Why Uber Drivers and Lyft Drivers Should Never Buy a Prius
For Uber drivers and Lyft drivers, along with delivery drivers like Amazon Flex, Postmates, Uber Eats, Instacart, and Doordash, the biggest expense we have are our cars, whether its gas or depreciation or car maintenance. Most people focus on reducing gas consumption since this is often the most obvious way to save money on our car. We fill up on gas a few times a week and when gas prices was high, you could save a lot of money with a more fuel efficient car. Now that gas is much lower price than a few years ago, it doesn’t make as much sense to get a fuel efficient car.
What on-demand workers need to focus on is that a vehicle is a depreciating asset that is used to make money. Once you focus on this and do the below analysis, you will find that a Prius doesn’t make the best financial sense. If you are to buy a car for rideshare or delivery, you need to focus on the financials and not the features of the car. Sure, I would love to drive a BMW or Mercedes everyday, but for rideshare or delivery, it would be the most financially wasteful to do that. You need to strike a fine balance between being financially responsible and buying a car you want to drive everyday.
Much of the cost of owning the car is the purchase price, its depreciation and then the cost of gas. The first goal is to minimize the purchase price of the car. Prius is often at a premium because of its gas mileage and reliability. However, there are many other cars that while it has lower fuel economy is much cheaper to buy, which will reduce the related depreciation.
Comparing Car Expenses of an Elantra and Prius
The below figures are from Edmunds TCO (true cost of ownership), calculated from numerous data points and not personally calculated by myself:
Here is an example of a 2012 Hyundai Elantra (GLS):
|Year 1||Year 2||Year 3||Year 4||Year 5||5 year total||Per mile (60k total miles)|
|Taxes and Fees||738||50||50||50||50||938||0.0125|
You can see the depreciation of a Prius is double that of its fuel cost, which is to be expected. However, you are paying an extra 4 cents a mile to save just 3 cents a mile on gas. Is that really worth it? It is very rarely worth it because of the increased depreciation.
And here is an example of a 2012 Prius Two:
|Year 1||Year 2||Year 3||Year 4||Year 5||5 Yr Total||Per mile (60k total miles)|
|Taxes & Fees||$1,167||$50||$50||$50||$50||$1,367||0.0182|
|True Cost to Own ®||$7,931||$4,655||$4,331||$3,696||$4,906||$25,519||0.3403|
You can see that the Elantra is slightly cheaper to own than the Prius long term. If you ignore the first year cost (especially if you have bought either car used), then the gap shrinks by a little. You can see that while fuel cost is 3 cents per mile cheaper than the Elantra, the depreciation on the Prius is 4 cents higher. In Year 5, the depreciation on the Prius is double that of the Elantra, mainly because the Elantra is about $7,000 cheaper than a Prius brand new.
Car Expenses vs Car Purchase Price
My biggest recommendation is to buy a used car in order to reduce the car purchase price. If you buy a cheaper car, it will typically be cheaper to operate, mainly because of reduced depreciation, taxes, and insurance. Maintenance will go up, along with any repairs you may have so it would be best to get a reliable, cheap car, like Toyota, Honda, Ford or a newer Hyundai.
I did a quick price comparison between a 2013 Prius II and a 2013 Hyundai Elantra. For about 35k miles, I can get a Prius II for around $15k, while I can get the same Elantra for around $11.5k, a savings of $3.5k. With the fuel cost savings, you would need to drive over 130k miles just to break even for the cost of a Prius! This is not even considering the extra depreciation with the Prius.
Since a 2013 Prius is worth more when you bought it, it will be worth more if you decide to sell it a few years down the road. A 2008 Elantra with about 125k miles (35k + 15k miles a year for 5 years) is worth about $5,000 while a 2008 Prius with 125k miles is worth about $7,000. This shows that if you bought a 2013 Elantra and drove it for 5 years for a total of 90k miles and sold it with the odometer at 125k miles, then you would save about $1,500 in depreciation over a similar Prius. According to Edmunds, the maintenance and repairs are very similar and the only financial incentive to buy a Prius is to save money on gas.
Why You Shouldn’t Buy a Prius
Here are the three reasons why you shouldn’t buy a Prius:
- Prius are often more expensive to buy than other cars and it’ll take many miles to recoup in the form of savings on gas
- Prius has high depreciation, which offsets any potential savings in gas
- The Prius doesn’t have lower maintenance or repairs than other vehicles
Also, I want to mention that if you drive a lot of miles, it still isn’t worth it to get a Prius. The Prius would just depreciate more and it would still be cheaper to get a different car. All of the metrics I noted before is based per mile, which means that the argument holds regardless of the number of miles you drive. The more you drive, the more the car depreciates.
If you take a look at the above numbers, you would need the cost of gas to double (so about $4 a gallon) in order to just break even between buying a Prius and an Elantra. However, you still have a higher purchase price. In accounting, there is a metric called Return on Investment (ROI). Since you are paying more for the same car, your ROI is lower if you buy a Prius over a cheaper car. Of course, if gas prices did double and you eventually sold off the Prius, then you could argue that your ROI would be the same as an Elantra. But what if you stop driving on Uber/Lyft in a year? Now you have a more expensive car that depreciating even though you are not earning money with it.Have more questions about Uber or Lyft? Head on over to our Rideshare Driver Training Course! Driver Promotions