
Uber vs. Car Ownership - ramykhuffash
http://blog.samaltman.com/uber-vs-car-ownership
======
recalibrator
Sam. You own a Tesla Roadster, a car for people who don't have to niggle over
money.

Most people a) don't live in SF b) have your money c) have access to Uber and
d) have a Tesla Roadster.

You're essentially talking to yourself and a few choice friends who live in
the same bubble as you.

~~~
tdicola
Not to mention since the car is paid off/owned outright the calculation
doesn't take into account the price of the car. I would wager a majority of
car owners are financing or leasing their cars and pay a monthly cost to do
so. I guess depreciation kind of counts in his calculation, but it also
applies to financing a car. Adding this cost would actually help his argument.

~~~
mikeash
Depreciation is the ongoing cost of the price of the car. Depreciation applies
to financing a car too, but you don't count it in addition to your principal
payments. Quick smell test: if you finance a $25,000 car, by the time you've
reduced the value to zero it will have depreciated $25,000 _and_ you will have
made $25,000 in car payments on the principal, but you will not have paid
$50,000 total, you will have paid $25,000 plus interest. Depreciation is
ultimately just "take the price of the car, average it out over time" with
potentially some games to take into account the nonlinearity of the curve.

I'm not sure if $5,000/year is right, though. The car cost at least $109,000
new and probably more. At that rate it would take 21 years to fully
depreciate, but the average life of a car is more like a decade. It's
nonlinear, but the car is at most six years old. I think this may be an
underestimate.

While we're at it, I'm struck by the maintenance figure of $3,500/year. That's
a big pile of cash! I had a (much more boring, plain old gasoline) car of
similar age until last year and the yearly maintenance on it averaged well
under $500 and I drove it twice as many miles per year. I don't know enough
about the Roadster to say whether that's correct or why it would be that way,
but it reinforces that this is a highly unusual calculation whose numbers will
apply only to a tiny number of people.

Taking a quick whack at the calculation for myself, I currently do around
8,000 miles/year, insurance is about $1,000, maintenance is $28 (preventive
maintenance is bundled in the price of the car for another year, and nothing
should break, so I'm just on the hook for the state inspection), depreciation
is, somewhat wild guess vaguely informed by my perusal of the used car market
last year, maybe $2,000, parking is zero, and my cost per mile is about 8
cents. (Amusing side note: I did that last calculation with Google and it
defaulted to giving me the result in dollars per meter.)

Putting it all together, and I have about $3,000 in fixed costs and $640 in
per-mile costs, so $3,640/year total for ownership. At $2/mile, UberX would
cost me $16,000/year for the same distance driven, about five times the cost.

------
mastermojo
I actually have some personal numbers after owning a second hand 2000 Mustang
for 1 year from 112k to 121k miles exactly since yesterday. I got the car for
6000.

    
    
      Uber 9000 miles x $2 = 18000
      Personal Car: 7000
      Maintenance 2500 
         - new bumper (old one taken off while street parked) 1000
         - replaced foggy headlamps 400. purely cosmetic reasons
         - side window smashed 800. never park in oakland =(
         - oil changes etc? (200 at most) 
      Insurance 600 (checkout AAA) 
      Depreciation 2000(?)
      Gas 1800 ($4/gallon @ 20 miles/gallon)
    
    

No contest for me, really. Even if I payed 300 bucks a month for a commuter
parking spot in SF, and got an occasional parking ticket here and there.

For people who can get to and from work easily using public transportation,
perhaps owning a car does not make sense as much as Zipcar/Uber. Owning a car
can cost a lot of money, but for people who want one as a form of
transportation it can be very affordable (i.e dont buy new). Also, the average
car is expected to travel 10-12k miles a year.

~~~
dsil
Hold on, what you're missing is the last part of the essay, the difference in
value of time spent driving vs time spent riding an Uber.

Say you averaged going 45mph. Then your 9000 miles took 200 hours. And you'd
spend $4000 extra to use Uber, so not having to drive would cost $20/hour.

Depends how you'd use that time, but for many it would be well worth $20/hour
to be able to do other things, like bill hours.

~~~
btilly
And if you're prone to motion sickness, like I am, then the value of that time
you get back is approximately $0.

~~~
mikeash
Quite possible negative. For many people it can easily be a net negative to be
driven around rather than driving one's self simply in terms of how you feel
afterwards. All else being equal, I'd prefer to drive than be driven.
Sometimes not all else is equal, like parking is hard, or I'm taking a trip
and need to leave the car for the wife, and then I take a taxi or Uber or
something. But I would assign a value of something like $50/hour to _not_
being in a taxi/Uber.

