Car Insurance

How Does A Car2Go Charge

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 10 minute read

That which I am using to get around is mine, including my two legs, my bike, and my car. When it’s nice out, I prefer to travel by foot or by bike, whether I’m going to the corner store or somewhere in the city.

The bus is my mode of transportation of choice when I am not in a rush and the weather is bad. When I have to drive a long distance, such as to the grocery store or to a friend’s house in the suburbs, I rely on my automobile.

There are a variety of reasons why I’ve been trying to cut back on my automobile use recently. However, I’ve been reluctant to give up my automobile because of the independence it provides and the fact that I enjoy having a variety of transportation options available to me.

With this new popular trend, I may now have the incentive to try ridesharing or vehicle sharing, which promise to bring all the advantages of car ownership without any of the drawbacks, and at a lower cost than conventional rental car or taxi services. This trend is picking up steam in metropolises all around the United States and Canada.

What Causes the Trend?

Some lasting societal and economic shifts favor ridesharing and carsharing. Lower crime rates, impatience with long commutes, and a desire to downsize are driving a long-running construction boom in many American communities. Brooklyn, which is urban, centrally situated, and (relatively) inexpensive, grew at a rate of 3.5% between 2010 and 2013, according to data provided by NYC.gov, making the city a microcosm of this phenomenon. 

The most suburban and physically isolated borough of the city, Staten Island, expanded by just 0.8% during the same time period, far less than the city as a whole.

Downtown Chicago added about five thousand new apartments between 2013 and 2014 (as reported by Crain’s Chicago Business), and the Denver metropolitan region is now constructing over ten thousand new units (as reported by the Denver Post). An analyst with the Colorado Division of Housing claims that the growth is being fueled by young professionals who don’t have children (or even pets), don’t drive, and would rather live in a thriving urban core than a quiet suburban one.

Statistical surveys show that this sentiment is shared by a sizable percentage of the American public. Sixty percent of those surveyed by the National Association of Realtors said they preferred communities that offered a variety of housing types, commercial spaces, and dining options. Nearly half (45%) of respondents agreed that it is important or very important for their local governments to facilitate non-automobile modes of transportation.

Car ownership is a need in today’s increasingly sprawling suburbs, small towns, and rural locations. It’s a privilege to be able to get around by foot, bike, or public transportation and yet have access to everything you need. It might be a costly one if rentals in your convenient, close-in neighborhood are more than in more distant regions. Why bother making loan and insurance payments on a car you rarely use?

Different Kinds of Sharing

There are two main types of car-sharing services, each controlled by a different set of national or multinational corporations.

Ridesharing Is Like a Taxi, But Not

Two of the most popular ride-hailing services in the US are Uber and Lyft. The idea is straightforward: When you create an account with a certain organization, you typically supply a valid credit or debit card number for future charges. Finally, you can get a driver to come to you by downloading an app that does just that. The app may display the driver’s name, phone number, photo of the car, the route the driver is taking to get to you, and an estimated time of arrival, depending on the service you choose.

It’s quite similar to prearranging a taxi service pickup, but without actually making a phone call. To maintain a healthy supply and demand system, ridesharing applications don’t allow riders to book rides in advance; instead, pickups occur as soon as possible. Even if Uber and Lyft would rather be known as “transportation network companies” (TNCs) to differentiate themselves from taxi services, the term “ridesharing” has stuck because of the nature of the service: sharing a ride with another person.

Even while Uber has high-end services that may compete with livery and limo firms, the vast majority of ridesharing occurs at the lower end of the pricing range. Consequently, it is typically more affordable than a cab. (Both Uber and Lyft state that they may provide discounts of up to 50 percent.

There may be a pricing differential between peak and off-peak times for a given service. Moreover, it is more relaxed because drivers use their own cars, and Lyft even recommends that you sit in the front seat. But there is a catch: Because you are normally assigned the driver who is closest to you, you may be assigned a small car with inadequate space for your legs and body.

