All Hail Lyft: Comparing ride-hailing services and vehicle ownership
A head-to-head comparison of using Uber and Lyft with owning a personal vehicle
By the Numbers
56% of new cars sold in Norway in 2019 had a plug, with 42% being fully electric
Autonomous electric ride-hailing is expected to cost only $0.16/km by 2030
The UK plans to ban the sale of new gasoline and diesel vehicles by 2032, moved up from 2035, and from 2040 before that.
Ride-hailing
Ten years ago, ride-hailing didn’t even exist. Now ride-hailing is a major mode of daily transportation—just like driving, public transit, biking and walking—that everyone considers when opening their maps app in metropolitan areas. In 2019, a billion people around the world used ride-hailing services and the industry is already a $200B market. Though there are many ride-hailing apps around the world, in North America there are two juggernauts we all know and love (or hate)—Uber and Lyft. Before we compare ride-hailing with vehicle ownership, let’s first take a look and see if there’s any difference between the two ride-hailing giants in North America.
Lyft vs Uber
Is this the new brand rivalry of our time? There was Pepsi vs Coke, Ford vs GM, Mac vs PC, and now Uber vs Lyft. Among my circle, people definitely prefer Lyft, but in North America in general, Uber is by far the larger and more frequently used service. Still, it may not be as cut and dry as we think. Let’s dig into the numbers and see if there’s any difference between the two for your wallet, or the planet.
The chart above shows that the two apps have very similar pricing structures, though Lyft is slightly cheaper, and as you know, this adds up over time! More interestingly though, Lyft pays to offset all of the carbon associated with your ride. Yes, you read that correctly. All carbon emissions associated with your Lyft ride are fully offset. In its first year of this program, Lyft offset two million metric tons of carbon.
So, not only does Lyft cost less to use, but it’s a form of carbon neutral transportation that we can use today! Delete your Uber app and get $20 in Lyft ride credit here. Note: I have no stake in or affiliation with any ride-hailing company whatsoever and the companies are not influencing this blog in any way. I will only ever recommend products that I truly love and believe in.
Should I ditch my car?
The total cost of owning a vehicle ranges from $6,000 per year if you own a very inexpensive, fuel-efficient car, and up to $12,000 per year for a brand-new truck or premium sedan. Even if you buy a 15-year old, $3,000 beater, once you factor in maintenance, fuel, insurance and depreciation, it’s very difficult to spend less than $6,000 per year on owning and maintaining a vehicle—and most people spend more.
It’s worth making a “plug” for electric vehicles (pun fully intended). An expensive EV with a purchase price similar to a premium sedan actually comes in with an annual cost of ownership of around $6,000—at the bottom end of the overall vehicle ownership range. That being said, I will probably write a separate article specifically about EV’s in the future.
Of course, any vehicle becomes more economically efficient for every extra kilometer that it’s driven because some of the depreciation, maintenance, and insurance can be spread out over those extra kilometers. So, in order to compare car ownership with ride-hailing, I’ll need to compare the cost per km. For example, someone who uses their car modestly and drives 100km a week, will spend approximately $1.13 per kilometer for a used 5-year old Honda Civic and up to $2.10 per kilometer for a brand-new truck. However, if they drive 400km a week their cost per kilometer will be only $0.39 and $0.64 for the same cars.
Ridesharing has become so affordable and convenient that some people use it to get to and from work every day instead of owning a vehicle or using public transit. Are they wasting money or is this actually a money saving tactic? The simple answer is that it depends. Below I’ve plotted the cost per km for a few common vehicles and for ride-hailing at various average weekly distances travelled.
Note: It’s a no-brainer that if you can walk or bike to work then you’ll protect both the environment and your hard-earned (and taxed) cash. I’ll likely lay these numbers out more clearly in another post, but today we’re talking about owning a vehicle versus ride-hailing.
Multi-car household?
This analysis is even more relevant for households that have multiple cars. When using the chart above to consider whether it makes sense to ditch one of your cars, instead of asking how much you drive your car, you need to ask yourself how many kms per week are your family members driving all cars at the same time. If you were to ditch one car, one family member would take advantage of ride-hailing only when all family cars are needed at the same time. If you think about it this way, most 2 or 3 car households, in cities with ride-hailing services, can likely get rid of (or slim down to) one car.
For anyone who drives their used sedan less than 100 kms per week or for a family that simultaneously uses all of their cars for less than 100 kms per week then it makes sense to ditch your car. If you’re thinking about buying a brand-new car or truck, it doesn’t make sense to do so if you will drive less than 125 or 225 kms per week, respectively.