~~~
rdl
I prefer driving, but am ok with being a passenger in the right car _with_ a
driver I personally know (i.e. _my_ driver, vs. even a random guy from the
motor pool, and certainly not UberX or a black car/taxi driver). For me I'd
pay $50/hr to drive on a great road, $20 for most roads on e.g. the Peninsula,
$0 for stop-and-go or SF anytime, -$20 to have a meh driver drive me around
(black car or great uberx) or a very luxurious or empty train; $0-20 for a
great driver I know and trust, -$50 for most taxis or a slightly crowded
train, and -$100 for Thai taxis or public transit on wheels.

------
icandownvote
I have to be driving less than 7000mi/year for Uber to make financial sense
over my Model S P85+.

Let me repeat that: from purely economical perspective, if driving more than
7000 miles/year, Tesla Model S P85+ is cheaper than Uber.

Here are the numbers. Basic assumptions:

    
    
        gas : $4/gal (don't know if it's even a valid number anymore)
        power: $.1/kWh
    

Tesla Model S P85+:

    
    
        depreciation: $1/mile + $300/month (the $300 per months is a sandbagging factor, in reality it doesn't exist)
        power: $.033/mile
        maint: $600/year covers everything
        tires: $1600 (P85+ goes through the full set once a year, depending on how you drive)
        registration: $60/year
        insurance: $600/year
        parking: $300/year (suburbia, I hear you say. yeah, that's right)
        ---------
        7000 miles => $13993
    

Uber:

    
    
        7000 miles => $14000
    

For comparison: My old BMW M Roadster (yr. 2000, ~100K miles on the clock):

    
    
        depreciation: $1500/year
        gas: $1470 for the 7K miles
        maint: ~$2000/year (it's old)
        tires: $1000/year (chews through one set of good, soft tires. I like fast corners)
        tabs: $100/year
        insurance: $600/year
        parking: $300/year
        ---------
        7000 miles => ~$7000

------
sama
this is not worthy of HN and the concept has been touched on many times here.
i only blogged it because it was too long for a tweet and i wanted to
reference it in a discussion. please don't upvote.

~~~
sien
It was an interesting comment you made in your Econtalk podcast which was
really very good.

The point could be taken further to work out how much people spend on average
on a car and at what point they would get rid of their car.

Possibly for general use it is more applicable to self-driving cars than Uber
but it's still interesting.

------
7Figures2Commas
> This calculation is why I think Uber is still undervalued. The people who
> say Uber is only worth $4 billion or whatever don't think enough about
> people like me who will go from spending ~$500 a year on taxis and car
> service to ~$12,000 now that the experience and cost have reached a tipping
> point.

This is a lazy analysis.

Are there folks who will trade car ownership or public transportation for Uber
and services like it? Absolutely. But what is the size of that market? How
much of that market has Uber already tapped?

Sam's post _assumes_ that Uber's current valuation doesn't take into account
this segment of the market and that this segment of the market still offers
Uber significant growth potential. Maybe he's right, but he provides
absolutely no evidence and doesn't even attempt to come up with hypothetical
numbers for consideration.

~~~
alooPotato
"Are there folks who will trade car ownership or public transportation for
Uber and services like it? Absolutely. But what is the size of that market?

Literally everyone. Everyone needs to move around their city. The size of the
market is the size of the total city scale transportation market which
includes car ownership, taxis, public transportation, good walking shoes, pedi
cabs......etc.

How much of that market has Uber already tapped?

An insanely small percentage outside of SF and even in SF its small.

One question you didn't ask: Can Uber get even cheaper than it is now? My
guess over a 10-15 year time horizon is absolutely yes when you remove the
cost of the driver. I think the state of the world that Sam is referring to is
when ubers (or services like it) are the predominant way people move about
cities. In that world, who is best positioned to win? Uber.

~~~
foobarqux
Expected future growth is priced in, the question is whether it has been
mispriced.

------
bicknergseng
To be fair, the Tesla Roadster is a pretty odd example. I'm not sure
$5,000/year depreciation with $3,500/year for maintenance seems reasonable for
almost anything. Am I wrong in thinking that most cars depreciating at that
rate will have very low or 0 maintenance costs not covered under warranty?

For example, a 2014 Honda Civic with 1 mile on it (example) is ~$17k, while a
2013 with 6k miles is ~$15k (KBB values). There should be very few things not
covered by warranty since they're <3 years and 36k miles.

VW, BMW, and some others have also started including free maintenance for
things like oil changes and wipers and brakes as part of the new car warranty.

On the flip side, I'm impressed your insurance is so cheap.

