Measuring ownership and sharing - the sharing economy is here
According to our own research presented in the 5th Edition of the Australian Automotive Finance Insight (AFI - to be released), cost is the number one factor that ultimately determines whether a person will eventually buy or finance a car. Potential buyers carefully consider how much a new or used vehicle is going to cost them over the length of a finance contract, and thus factor in interest rates, monthly payments, fees etc. But with shared car services now available, us city folk now have a third option – car share.
Someone who lives in a large city drives around 10,000 kilometres in a year, according to the Australian Bureau of Statistics (ABS). This translates to roughly 192.3 kilometres per week, and estimating that he/she drives for 20 hours, the cost of ownership works out to $537.47 for the seven-day period. This includes insurance, depreciation, car loan interest, servicing, tyres and fuel.
If the same person used Hertz 24/7, available in Sydney and Gold Coast, he/she would pay only $858. In Melbourne, there is Flexicar (also owned by Hertz), which costs $781.50. GoGet, which operates in Sydney, Melbourne, Adelaide, and Brisbane, would set you back by $857.55; while using GreenShareCar, which has operations in Sydney and Melbourne, comes with a weekly charge of $1042.38
So is ownership cheaper?
The question of whether ownership is a cheaper option requires a bit of thought and calculation in order to determine if it is indeed the right fit for you. A number of factors can of course play into a decision to buy or not buy, moving house, changes in lifestyle, or changes in daily needs. Let’s consider a few scenarios that represent a few basic drivers.
I’d recommend using the following as a guide and then of course considering your own requirements. These calculations are all based on the average person.
- Someone who drives only 5000 kilometres in a year or 96 kilometres per week (10 hours per week) would find his/her ownership costs at $468.27. Flexicar, Hertz 24/7 and GoGet would all be cheaper than this, at $393.67, $429 and $444.31 respectively. GreenShareCar works out to be more expensive than ownership at $522.82.
- What if the person drove only 2500 kilometres in a year? 48 kilometres or 5 hours per week entails an ownership cost of $433.66. All the shared car options work out to be cheaper than this, with Flexicar, Hertz 24/7 and GoGet costing him/her only $199.75, $214.50 and $237.70 respectively. GreenShareCar is the most expensive, but still much cheaper than ownership at a respectable $263.03.
- When the usage drops, these costs dip even further. Someone who drives only 1,250 kilometres a year; or 24 kilometres in week that take up a total of 2.5 hours has a car ownership cost of $416.36. Shared car services would cost him/her less than half of this, with Hertz 24/7, Flexicar, GoGet and GreenShareCar costs working out to $107.25, $119.58, $134.39 and $143.98 respectively.
It seems clear that if your usage is low and you drive less than 100 kilometres in a week, a shared car service makes good economic sense compared to owning one. Car share programs today are becoming increasingly flexible and represent a fantastic option for drivers living in a city where parking is at a premium and insurance rates and other costs are traditionally higher.