Two car families are so 20th Century. Move on, folks, this is the 21st century – the era of Mobility As A Service (a.k.a. Transportation As A Service or Cars-As-A-Service). All of them are lousy acronyms, but they make compelling financial sense. There’s no longer really a need for two dedicated family cars. So save yourself a bundle of money and dump a car.
It may seem counter-intuitive, but more than one family car is more than just unnecessarily. It’s a costly extravagance. Here’s why:
- That extra car may cost you as much as $20,000 per year. How many other things can you do with $20,000 a year?
- Cars cause traffic, pollution and other environmental havoc.
- There are new alternatives to car ownership that shouldn’t be ignored.
- Sharing a car involves greater scheduling coordination. A family that coordinates together, thrives together. Thus the term: “togetherness”. It’s a good thing.
The New Reality of the 21st Century
The car manufacturers know it. The car dealers know it. The venture capitalists know it. Just about the only ones who don’t know it are consumers interested in buying new cars. The phrase “mobility as a service” weaves together the business models of ride-sharing companies, the ambitions of manufacturers like Ford and Tesla, and the broader turn to a service economy.
In the future, cars will be like smartphones–not just complex devices that you buy but devices that provide useful functions for you. You’ll pay monthly or annual service charges rather than own a depreciable asset. And as cars become autonomous – which is actually happening sooner than you think – most of your decisions about maintenance, purchases, insurance and routing will be taken out of your hands. Rather than a costly five-figure purchase that requires a loan, you’ll be thinking about doing something akin to booking a flight. You’ll let the Mobility As A Service (MAAS) provider worry about getting you to a destination.
Almost on a daily basis, mobility service providers are popping up. Most will be absorbed into a handful of ever-present transportation services who provide travel focused services like ride-sharing and e-hailing services, bike-sharing programs, and car-sharing services as well as on-demand “pop-up” bus services. In the near future, self-driving cars will form part of this integrated network.
One example of this can be found at VW Group. Harking back to the old VW Campervans but updated for the 21st Century. It has formulated ‘Buzz’ — a new mini bus service which will use a mobile app to plot its route, picking people up and allowing drop offs, much like the UberPool model. Ride-sharing apps for electric autonomous vehicles is likely the future of group transport. But there’s more on the horizon. We are already seeing the deployment of transport subscriptions services throughout the U.S.
Transport Subscription Services
Subscription car leasing will also expand in the coming years as increasingly more companies look towards fractional leasing. Audi, Ford, and Porsche have already started investigating this (Check our the Audi Unite in Stockholm). London based company Orto, are a luxury fractional car ownership provider who will deliver cars to your door for free. They legally maintain possession of the car, so the customers don’t need to bother with any paperwork. Customers can choose from four days, to a week or four-week ownership
On the new car front, Cadillac and Porsche (Powered by Clutch) offer subscription services for vehicles with month-to-month commitments and the ability to “flip” vehicles. Companies like Flex Drive and Fair.com also offer their brand of CaaS focused on pre-owned dealership inventory; Fair raised nearly $1B in debt and equity during 2017 from BMW’s iVentures, Penske Automotive Group, and Mercedes Benz, amongst other investors.
Ridesharing and other delivery-as-a-service drivers need access to cars to support their businesses, but for shorter terms and at cheaper price points. Two other new subscription companies, Canvas and Borrow, offer an electric car-only subscription service in Southern Californai that will give you an EV for three, six or nine months at a time. Borrow functions more like a rental service since all vehicles remain the property of Borrow. Customers can currently choose from two tiers of electric vehicles, each with different pricing. The lowest-cost tier is the “City” plan. Those who opt for the City plan can choose either a Nissan Leaf or a Fiat 500e, and prices range from $499 per month for three months to $399 per month for nine months.
Saving Big Bucks
If you live in a city, there’s almost no reason to own ANY car, let alone two of them. City parking in some U.S. cities can cost $500 a month and up – the same price as a five-year loan on a $30,000 car. That’s parking alone!
The AAA estimates that vehicles driven 15,000 miles a year, average car ownership costs were $8,469 a year, or about $706 a month, in 2017, according to AAA. Nerdwallet provides a monthly car cost calculator so you can figure your own estimated annual cost. But consider this: the IRS will allow you to deduct 54.5 cents per mile. So our government has calculated the cost of maintaining and running a car is appx. 50 cents a mile. If you drive the typical 15,000 miles per year, you are shelling out about $7500 a year for that car.
And that reimbursement rate is considered very conservative. If you own an SUV, minivan or hybrid sedan, you likely shelled out over $50,000 for that car. That results in monthly car loan payments of about $1400 per month. Plug that number into Nerdwallet’s calculator and you are looking at annual auto expenses of $21,600 per year. Yeah – over $20,000 per year for a $50,000 car. And lest you think you have a $50,000 asset that you are maintaining for resell, guess again. Prices on the secondary (used car) auto market have been plummeting and will continue to for the near future.