~~~
jamesaguilar
"Pretty odd" is generous of you. Nonsense is what it is. It's like saying that
drinking craft beer for all your hydration needs is cheaper than drinking
water, but citing one of these[1] as your baseline for comparison.

[1] [http://www.therichest.com/expensive-
lifestyle/entertainment/...](http://www.therichest.com/expensive-
lifestyle/entertainment/the-top-10-most-exotic-and-expensive-bottled-waters-
in-the-world/)

~~~
bicknergseng
Depends on what city you live in. Drinking craft beer for all hydration needs
is perfectly acceptable in Portland, OR.

------
crabasa
I'm a huge fan of Sam's blog posts and he is President of YCombinator for a
reason, but I'm struggling to understand what Sam think that his personal data
point (as a wealthy owner of a Tesla Roadster no less) says about the
viability of Uber replacing a family vehicle for normal people. Does he not
realize that plenty of people __love __to drive?

~~~
AVTizzle
Sam's post has little to do with the emotion of "loving to drive."

It's a calculation about the cost of car ownership vs. taking alternative
means of transportation.

~~~
crabasa
> This of course leaves out the huge intangible of how much nicer it is not to
> drive...

I'm simply saying that it's often quite nice to drive, as Sam knows quite well
as the owner of a Tesla Roadster.

~~~
lutorm
On the other hand, quite often, if you live in the Bay Area or LA, it's also a
complete disaster to drive... I also like to drive, but not in stop and go
traffic on a freeway...

------
yoodenvranx
I used to live in a smallish german town which had an excellent car sharing
service. They had about 15 cars of all sizes all around town which you could
rent vja phone or web for as long as you needed then. I paid 11 euro per month
and in addition 3 to 10 euros an hour (depending on the car) and some cents
per km.

Tbis service was perfect! Need to go shopping for the weekend? Take the vw
golf. Cat needs to go to cat doctor? Take the smart. Want to help a friend
with moving? Take the mercedes sprinter. Want to go to the beach with some
friends? Take the vw passat.

All in all i paid 20 to 50 euro for _all_ my car needs and i never had to
think about refilling gas, switching to winter tires, do checkups and so on.

Unfortunately i had to move to a different town where such a service does not
exist and i really really feel limited. I need a car only once or twice a
month so buying one is out of question. And renting from a normal car renting
company is too expensive.

------
tptacek
I'm a little confused about the valuation point. People have been doing the
math on taxicabs versus car ownership since... forever. Whole cities, like
NYC, are organized around that tradeoff. How is this not already priced into
Uber?

------
yazaddaruvala
While this is very specific to 20+ year olds, Uber has allowed me to lower my
rent significantly.

Being in my early 20s I frequent bars often. I like my car but I can't go to a
bar in my car.

Previously, to accommodate my lifestyle I lived in downtown Seattle. This year
I moved away, not very far, a 30-40min walk, and am saving about $1000 a
month. According to Mint I've only spent $150 (about $6 a ride) on UberX this
month.

------
craigmccaskill
My wife and I moved to SF ~6 months ago from Mountain View. We sold one car
almost as soon as we moved, as we definitely didn't need a car each. Just last
week got rid of the last one as the math really didn't make sense.

All in, gas, insurance, car payment and parking spot we were spending over
$900 a month on unavoidable monthly costs, at times this number would also go
up based on using the car to get around the city and having to pay $10-40 to
park the car at wherever we were going.

Add it all up and that same money can buy a lot of Uber/Lyft/Zipcar at 90% of
the convenience. I've yet to see how much we'll spend monthly on various
transportation services but so far it looks like we'll be saving close to
$400/m.

------
GBKS
Still not sure how this would work for anybody with a family and kids and/or
living outside of urban areas (the majority of people). Has this been touched
on in previous discussions? Would love to hear some thoughts.

~~~
gautambay
Two thoughts:

1\. People will move back to cities as cities become more attractive (thanks
in part to things like the shared economy). There's already some evidence of
this trend among millennials. Reverse white-flight if you will.

2\. Uber will eventually work just as well in suburban areas. The fundamental
economics don't change (higher resource utilization => lower costs). It will
take longer to get to penetration levels that result in sufficiently high
utilization. But we'll eventually get there.

~~~
7Figures2Commas
> Uber will eventually work just as well in suburban areas.

No, it won't.

> The fundamental economics don't change...

They don't change for Uber, but they do for drivers.

> It will take longer to get to penetration levels that result in sufficiently
> high utilization.

You seem to be under the belief that supply drives demand here. That's not the
case.

