There are many people who claim that taking a cab is cheaper, since you don’t have to buy the car, and don’t need to pay all the related costs, including but not limited to: road tax, maintenance charges, fuel, parking fee etc.

There are other people who claim that buying a car is cheaper, since cab fares are way too expensive compared to the fuel cost – 7 Rs/km.

Owning a car or using a cab argument varies across geographies. In Mumbai, mostly people are comfortable using public transport or cabs whereas in Delhi mostly people prefer using their own cars.

So that leaves us with a question – Which is better, owning a car or using a cab.

Purely, speaking in financial terms, one should not invest in depreciating assets. The moment a new car is taken out of the showroom, it value decreases by 20%.

For example, you purchase a car for Rs 5 lacs, the next day value of the car will be Rs 4 lac. However, owning a car provides a lot of convenience especially in places where public transportation is not good.

So here are few tips:

Prefer public transportation. You can prefer public transportation where services are reliable. For eg. Delhi has a good transportation system with good Metro service and buses. Even the cab service by various cars renting companies is reliable. You can evaluate the comfort and cost element.

Driver’s salary. In case you stay in a crowded city such as Mumbai, add the cost of a driver if you are planning to purchase a car.

Know your purchasing limits. Know your capacity by looking at 3 year EMI and not more than that. Usually people who are planning to purchase a car would look at even a 7 years term. More the term of loan more is the interest. So keep it short.

Car pool. Pooling will not only help you save money but also save the effort of driving on a daily basis.

Know what you are losing. A car may be available at affordable EMIs, but still there is interest which needs to be paid. Evaluate whether keeping the money in growth assets is better or spending on car EMIs is better

Office cab service. It’s totally worth it to use office cab from all perspectives. You can easily delay the decision of buying a car.

One car dependency. If you use cab service you are not dependent on one car. It doesn’t matter if the cab tyre bursts or there is some mechanical problem, you can simply call another one.

These are suggestions based on limited set of situations. You are the best judge of what is right for you. Make right decisions and be financially smart.


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