In a speech to the Automotive Press Association last month, NADA Chairman Wes Lutz challenged media storylines about the future of mobility, in particular, the one that claims ride-hailing will replace personal vehicle ownership.
Lutz said one of the biggest false narratives is that ride-hailing services like Uber and Lyft are less expensive than personal vehicle ownership.
To refute that claim, he cited the AAA Foundation for Traffic Safety’s recent study, which found that the cost of relying on ride-hailing services as a primary mode of transportation in 20 of the biggest metro areas in the U.S. (which are where using these services is a practical full-time transportation option) was, at minimum, more than twice as much as the cost of owning a personal vehicle — even when factoring in the expense of fuel, insurance, parking and the vehicle itself.
Lutz said he thinks this revelation is one of the biggest auto industry stories of 2018.
Why? Because it disproves one of the central pillars holding up the argument that people are going to stop buying cars, which is that it’s cheaper to use ride-hailing services. But this study shows exactly the opposite of what we are being force-fed. It shows that ride-hailing is substantially more expensive than personal ownership, even of a new car.
Lutz continued, “If Uber and Lyft are dramatically more expensive than personal vehicle ownership, then people aren’t going to stop buying cars, and the auto industry isn’t doomed. Instead, people are going to continue doing exactly what they’re doing now: owning a car or truck for day-in and day-out personal transportation, and using ride-hailing services when it makes more sense than driving. That’s not a revolution. That’s an evolution.”
According to data from AAA’s annual Your Driving Costs study, the average annual cost to own and operate a new vehicle (the costliest form of vehicle ownership) is $7,321 for 10,841 miles of travel annually. Understanding that parking costs can be a major ownership expense for those living in urban areas, AAA also analyzed the costs of flat-rate parking per year, which ranges from $706 (Phoenix) to $8,088 (New York), with an average cost of $2,728. For those with access to free parking, relying on ride-hailing services is nearly three times more expensive than vehicle ownership in these cities.
“Whether you own a vehicle or not, ride-hailing services are a convenient transportation option,” said John Nielsen, AAA’s managing director, automotive engineering and repair. “However, with the average American city-dweller driving nearly 11,000 miles per year, a personal vehicle is still the more cost-effective choice.
He continued, “For those who travel a very limited number of miles annually, or have mobility issues that prevent them from driving a personal vehicle, ride-hailing can be a viable and important option. But, for everyone else: the car is still king.”
When you’re having conversations with your sales associates who claim sales are down because they think people aren’t buying cars anymore, give them the above data to share with customers. A customer who thinks ride-sharing is a better option may change their mind if they knew these statistics.
Editor’s Note: For more of Lutz’s speech, which included comments on the safety of self-driving vehicles as well as dealers’ thoughts on selling electric vehicles, visit blog.nada.org.