For various convoluted reasons, I find myself without a car right now.
So today, I took an uber from home to work and then back from work to home. Total cost was 21.68 USD.
And I got to thinking that 22 bucks isn’t too bad.
Is it actually worth buying a car in my situation?
So I decided to run the numbers.
I’ve been doing a little shopping and have seen that the cars I’d probably be buying are in the 15k-17k range. I actually live pretty close to my office, so my gas bill is pretty low. Projecting some pretty average numbers for insurance, oil, and tires produces a monthly cost of 315 USD. And that’s assuming there are no non-standard repairs.
So is it better to spend 17k and 315 a month or just 440 a month?
Well, we have to look at the cost of capital there and how a yield is imputed by the difference between the two scenarios. Effectively, I’m “gaining” a rental income of 125 per month in exchange for purchasing the car.
Over 12 months, that makes for an 8.8% yield. Which is OK. Not fantastic, but OK.
Of course, these numbers don’t fully capture the whole picture.
Without a car, I lose a little bit of flexibility. In my case, this doesn’t add up to much because I’m not actually going places during the work week, and I do have a car available on the weekends.
With a car, I have repair risk.
Without a car, I end up waiting a few minutes for the Uber driver to show up.
Without a car, I can use that 17k of opportunity cost to do something with. And since I know plenty of places to make more than 8.8%, I am leaning towards this.