Car rental or car loan – which one should you prefer!


More often than not, the question of owning vs. hiring a car crosses an average person’s mind. Well, why not!  Because most of us working today either drive our own car or hire mobile car rentals from Uber/Ola. And some of us might even be doing both on different days! Thus, the question of a car rental or car loan for owning a car is of prime importance and I discuss the pros and cons of both. This will help you decide what will suit you most.

Buying your own car versus hiring a Ola or Uber car – Which is better?

The question is key here and the answer is not so straight when you look out for. So, in this blog today, I will put forward a breakdown of almost everything involved within. This will help you decide whether to avail car loan to buy your own new car and lease a car every day through car rental platforms like Uber or Ola.

Before we get into A to Z of the two, here a few points to take note of:

  • The idea is to share a comparative of the two options on financial grounds, so you may decide which one is better for you.
  • I am covering two types of cars here a small/hatchback car and an affordable sedan/mid-sized car so you have more options to explore.
  • Certain key parameters like taxes vary from each state to state and so, for the sake of ease in comparability, we took New Delhi for our analysis and computations.
  • All amounts are in Indian rupees (INR)
  • Lastly, we have also shared certain non-financial and intangible factors that we know would be key to your decision making just as much as financial ones, if not more!

This blog is divided into following parts:

  1. Financial factors for car rental or car loan, and
  2. Non-financial factors for car rental or car loan

Let’s get into the comparatives.

Financial factors for car rental or car loan

Here in this section, I will discuss the cost associated with car rental or car loan for owning a car. After the comprehensive analysis of costs associated with car rental or car loan, I will put a concluding remark on the same. This might be of some use to the reader who is confused with the matter.

Cost of owning a car through EMI

First of all let us base the discussion on certain base assumptions, which are –

  • The total distance traveled over a period of 5 years = 1,00,000 KMs
  • For simplicity of calculations toll charges and other special taxes are not included here.
  • The below EMI calculations and the on-road pricing have been taken as per the current rates from the calculators available online, your actual cost may vary.

Cost associated with buying a new car, availing a car loan facility 

Parameters Maruti Suzuki Swift Maruti Ciaz
Model Manual, Petrol Manual, Petrol
Ex- showroom Price                         499,000                         783,383
Down payment (A)                            82,367                         122,044
Monthly EMI                              9,463                            14,856
Total EMIs over 60 months (B)                         567,780                         891,360
Total cost = (A) + (B)                         650,147                      1,013,404
RTO + Road tax and Others 37,258                            86,971
Insurance 18,554                            24,200
On-Road price (C’)                         705,959                      1,124,575
Petrol price per liter 77.06 77.06
Expected mileage – KM/PL 20 20
Petrol cost per KM 3.853 3.853
Total Petrol cost for 1,00,000 KMs (D)                         385,300                         385,300
Expected Maintenance cost over 5 years (E’)                            35,000                            20,000
Resale Value at the end of 5 years (F)                         260,000                         400,000
Net Cost of Owing = ( C+D+E-F)                         866,259                      1,129,875


Cost of hiring a car from car rental Ola or Uber

Here again, I  base the discussion on certain base assumptions, which are –

  • Total distance traveled over a period of 5 years = 1,00,000 KMs
  • The speed of the Car is 60KMPH, that is a KM in a minute
  • We have assumed that the fares shall remain the same as now over the whole 5 year period i.e. the effect of inflation has been ignored.
  • Surge pricing and other special taxes not included.

Hiring through car rental Uber

Parameter Uber Go Uber Premier (Sedan) Uber Pool/Share
Base Fare 52.5 63 52.5
Per minute fare (A) 2.1 1.05 2.1
Per KM fare (B) 6.3 9.45 6.3
Cost per KM : (A) + (B) 8.4 10.5 8.4
Cost for 1,00,000 KMs over 5 Years               8,40,000                       10,50,000                8,40,000

Hiring through car rental Ola

Parameter Ola Mini Ola Prime Sedan Ola Share
Base Fare 55 60 N/A
Per minute fare (A): 1 1 1
Per KM fare:
Up to 20 KMs 8 10 8
After 20 KMs 12.5 13 12.5
Average Per KM Fare (B) 10.25 11.5 10.25
Cost per KM : (A) + (B) 11.25 12.5 11.25
 Cost for 1,00,000 KMs over 5 Years             11,25,000                         12,50,000              11,25,000

For better comparison with the cost of owning, we shall take the average hiring cost of both Uber and Ola:

Average cost of hiring car rentals (both Uber and Ola)                         982,500                      1,150,000

As we see from the workings and illustrations above, owning a car is cheaper than renting one over a period of 5 years with heavy usage. While the difference might not seem much but you can note that I have not considered the inflation effect in case of hiring. In case of rising fuel cost and inflation, your rentals are sure to shoot up. But when you buy a car now, the inflation won’t hit you much, besides fuel costs. Plus, there are other factors which would matter in your decision making too. Those nonfinancial factors I discuss in below paragraphs. Read them before deciding.

Nonfinancial factors for car rental or car loan

For any individual, some or all factors matter too. So read carefully and then decide.

1. Urgencies/time management

So, here is where owning a car comes in handy. In certain areas and at odd times, hiring an uber/ola may take up to 15-20 minutes before they arrive. In times of urgencies or maybe just when you getting late for a meeting or office in general, having to wait for longer may cost you more than just money!

2. Privacy and security

Talk about privacy, we would say Owning a car wins and talk about security, its a matter of the factors you would like to consider. For example, the drivers in companies like Uber or Ola or mostly professionals and so if you are not experienced into driving, Uber/Ola would win.

3. Consistency

Owning a car comes into the picture here because you might not get the same comfortable cab and a well-behaved driver who drives smooth every single day? So, we can just appreciate that the type of comfort that we want can be consistent in the self-driving experience only.

4. Health/fatigue management

Driving in metro traffic scenes is a pain to the body as well as to the sight. It’s only in rented cabs that you get the comfort of sitting in the back seat and doing nothing but the things like listening to some music, talking to your friends, reading a book etc. While in the mornings you may work from the back seat as well. The choice is clear here.

5. Parking and logistics

Parking, Navigation, and fuelling are what it takes to reach your destination. We would say hiring a car is much ease oriented in these cases and you do not have to worry about any of these and you would reach hassle free. Also, you just not have to face breakdown issues. In most cases, you will be provided a replacement of the cabs in a few minutes.

6. Social/peer pressure

Owning a Car is one of those things that is highly impacted by social/peer pressure. Till date, a person would like to own his own car and feel better about himself because of the recognition society and his peer would give him than when he would just be renting one to and fro every day.

7. Self-satisfaction

This one is obviously personal and would vary with each one of us while in the decision-making bar. What wins for self-satisfaction is up to us to decide.

8. Environmental considerations

This is key in today’s time, hiring a cab promotes car-pooling or sharing which in turn helps reduce the CO2 emission levels into the atmosphere by a considerable extent. However, if you are willing to pool your owned car with your friends/colleagues, that would win the race here too.

Any questions on your mind? Let our experts do the thing, just post your questions in the comment box below and our Car loan Advisor shall reach you with the right answers!


About Author


Priyanka Gaur is a blogger & creative writer with a specialty in Financial Products & Services. An avid reader & a financial analyst herself, Priyanka covers almost entire personal finance space with equal expertise & depth. Priyanka analyses and writes the articles in such a simple way that she makes even the most complicated financial subjects look easy & fun to understand. Besides blogging & writing, Priyanka also manages the product at Money Dial.

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