Give it up
Think twice before you buy a brand-new gasoline vehicle and take a few moments to ask yourself if you really need the cars in your life at all. It could mean thousands in savings and dozens of saved headaches. No more flat tires, changing your winter tires, going to the mechanic, oil changes, gassing up, worrying about washer fluid, and everything else. Most importantly, you will shed the cognitive load of handling all of these things, driving in thick traffic, and finding scarce, often expensive parking.
With all of your savings, you can easily rent a Turo car (a very popular car-sharing service similar to Airbnb) or normal car rental for the weekend when you need to go on that rare weekend getaway.
I recognize that consumers living in small towns and rural areas, where ride-hailing is not available, have difference choices to make, for now. First and foremost, I’m a big proponent of investing in public transit and designing more bike-able and walkable cities. For when this is not possible, I am excited about a future with autonomous electric ride-hailing.
Of course, the sustainability angle here is that if people use Lyft, the carbon emissions associated with their rides will be offset. Furthermore, building cars is a very carbon-intensive process and today’s cars are parked 95% of their usable lifetime. Ride-hailing, and better-yet ridesharing, requires fewer cars to be built. Plus, the cars that are built will be used much more. Finally, we all realize the future of transport is electric—if people can stop buying new ICE cars today, then these cars will not be on our roads burnings fossil fuels for the next 20 years.
Put it into action
Delete your Uber app and download Lyft for savings and carbon neutral transportation.
Calculate how many kilometers you use your vehicle per week. If you live in a multiple vehicle household, calculate how many kilometers per week all vehicles are being used at the same time.
If that number is less than 100km for a used sedan, 125km for a new sedan, 150km for a used truck or SUV, or 225km for a new truck or SUV, then ditch your car or plans to buy one!
Live a more care-free life with extra savings and a cleaner planet.
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Jacob
This is an amazing analysis and definitely something to consider for many audiences. I elected to forego car ownership and instead purchase an electric bike ($2000) that can whip me around wherever I need to go in less than 30 minutes (which is about the same amount of time as vehicle transportation, including Lyft or driving one's own vehicle) – for me, it was a time-cost balance. Living in Vancouver, this is easily justified for one can travel by bike year-round; in other cities, perhaps not, but the case for Lyft over vehicle ownership hold true. However, I feel that supplementing bike transportation with ride sharing, car sharing, and car rental services not only is a more economical and environmentally friendly way of commuting, but is incredibly practical as you can adjust your consumption of these services relative to what you can afford given life's dramatic uncertainty.
There is something else to be said about how we model vehicle depreciation today. If you purchase a new vehicle today and intend on driving it for 4-8 years (up to the point of ownership for most contracts, and the typical length of manufacturer and extended warranties), that vehicle might be worth 30-60% of it's original value by the books today; however with the decreasing costs and increasing efficiency of ride sharing and the technological advancement towards level 5 autonomous driving, I reckon that the same vehicle might be worth substantially less, perhaps as low as 10-30% of its book value 4-8 years down the road.
I'd imagine we are close to a future where owning gasoline vehicles is something for enthusiasts or those who need a car for odd jobs and hobbies that transportation services or EVs fail to deliver the ability or convenience to do so today. This however might be different with owning a self-driving-ready vehicle today, like a Tesla, or with the massive amounts of innovation in battery technology bringing life to long distance EV transportation. Although EV costs of ownership might be comparably high today, over the same 4-8 year time period, it may be considered an asset or a very low cost liability as it could not only act as a personal vehicle, but also serve public transportation needs with Tesla's very own autonomous-taxi service.
Whatever happens, I'm placing my bets today on not making long term and expensive commitments to the way I travel, making biking, Lyft, car sharing, and car rentals increasingly appealing and stressless.
Very interesting read. For people in big cities, the (opportunity) cost of parking is also relevant to the cost of owning vs. ride-sharing, and I'm not sure it was included in the analysis. Writing from Toronto, a person in a condo who can easily rent out their parking spot for $150 per month is also foregoing that income by owning.
It would also be interesting to consider the "value of time" factor of taking public transit vs. owning a vehicle or ride-sharing. I am a big user and proponent of transit but, again, in Toronto, where the transit infrastructure isn't very good, it can be a difference of an hour on transit vs. 20 minutes in an Uber or Lyft car or one's own car.