The economics of utilizing a taxi service can be markedly different for
suburban consumers than urban consumers. Point B is frequently more distant
from Point A in suburbia, so the average cost of a taxi ride tends to be
higher. Thus the relative attractiveness of paying for a taxi ride decreases.

~~~
ewindisch
> > Uber will eventually work just as well in suburban areas. > No, it won't.

Perhaps it doesn't work "as well", but I live in a very-much suburban area
that borders on rural. I know several __farms __from which where one can
consistently get an UberX with a 5-10 minute wait.

~~~
sliverstorm
There are other ways in which it needs to work.

For example, the further you travel, the more important cost per mile becomes
in deciding car vs. Uber. As with every other own vs. rent discussion, the
more you use something, the more compelling ownership is.

------
matthewaustin
Imagine what will happen when we combine decentralized car use with autonomous
driving. Uber is already cheaper than driving yourself around, but think how
affordable it would be if no Uber driver was needed at all.

~~~
tesq
Why do you think the consumer will see any significant price benefits from
automation instead of having the profits diverted to shareholders, executives
or as reinvestments?

~~~
icambron
Because competition drives prices down until they're close to costs.

~~~
dragonwriter
Automation isn't competition; in fact, it is a factor which increases capital
costs in the industry, spurs consolidation and monopolization.

~~~
eurleif
Google isn't the only company developing autonomous cars. Multiple car
companies have own working prototypes. So it doesn't look like there's any
monopolization of the technology itself. It seems likely that the capital cost
of an autonomous car will be roughly comparable to the capital cost of a
normal car.

~~~
dragonwriter
Sure, but a self-driving car by itself is of fairly limited utility in a taxi
operation; the advantage that they provide comes with the data gathering and
analysis system that provides centralized control of the fleet. Automation, as
it matures, should drive down the per-car cost and drive up the competitive
advantage of the player that can expend the most on central resources.

When you reduce the relative importance of the per-unit cost and drive up the
relative importance of centralized costs, you make a market that has stronger
natural tendency to form a monopoly, because there is more of a positive
feedback loop reinforcing the position of the leading player.

------
sah88
I agree with most of the posters here that the market for Uber totally
replacing household vehicles is pretty slim. However I think there could be a
larger market for Uber replacing 2nd/3rd vehicles.

That said, there are already taxis and car share programs. Uber may be able to
take customers from them but I'm not sure that Uber really provides something
compelling enough that it would push a large number of people who are at the
margin over the edge. Disclaimer: I've never actually used Uber

~~~
stormbrew
Uber definitely provides a significant improvement over taxis in pretty much
every way. Day to day use of taxis in most jurisdictions is pretty much
impossible because, if this is even possible, they are even _less_ reliable
than public transportation.

With a taxi, unless you're going from a dense main drag (of either people or
taxi-needing people, ie. bars) you call for a cab and it may or may not come
some time between now and 2 hours from now, depending on if the cab that's
supposed to pick you up got flagged down for a better fare.

And then, in most places, the cabbie will tell you he can't take anything but
cash. After some grumbling they might let you pay with a credit card, or they
might make you take them to a cash machine.

With Uber you say you want a car and it tells you where the car that's coming
is and how long it'll take to get to you. And then when you get there you pay
by clicking a button.

------
calvinbhai
Its definitely cheaper because

1) UberX is covered by personal insurance, drives a lot of other people around
(hence the cost is shared over many rides).

Your personal car also is covered by personal insurance but drives only "you"
around.

Of course, UberX has an insurance advantage!

2) UberX driver is doing it part time, so he/she certainly has a lower paying
job (~minimum minimum wage) or no job at all, at which point, the UberX
driver's hourly rate is wayyy less than that of a Silicon Valley techie.

3) Since an UberX waiting for a passenger is probably idling somewhere or is
driving around the high density of pickups area, the vehicle, technically is
not required to pay for parking at any point, but if you driver your own car,
you have to leave it somewhere, and pay for the parking (at work, and in SF,
at home too).

Bottomline: UberX can be (strike that), will be cheaper than owning and
operating own car once Uber + autonomous vehicle becomes a reality.

why?

1) Insurance: Less human error --> Lower premium

2) No need to pay a driver: 50% of UberX price goes to pay the driver
(assuming 30% costs, 20% Uber commission). If Uber just keeps that 20% of
commission, and costs remain the same, the fares can go down an another
50%!!!!

3) More people moving to autonomous UberX will lead to increase in premiums
for manually driven cars (Insurance company has to make profits!).