“Hold on a second,” you undoubtedly say. “What about the costs for mass transit, rideshare or car subscriptions?” You are unarguably correct. There are costs for these car ownership alternatives — and short of using a taxi every time you leave your house – all of the options will cost less than owning a car. Why? Because their costs factor in better utilization of your dedicated car.
Think about it this way. When you own a car, you use it to commute or you may use it for errands. But in both cases, the car is rarely used for more than two hours each day. Whereas, all alternative transportation options use either a car or a transport device closer to 24 hours a day. Greater utilization results in a lower per hour or per mile cost.
Ask yourself: is it worth $15,000-20,000 a year for me to own a transport machine that I use approximately 10 hours a week (or, 520 hours per year). If you calculate based upon mileage, then you are paying out $1 or more per mile. If you calculate based upon hourly usage, you are paying about $30 per hour when you drive your car. $30 per hour is more than the majority of wage-earning jobs in the U.S.
Alternatives to Car Ownership
Above, we’ve touched upon some of the emerging services that will be replacing car ownership. But you don’t have to wait for the future. It’s here now with a number of very affordable alternatives:
Chances are there is someone that lives near you that is going close to where you are going. Here are some resources for San Diego County that are similar to those offered through the U.S:
- TripPlanner: This tool is a simple and secure way to find a carpool or vanpool partners. Carpools and vanpools can take advantage of carpool lanes, I-15 Express Lanes, and Park & Ride lots throughout the region.
- Ridesharing is also readily available in San Diego County. We’ve detailed many of these options at our blog about County rideshare services. To save money you might consider using UberPOOL and Lyft Line . They operate like an on-demand carpool by matching travelers that request rides along a similar route, allowing passengers to share the cost.headed in the same direction headed in the same direction. You might also mention to your bosses that Uber for Business and Lyft for Work are corporate-sponsored transportation options that allow employers to either cover the cost of rideshare services for their employees, or integrate rideshare services into pre-tax benefit plans.
- Car-riding: Think ridesharing combined with carpooling and you’ve got car-riding. Check out this app and find commuters who may be going your way. It’s as easy as ridesharing but better.
- Carshare services give you access to a car 24/7 without the hassle or cost of owning one. Multiple carshare companies operate in the San Diego region and provide vehicles to members for a set rate:
- Vanpool: What would your commute look like if you shared the ride in a vanpool? A vanpool is a great way to share the costs of getting to and from work with five or more people in a van or SUV. Vanpool participants generally pay less than $100 per month to get to work. Designated vanpool vendors, Enterprise and vRide, offer month-to-month leases that include maintenance, roadside assistance, registration, and insurance costs. Drivers have access to the vehicle after work hours and can even log personal miles. Sharing your commute in a vanpool saves money, time, and the environment too. Choose your ride and save!
- Guaranteed Ride Home: Makes sharing your ride even easier. If you carpool, vanpool, take transit, walk, or bike to work, you have a safety net with the Guaranteed Ride Home program. Registered participants can get a free ride home in a taxi or rental car up to three times per year in case of a personal or family emergency, illness, or unscheduled overtime. Learn more and sign up online.
- Park & Ride: There are 90 Park & Ride lots in the San Diego County region and southern Riverside County that provide convenient places to meet up with your carpool or vanpool buddies. Park & Ride lots provide bike lockers and secure bike parking too.
In addition to being a wonderful form of exercise, bicycling is good for the environment and allows you to bypass a lot of traffic. Even though it might take you a little longer to get to your destination, you may end up saving time in your day because you will have already completed your daily workout. And in case you’ve missed the seemingly hundreds of scooters sitting at what seems like just about every street corner and bus stop, per-usage scooter rentals are plentiful and cheap. Just wear a helmet and make sure you have paid your health insurance bills. There is definitely risk involved in using these scooters.
San Diego offers a very decent trolley system and a maligned, but not awful bus system. Mass transit is a great alternative to owning a car. Not only are the prices reasonable — especially for seniors and monthly pass purchasers — but while the bus driver is navigating traffic, you have time to listen to podcasts, respond to emails and get some work done without the usual office distractions. Sweet! If you have a busy life, it might be nice to just “chill” for 20 or 30 minutes every day. While public transportation does cost a few bucks, it is usually much less than what you would pay in gas and in parking.
There’s been a 115% increase in telecommuting over the last 10 years, and 43% of the U.S. workforce currently work remotely to some degree. 4.3 million employees (3.2% of the workforce) now work from home at least half the time. Remote work helps companies reduce operating costs, attract or retain talent, expand into new markets, be better environmental stewards, be prepared for emergencies or disasters, improve worker health and satisfaction, and more. So you can make some fairly compelling arguments to your bosses/partners/owners that allowing you to work remotely can help both bottom-line and that of your employer.