There is a minimum price, a per-minute rate, and a per-mile rate for each ride. A receipt will be mailed to you along with a charge to your credit card or account when your ride finishes. You can’t pay your fare or tip in cash, but you may add a gratuity to your credit card or account.

Not Quite a Rental: Car Sharing

Large national suppliers in the United States include Zipcar and Car2Go, with numerous smaller, often nonprofit, companies also present. Vehicle-sharing firms, in contrast to traditional rental car agencies, typically charge by the minute or hour for shorter journeys. 

When taking a longer vacation, you have the option of paying per day, albeit this may not be cheaper than going via a vehicle rental company like Hertz or Avis.

Since you’ll be responsible for operating the business’ cars on your own time, you’ll also need to furnish a credit or debit card and driver’s license. (Recent DUI or reckless driving offenses are automatic disqualifiers; other criteria may vary per provider.) After being accepted, you will be issued a membership card that may be used to get access to any business vehicle.

You can see them parked on the side of city roadways or in the middle of campus parking lots. The location, manufacturer, and model of every accessible vehicle are all shown in a user-friendly smartphone app.

There are now convenient ways to get behind the wheel of a car anytime you need to, thanks to car-sharing programs. Zipcar typically needs bookings at least 30 minutes in advance, however this may increase to an hour if demand is high in your location or if you want a certain brand and model.

After you get where you’re going, you may stop the journey using the car’s touchscreen or the car-sharing app on your phone. Whenever you use this, the pre-set payment method will be used. There is often no minimum charge, mileage cost, or fuel fees, and instead you pay by the minute or hour.

The provider may request an initial application fee in order to access the applicant’s driving history. The monthly membership packages they may provide, however, can help cut down on gas expenses.

To clarify: The automobile is available to other Car2Go members after the rider returns the card to the reader. Leaving the meter active in a parking lot while you go grocery shopping is one way to guarantee that your car will still be there when you return. You shouldn’t have this issue with Zipcar because you may reserve vehicles for set periods of time.

When Ridesharing and Car Sharing Are Useful

Ridesharing and carsharing services are often only available in highly populated regions of major cities, however availability varies by provider. For instance, in my local area of the Twin Cities, Uber serves the central city and the inner and outer suburbs. No matter where I go in the Twin Cities suburbs, I always have to return my Car2Go to the city limits of Minneapolis or St. Paul.

Therefore, you are out of luck unless you happen to be located in a major metropolitan area.
Depending on where you reside, ridesharing and carsharing may serve slightly different purposes.

Ridesharing

When a cab would normally be required, ridesharing is the best option.

  • Transportation to and from the airport
  • Returning home safely after a night out and/or under the influence of alcohol
  • Getting to and from areas with inadequate transport access
  • Without mastering a new transit system or renting a car, navigating a strange city.
  • If your driver’s license has been suspended or revoked, you will need other means of daily transportation.

Car Pooling

The benefits of carpooling include:

  • Longer excursions, as you often do not pay per the mile nor for gasoline.
  • Reaching areas with limited transit access
  • Performing errands with several brief pauses

Both ridesharing and carsharing have their uses for commuting, depending on the situation. Due to their per-mile and per-minute pricing structures, ridesharing services may end up costing more than public transportation in the long run.

However, if time is of the essence and you know that driving will get you where you need to go faster than other modes of public transportation, then you may find that to be an acceptable compromise. Sharing a transport to and from work might help you save money if you and your coworkers live close by.

If you can beat the gridlock or pick up some passengers along the way, vehicle sharing might be a cost-effective way to get to work. On the other hand, be careful to park in a legal area. Some municipalities prohibit the use of private parking garages and short-term parking meters.

Is It Less Expensive Than Having a Car?

Many factors contribute to the total cost of automobile ownership, including where you live, the price of gas, how often you drive, your driving record, and the vehicle you choose to purchase. It’s crucial to remember that while I ran the calculations for two fictitious city dwellers, one in a big coastal metropolis (Los Angeles) and the other in a major Midwestern hub (Milwaukee), your circumstance may be different.

