Most dealers probably don’t lose sleep with worry that Uber, the popular app-based service that pairs private drivers with riders, will usurp car ownership anytime soon despite Uber’s ambitions to make it so.
In most cases, when a person drives more than 13,500 miles a year, car ownership is still ideal and ultimately cheaper than using ride-sharing, according to published reports that cite AAA, government and other data.
But what about commuters who travel less than 10,000 miles? At that point, depending on the price of the car payment, the price of gasoline, insurance costs, maintenance expenses, and so forth, the annual cost of car ownership might bump up against the annual amount spent on Uber, making the service a cheaper option.
The key word, however, is “ownership.”
According to Swapalease.com, a national car leasing marketplace, leasing trumps Uber at 9,500 miles a year. Here is how Swapalease.com breaks it out:
- Car lease monthly payments: $400 ($4,800 per year, including taxes).
- $1,344 in calculated fuel (assuming 9,500 miles per year at $3.50 per gallon and a 12 gallon car).
- Annual insurance fees in a lease may average $1,300 a year.
- $355 for maintenance.
At this rate, the lease customer would pay $7,799 per year. Whereas a customer using Uber to travel 9,500 miles a year in Los Angeles would pay more. Uber’s rate in Los Angeles, according to its website, is a $0 base fare, 18 cents per minute and 90 cents per mile.
If calculating just the mileage, that equals $8,550. A Swapalease spokesperson factors in the 18 cents per minute by averaging a mile per minute in every trip, amounting to an additional $1,710 using Uber, for a total of $10,260. She said if you average a more realistic half a mile per minute that would be an additional $3,420 added to the Uber price of $8,550, for a grand total: $11,970.
Of course, there are other costs tied to leasing a car such as any parking fees and perhaps traffic violations. They should be considered on that side of the equation.
“There are some instances where Uber could be an attractive alternative,” said Scot Hall, executive vice president of operations for Swapalease.com. “But in general leasing a car today is an extremely affordable means of transportation.”
That’s a compelling argument for dealers in large metro markets to make, for now.
But Uber regularly lowers its pricing because CEO Travis Kalanick believes the company will ultimately go head-to-head with car dealerships. Kalanick, according to various published reports, wants to make Uber so affordable that it becomes cheaper and easier than owning a car.
And for that reason, car dealers should be a little worried.