Until this Autonomous UberX happens, all other explanations of UberX is
cheaper than driving, needs to be taken with a pinch of salt

------
absherwin
For those people who see this argument as inapplicable, you're right for many
people _today_. Sam worries about UberX rates going up. The exact opposite
will happen. They have steadily pushed prices down since inception. They've
also started realigning the price more towards time and away from mileage and
have much farther to go.

UberX will eventually charge prices more like $0.60 per minute plus $0.20 per
mile.

A rough estimate based on the distribution of miles driven is that 30% of
Americans should give up their cars under these numbers. Of course, many won't
because owning a car isn't purely a financial decision and humans change
slowly.

Discussions and imagination move much faster than reality but the world will
catch up.

Technical note: The price per hour should be (time-related depreciation)/miles
+ hourly wage divided by the utilization rate. Mileage should be the sum of
fuel costs per mile, maintenance cost per mile, and mileage based
depreciation.

Running these numbers for a driver expecting $20 per hour (Average for a Taxi
driver is ~$12) with 2/3 utilization and driving a Prius yields a pricing
structure of ~$0.60 per minute and ~$0.20 per mile.

------
bigfoot13442
I did some back of the napkin math of my own and this is way of base. I don't
live anywhere even close to somewhere that uber operates so it doesn't really
matter but it made me think, "am I really spending that much on owning a car?"
The per mile number is what got me so I came up with a number myself and I'm
way closer to $0.50 per mile.

I have a Chevrolet cobalt that I bought 5 years ago for $6000. I will have
this car until it dies so depreciation isn't really a factor. Instead I just
divided $6000 by 5 years. I live in Canada and gas here is the equivalent of
about $5.29 per gallon. It's been a good car and has only cost me about $2000
per year in maintenance (I do some minor stuff myself). Factor in
registration, license, insurance and at 12000 miles per year at my measured
fuel efficiency, I come in at a little less than $0.50 per mile.

If it was going to cost me $2 per mile I think I would have to just stay home.

------
CanSpice
I would like to see a comparison between Uber, car sharing (like Zipcar or
Car2Go or whatever local carsharing organization you might have) and car
ownership. I'm a carsharer, and between me and my wife we spend about
$500/month on carsharing, which looks about half of what it costs Mr. Altman
to own and operate a Tesla Roadster.

------
xophe
lol @ 5k a year depreciation, 3.5k maintenance, and 3.6k parking, i.e. the
majority of this analysis.

In conclusion, paying someone to take you in their Toyota Prius is less
expensive than paying for your own Tesla.

Still, I see sama's point. I own/maintain my own motorcycle and I uber/lyft
when I can't do that. Best of both worlds.

~~~
sama
it's definitely an extreme data point, though car ownership in SF is expensive
no matter how you cut it (most of that maintenance goes into fixing stuff that
happens to it when parked on the street, and parking garages are always
expensive).

i could definitely get a car that depreciates less. it's old battery tech at
this point.

------
tdicola
As a counterpoint I bought a car for about $3000 4 years ago and have put a
bit over 40k miles on it. Maintenance, insurance, registration, etc. have
added up to about $7k (you don't need full coverage insurance on a $3k car).
Fuel costs are about $10k (13 miles per gallon at about $3.30/gallon). Total
cost of ownership is about $20k.

An uberX at $2.00/mile would have cost me $80k.

I could have bought 4 cars and driven them the same mileage for the price of
uberX. I've been able to drive this car deep into the cascades, olympic
peninsula, etc. for awesome camping trips--something uberX would never let me
do. I also never worry about parking on the street because, hey it's a $3000
car who cares?

edit: Car is a '99 Jeep Cherokee if anyone cares, with over 180k miles on it
now (and should easily go to 250k+ miles with regular maintenance).

~~~
hyh1048576
So you made a good point. If UberX can lower its cost to about $0.5/mile then
it's way more competitive.

* Or UberX can be lucrative for people who doesn't need 10k miles per year.

------
rusabd
In Kazakhstan you can hail any car on the street - the cost of travel would be
about 5 dollars. People still buy cars because for certain trips it is
inconvenient (e.g. going to/from an airport, shopping, travels outside cities,
non-popular routes). This system also coexists with normal taxi services which
are more expensive but the fares are still suppressed.

~~~
hackuser
> you can hail any car on the street

This makes a lot of sense. New Yorkers might charge more. I would guess the
biggest objection would be safety -- how do you know you're not getting in the
car of a kidnapper, thief, rapist, etc.?

On one hand, I think people greatly over-estimate that risk. On the other,
many criminals likely would take advantage of the service to find victims.

What do the Kazaks do about that?

------
nraynaud
and what's the price difference with a normal taxi?

