A more realistic #uber vs. car ownership comparison
YC’s head, Sam Altman, posted an interesting blog post on how Uber is now cheaper than his car and it hit the front page of Hacker News on Monday. However, his scenario is pretty unique in that he drives a Tesla Roadster with a cost of ownership quite different from the average car.
How does Uber compare to the cost of ownership for someone driving a “normal” car? AAA has a handy estimate of the cost of ownership for different car classes.
I took the base class, a small sedan, and adjusted the numbers for someone living in San Francisco. Specifically, I adjusted the gas numbers and added in a line for parking costs since most people who live in the city have to pay for a parking spot. On Uber’s side, I estimated an average of $2.08 cost per mile. This assumes a $1.75 base cost per mile and hitting a surge of 1.75X 25% of the time.
You can play with the spreadsheet here: https://docs.google.com/spreadsheets/d/13Enl89qImK3WSBWX2hp57d4eqaH-L9jOcyI03hn8ttY/edit#gid=0
- The break-even point for Uber is around 4K miles. This is a no-brainer; if you rarely use your car, you should alternative services such as Uber, Lyft, & Zipcar.
- Uber is not priced competitively for those who commute regularly. Specifically, when you estimate a yearly mileage of 15K miles (which can easily be reached for those who work in the Valley) the cost of Uber is over $20K more than car ownership. Uber would need to drastically cut fares to capture this market as car ownership is around $0.68 per mile. This number is already on the high end of the scale since the AAA estimates come from 2013 models. For those who own older cars, the cost of ownership is even cheaper as depreciation & financing costs are significantly less.
So for the majority of Americans, Uber probably isn’t cheaper than owning a car. A self-driving taxi, however, could change the equation since labor is the biggest cost driver for car services.