Becoming an Uber or GrabCar driver is Singaporeans’ favourite side gig of the moment. And when compared to waiting tables for $6/hour, it’s easy to see why.
Aspiring Uber and Grabcar drivers are behind a recent surge in the number of used car purchases made in Singapore, which analysts believe is going to push up COE prices.
The prospect of being able to earn enough cash with the car to cover the cost of the vehicle is actually not that enticing, when you really think about it. After all, if you really wanted to finance a car purchase, you could do it in any number of ways, including become a private tutor being a host at one of those annoying roadshows in shopping malls.
But for Singaporeans who’ve long been priced out of the car market, anything that will keep them off the MRT system sounds like a dream.
Still, a car purchase remains pretty damn expensive, and car rentals have sprung up as an alternative for Singaporeans who want to be able to cruise down the PIE with the wind in their hair, but not have to fork out a downpayment to do it.
So, which is the more sustainable option?
Price of buying a car
Most people who buy a car intending to fully cover their loan installments by becoming Uber and Grabcar drivers do not buy brand new cars, for the obvious reason that new vehicles are so expensive they’d be driving like maniacs to recover the cost.
The value of new cars falls so drastically that selling them after a few years or waiting 10 years till they’re ready for the scrapyard will do little to recover your costs.
According to the Straits Times report, most Uber drivers buy cars with 3 years or less on their COEs. These cars cost $10,000 to $50,000, and have a scrap value of $5,000 to $13,000. Assuming the drivers hold on to their vehicles until expiry of the COE and then scrap them, the total amount of cash they’ll spend purchasing their cars should be somewhere between $5,000 and $40,000.
On the other hand, if you buy a car with a decent number of years left on its COE and strategically sell it within 2 or 3 years, there is a chance you might recoup most of your costs or even make a bit of money, especially if COEs move upwards over time.
Price of renting a car
Uber’s purchase of a fleet of cars for their car rental service, Lion City Rentals, recently made the news. Car rental from Lion City Rentals costs anywhere from $52 to $79 a day. The models which consume less fuel are priced from $57 to $67 a day.
If you’re thinking you can easily earn over $60 a day as an Uber driver, things are unfortunately not that rosy. The shortest contract period at Lion City Rentals is 5 weeks, which means you have to keep the car with you all the time.
For each day you let the car sit idle in the carpark, you’re still going to have to pay that $60. That’s $1,800 for a 30-day month.
In general, the cheapest rentals across all car rental companies will still cost you at least $350 a week, or approximately $1,400 a month.
Some companies even offer special packages for Uber drivers. Smove rents cars out at $4/hour during off-peak hour provided you make at least one trip per hour, and $6/hour during peak hour.
This might suit people who just want to make a few trips each day before returning the car. However, they also don’t get to benefit from the general convenience of owning a car, since they’re less likely to use the car for their own purposes.
Assuming you’re paying $1,800 a month for your Uber, you would be paying about $21,600 over a year, or $43,200 over two years. This is comparable to or even higher than the cost of buying and then scrapping a car with less than 5 years of COE left.
So which is better?
On the face of it, it appears those who intend to drive regularly for a year or more would be spending less on a car purchase than renting a car, mainly because they are able to claw some of the cash back by reselling or scrapping a purchased car
However, there are additional costs to think about when buying a car, such as road tax, insurance, servicing and maintenance. Insurance alone usually costs over $2,000 a year. Servicing and maintenance costs vary, depending on how beat up the car is and whether you drive like a maniac or a grandpa.
In addition, newbie drivers prefer to rent simply because the commitment is lower. They are not forced to fork out a downpayment or shop around for a car loan. Some rental companies do not force you to sign on for a minimum duration, meaning you can test-drive the Uber gig for a week and then return the car if it’s not for you.
The time commitment is also lower when you are driving a rental car. There are lots of annoying little things you have to do as a car owner, including driving to the workshop for oil changes, shopping around for insurance and a car loan, and renewing your road tax and going for your yearly inspection at inconveniently located centres.
Would you rather buy or rent a car in order to become an Uber or GrabCar driver? Share your opinions in the comments!
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