Both of our protagonists are located in highly populated, core areas of their cities that are well-served by public transportation. Neither of them has to pay to park overnight in the area where they work, and they both rarely use cars.

They both drive their automobiles for errands such as grocery shopping, visiting nearby attractions, and on rare occasions when they are running late for work and cannot wait for the bus. For the sake of convenience, let’s assume that both of you drive a used 30-mpg automobile from the same year, make, and model.

Both of them pay the same amount each month toward their auto loans and insurance ($120 and $70, respectively). On the other hand, the L.A. local averages around 40 round trips each month, each of which takes roughly 17 hours of driving time. An average of 30 round trips each month add up to 390 miles driven by the Milwaukee resident. A gallon of gas in Los Angeles costs $4.10, which is a 20% premium over the national average of $3.40. Each person evaluates Zipcar and Uber as alternatives to buying a car.

Our hypothetical motorist in Los Angeles spends $190 every month (insurance and loan payment) before even getting behind the wheel. Add $70 a month for gas ($4.10 a gallon) if you drive 510 miles a month, and your total cost is $260. That’s not including things like parking and toll costs that may pop up.

Our hypothetical driver in Milwaukee spends $190 each month on loan payments and insurance, plus another $44 on gas and other incidental costs, for a total of $234.

Car Pooling

Zipcar charges its frequent drivers (this applies to you) $8.10 per hour on weekdays and $9 per hour on weekends in Los Angeles. If our driver spreads out their journeys evenly across the week, it would equate to around 7.3 hours of driving at $9 per hour and 9.7 hours at $8.10 per hour, for a grand total of about $144.30.

Zipcar provides an additional financial incentive by just charging for tolls and not for gas or parking. A one-time $25 application fee is nonrefundable, but it’s a little price to pay given the potential cost savings.

Zipcar customers in Milwaukee pay $7.88 per hour on weekdays and $8.78 on weekends and holidays. It would take around 5.6 hours of driving at $8.78 per hour and 7.4 hours of driving at $7.88 per hour, for a total of about $107.50, assuming the trips are spread equally apart. Again, there will be an application fee and tolls, but no costs for driving or parking.

Ridesharing

The current Uber prices in Los Angeles are as follows: $1.61 base cost, $0.29 each minute, and $1.25 per mile. There would be a total monthly outlay of $997.70 composed of the basic fee of $64.40, the time charge of $295.80, and the mileage charge of $637.50. It’s free to apply, but motorists will have to cover toll costs.

Currently, in Milwaukee, Uber has a $2.50 basic rate, a $0.25 per minute surcharge, and a $1.25 per mile minimum fare. The total cost is $757.50 each month, consisting of a base ticket of $75, a per-minute charge of $195, and a distance fee of $487.50. That’s before you factor in any tolls.

In all cases, the individual is assumed to be traveling alone and to utilize the service in place of personal transportation. This may be a pipe dream. Taking an Uber with a group of friends may help split the expense, as would finding strategies to reduce or eliminate the need for individual car use.

Also, if the hypothetical drivers in this article had a more costly automobile that required a larger loan, insurance, and gas payment, then using a ridesharing service would make more economic sense. However, car sharing appears far more cost-effective than ridesharing or car ownership for city dwellers who do not travel as frequently as the average American but still want on-demand access to a vehicle.

Bottom Line

The use of ridesharing and carsharing services is growing in popularity across North America. Those who reside in larger urban centers may have access to a plethora of vehicle sharing options, including but not limited to Uber, Lyft, Car2Go, and Zipcar. As more individuals relocate to urban areas where automobile ownership isn’t a requirement, their growth may quicken.

These services, while helpful, have some flaws. You may have to wait a while (or walk) before you can use an app to hail a car or find a parked automobile and drive it. Also, relying only on a ridesharing service like Uber may add up rapidly.

Also important is striking a good balance between the two factors of price and ease of use. You could decide that the independence of automobile ownership is worth the small savings offered by car sharing services in your region. It’s also not obvious when people in rural or smaller-sized-town areas will have access to car-sharing services, or whether they really want to.

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