it might save you cash, a study by the AAA Foundation found that ride hailing takes a back seat when it comes to savings compared with owning your own vehicle.

That’s because in a typical urban setting, a typical driver goes a little over 10,000 miles each year.

AAA found that doing the same mileage with a ride-hailing app would cost you a little over $20,000.

“Whether you own a vehicle or not, ride-hailing services are a convenient transportation option,” says John Nielsen, managing director, automotive engineering and repair for AAA. “However, with the average American city-dweller driving nearly 11,000 miles per year, a personal vehicle is still the more cost-effective choice.”

AAA compared prices in 20 urban areas. Here is how much exclusively taking a ride-hailing app would cost in a typical year (cities are in alphabetical order): 

  • Atlanta ($17,741)
  • Austin ($19,821)
  • Baltimore ($19,917)
  • Boston ($27,545)
  • Chicago ($22,020)
  • Cleveland ($20,091)
  • Dallas ($16,944)
  • Denver ($20,434)
  • Los Angeles ($17,951)
  • Miami ($17,339)
  • Nashville ($26,397)
  • New York ($21,279)
  • Philadelphia ($23,201)
  • Phoenix ($17,436)
  • Pittsburgh ($18,940)
  • Salt Lake City ($18,866)
  • San Diego ($17,316)
  • San Francisco ($21,972)
  • Seattle ($23,951)
  • Washington, D.C. ($21,093)

But, according to AAA’s annual Your Driving Costs study, the average annual cost to own and operate a new vehicle — the costliest form of vehicle ownership — is $7,321 (for the same mileage as the ride-sharing study used). That’s a fraction of what it would cost to catch a ride everywhere.

Even when you count in the high cost of urban parking, AAA found that ride hailing apps would cost an average of about three times the cost of car ownership each year.

“For those who travel a very limited number of miles annually, or have mobility issues that prevent them from driving a personal vehicle, ride-hailing can be a viable and important option,” Nielsen says “But, for everyone else: the car is still king.”

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When calculating the cost of car ownership, don't forget to include the cost of your car insurance policy.

In 2019, the average cost of car insurance was almost a $1,000 a year, according to the Insurance Information Institute.  Of course, this figure varies from state to state and from driver to driver.

So, switching to ridesharing for all your transportation needs could be a bigger savings if you live in a state with high premiums or if your driving record isn’t perfect. Then, you also need to consider factors such as age, marital status and sometimes even credit history to get a precise picture of your actual savings.

But you don’t even need to give up your car insurance if you don’t have a car. Nonowner policies are usually inexpensive and will provide some basic coverage, such medical payments or personal injury protection coverage, uninsured or underinsured motorist liability insurance and rental car liability coverage.

If cost is your primary motivator, AAA suggests you take a few measures to keep your vehicle ownership costs down: buy a gently used vehicle. Fuel it responsibly. And maintain and take care of that car.

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Now, obviously, the math changes quite a bit if you live near a transit hub, or you are self employed and don’t have a daily commute, and so on. But, if you are a typical driver with a typical commute, being a responsible car owner might make the most sense.

On the other hand, if you are intent on using a ride-hailing app exclusively, a few techniques might help you save cash doing it.

  • Watch out for surge pricing. When you are trying to go the same place as everyone else, the laws of supply and demand won’t be in your favor. You can pay many times more for the same ride than you would at off-peak times. Plan ahead and be creative with other modes of transportation at peak times.
  • Try the “pool” services. Sharing that ride with other people who are heading in the same direction as you can save you more than a few bucks. Sure, it takes longer, but didn’t anyone ever tell you that time is money?
  • Consider a taxi … or the bus. Just because they don’t have flashy apps, doesn’t mean that they aren’t good ways to get around.
  • Think rental. Sometimes if you know you are going a long way, or you have a bunch of trips bunched into a few days, it may make sense to go with a one-time rental and do the driving yourself.
  • Split the fare with your friends. You may be going the same place, and many of the car apps let you all pitch in on the ride.
  • Don’t forget promo codes. Hey, they want you to use them. You may as well save a few bucks on that trip. And don’t forget to refer your friends and get some rides for doing it. 

So, before you ditch your ride for a life of ride hailing, make sure you factor in all the costs. You might just be surprised.

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