The high costs associated with owning, running, and maintaining a car make it a luxury in Singapore. However, more people are choosing ride-hailing platforms services over having a car, as these services like Grab and Gojek gain popularity.
When would it be more cost-effective to buy a car in Singapore than to ride the cab every day?
Singapore is renowned for its expensive cars. In 2017, the average cost of a car in Singapore was over S$106,000, making them 4-5 times more expensive than those in the US or Korea. Singapore holds the unenviable title of having the highest car prices globally, largely due to factors like the Certificate of Entitlement (COE) system and various taxes.
In light of these exorbitant costs, the question arises:
Is it genuinely more cost-effective to rely on ride-hailing services like Uber and Grab instead of owning a car in Singapore?
A recent analysis conducted by the Value Champion challenges the conventional knowledge, revealing that the daily expenses associated with ride-hailing might be comparable to the overall costs of buying a car.
According to the research, owning a Car = Riding on Grab or Uber = S$15,000 to S$16,000 of Cost Per Year
A survey by the Land Transport Authority of Singapore found that the average car travels about 17,500 km annually, or about 4 trips of 12 km each. Considering that the most common car in the country is the Toyota Corolla Altis 1.6, driven by an average person. This specific vehicle gets 15.4 km/liter (6.5 liters per 100 km).
In the study, the following major expenses are taken into account in order to determine the cost of owning this car and driving 17,500 km annually: the purchase price (S$104,995 / 10 years), the annual car insurance premium (S$900, assuming a 50% no claims discount), the annual maintenance cost (S$600), the road tax (S$740), and the cost of gasoline (S$2,341). This adds up to an approximate annual cost of S$15,000 for personal vehicle ownership.
Please be aware that while these factors can differ significantly from person to person.
On the other hand, 4 factors were accounted to calculate the equivalent cost of using grab or uber in Singapore: number of trips, base fare, Grab and Uber’s cost per mile and cost per minute. In the study, they assumed 1,460 annual trips, which is about 4 trips per day and 12 kilometers per trip, which is the average for private cars. Furthermore, they assumed that a distance of 1 km can be covered in an average of 1.2 minutes, or an average speed of about 50 km/h (the average speed on expressways is 60 km/h, and the average speed on arterial roads is 30 km/h). The combined cost of both services came to about S$16,000.
Cost Analysis:
Upfront Costs:
The high cost of obtaining a COE and additional taxes makes purchasing a car in Singapore a substantial financial commitment. Ride-hailing, with its minimal entry barriers, appears to be the more financially accessible option. However, when spread over time, the daily expenses of ride-hailing services may closely align with the upfront costs of car ownership.
Operational Costs:
While ride-hailing eliminates maintenance, fuel, and parking expenses, the per-ride charges can accumulate rapidly. Surge pricing during peak hours or adverse weather conditions can significantly impact the overall cost-effectiveness of using ride-hailing services. Car ownership, with its fixed monthly costs, may prove to be a more stable and predictable financial investment over time.
Depreciation and Resale Value:
Singapore’s high car prices also mean rapid depreciation, especially considering the limited lifespan of COEs. Ride-hailing users, however, are shielded from concerns about the depreciation of a personal asset. With this, the long-term financial outlook for car ownership might be more favorable than buying a car.
Environmental Considerations:
Sustainability:
With an increasing focus on environmental sustainability, the type of vehicles used for ride-hailing becomes a crucial factor. Some ride-hailing platforms offer eco-friendly options, aligning with Singapore’s green initiatives. However, the overall environmental impact of a fleet of ride-hailing vehicles versus individual car ownership remains a subject of debate.
Congestion and Urban Planning:
The convenience of ride-hailing services might contribute to reduced traffic congestion, aligning with Singapore’s urban planning goals. On the flip side, owning a personal vehicle provides the flexibility to travel without relying on the availability of ride-hailing services.
Conclusion:
It’s essential to note that the comparison between owning a car and using Grab involves considering both the fixed and variable costs associated with car ownership versus the pay-as-you-go mode of ride-hailing. The specific costs can vary based on individual circumstances, such as the frequency of car usage, preferred vehicle type, and personal preferences.
The decision between owning a car and opting for ride-hailing services involves a careful evaluation of economic, environmental, and practical factors. The annual costs, estimated between $15,000 and $16,000, bring both options to a level playing field, challenging preconceived notions about the affordability of car ownership.
The allure of ride-sharing extends beyond financial considerations. The added benefit of being a passenger instead of a driver during your commute cannot be overstated. With the freedom to relax or be productive while someone else takes the wheel, the value of time becomes a tangible asset. While waiting for a ride may introduce a slight inconvenience, it’s a small price to pay for the comfort and convenience offered, especially when compared to the routine trek to and from a parking lot.