Tuesday, 18 December 2012

The Economics of Car Hire: PAYG Beats Ownership

calcphoto comThe fact that you don’t own a car doesn’t mean that you can never use one. So what are the economics when you need to hire some wheels? It would be easy to assume that like PAYG vs “owning” a phone on a contract you’ll end up paying a really high price on a per-unit basis, whether it’s the price per minute or the price per mile. Don’t assume: a couple of weeks ago I needed to hire a car to do some awkward cross-country journeys at inconvenient times across Sussex, Kent and Essex. Public transport didn’t work, so I hired a car from Enterprise, which has competitive rates, unlimited mileage, helpful staff, and a pick up/drop off service if you need it. I booked online, collected a newish Vauxhall Corsa at the appointed hour, and did the journeys. Here’s what it cost: 24 hour hire, including collision damage waiver and VAT: £51.95 (it’s cheaper at weekends). Fuel: £25 (18½ litres at £1.34 a litre). Miles travelled: 177.7, averaging 42.5 miles per gallon of petrol. Total cost, including fuel, (which you’d also pay for if you owned a car) was £76.95. Which sounds expensive, until you do the math, which shows the overall cost was 43p a mile. Compare that with the official 2011/12 rate allowed by HM Revenue and Customs for using a company car: 45p a mile. So hiring a car and paying the one-off costs still works out cheaper, on a cost per-mile basis, than what the government has decided it costs to use your own car. Better still, when you’re finished with a hire car, you take it back and walk away, and the costs became someone else’s problem. Now that’s what I call freedom.

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