Ready to Cut the Cord on Car Ownership? Dramatic Industry Changes by 2025.
Mike Mish Shedlock
A growing number of consumers forego car ownership thanks to the accessibility of car- and ride-sharing services , Zipcar and car2go.
Around 9% of people who sold or traded in a vehicle over the past year decided to forego getting a new car in favor of using services like Uber and Lyft, a poll conducted by Reuters and Ipsos found last May.
Robert Farrington, founder of personal finance website The College Investor, is one of those people. When the time came for Farrington to replace his car, which was over a decade old and had more than 100,000 miles, he decided to test his hand at going without his own car. Instead, he planned on using Uber or Lyft for the bulk of his transportation needs. His family still owned another car, but he primarily traveled via ride-sharing.
His experiment has proved to be a resounding success: He only spends between $100 and $200 per month on rides with Uber, and he has found that the availability of cars is fairly good even though he lives in the suburbs. “I definitely think it’s a viable option as long as ride sharing is available and low cost,” he said.
The shift away car ownership is even more notable when taking car-sharing services such as Zipcar and car2go into account. While 43% of Zipcar members owned a car prior to joining, only 24% continue to do so after they’ve joined, Zipcar found in a study. It does, of course, have a vested interest in people renting rather than buying automobiles.
Driver's License Study
Also consider a Driver's License Study by the University of Michigan’s Transportation Research Institute. The study examined changes in the United States from 1983 to 2014 in the percentage of persons with a driver’s license as a function of age.
- For 16- through 44-year-olds, there was a continuous decrease in the percentage of persons with a driver’s license for the years examined. The percentages for 20- to 24-year-olds in 1983, 2008, 2011, and 2014 were 91.8%, 82.0%, 79.7%, and 76.7%, respectively.
- For 45- through 69-year-olds, there was an increase in the percentage of persons with a driver’s license from 1983 to 2008, followed by a continuous decrease from 2008 to 2014. The percentages for 60- to 64-year-olds in 1983, 2008, 2011, and 2014 were 83.8%, 95.9%, 92.7%, and 92.1%, respectively.
- For those 70 years and older, there was an increase in the percentage of persons with a driver’s license from 1983 to 2008, followed by an increase from 2008 to 2011, and a decrease from 2011 to 2014. The percentages for 1983, 2008, 2011, and 2014 were 55.0%, 78.4%, 79.2%, and 79.0%, respectively.
People delay getting a driver's license likely as an affordability and college debt issue.
Better Off Without a Car?
Add up the full cost of ownership, including your time, and a quarter of American drivers might be better off using Uber or Lyft than owning a car.
The decision for owning a vehicle or using mobility services is unique to every individual. If you purchase a highly efficient vehicle for less than $25,000 and drive it more than 15,000 miles a year until it falls apart, then you should definitely own a car if your goal is to save money.
But, if you drive less than 10,000 miles a year, face long waits in traffic, or place a high value on your time that would otherwise be spent driving, our calculations show that mobility services might be the cheaper option. Geography can also play a role; it’s not a coincidence that there have historically been so many taxi cabs in New York City, where the high cost of parking and slow pace of traffic consume time and money.
Dramatically Different Future
By 2025, the car industry will look dramatically different than it does today.
Car ownership, electric vehicles, and autonomous vehicles will all be in play.
Mike "Mish" Shedlock