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Ridesharing Causing 2-Car Families to Decline

By Aaron Crowe

The number of U.S. families with two or more cars is declining in major cities, thanks in part to ride-sharing services such as Uber and Lyft that are changing the ways people drive.

The decline isn’t in every city — about 57 percent of U.S. households have two or more cars as America leads the world in car purchases, according to a November report by auditing firm KPMG. The major declines are in metropolitan areas, such as New York City, where 14 percent of households own two or more cars, and Philadelphia at 23 percent and Chicago at 28 percent. Even Los Angeles, where freeways rule, the figure is 47 percent, which is still lower than the national average.

KPMG projects that the number of two-car households will drop to 43 percent during the next 25 years as on-demand services such as Uber and Lyft grow and more people move to urban areas. “Mobility on demand” with on-demand ride-share companies is projected to increase to 10 million vehicles by 2040, according to the report.

More drivers getting rid of cars

What does all of this mean for families that would normally buy two cars? For the future of auto suppliers if demand drops because shared vehicles are increasing?

Over the long-term, it doesn’t mean that the two-car family is going away, with car ownership still dominating in America, KPMG says. But there will be fewer families with two cars, and car sales could change from individual transactions to a car company selling many cars to a ride-sharing company.

The change has already started with some drivers giving up their car, or opting not to buy one when they normally might, because they rely on Lyft, membership rental services such as Zipcar and Car2Go, car sharing services such as GetAround and RelayRides, or even bike sharing services such as Citi Bike.

Susan von Seggern, a public relations consultant in Los Angeles, says she and her husband ditched their second car in 2008 because he biked to work and she worked at home, which is in a very walkable area.

If they needed another car they’d use a ZipCar or take Lyft or Uber. They now both work at home and spend less than $500 a month on the car services, with most months limiting it to $300.

Andrew Chapados, a communications coordinator who lives near Toronto, Canada, says he has a 1997 Cavalier that runs well and should last another two to three years, but he doesn’t plan on replacing it because ride-sharing saves him the expense.

“Why buy a car when you can find a taxi on Uber wherever you are, rent a vehicle on ZipCar to get groceries, or ride-share a five-hour drive on AskforTask?” says Chapados, who works for AskforTask, a service in Canada. “It simply makes sense economically, and reduces emissions in the environment.”

He estimates he saves about $375 per month by spending about $300 a month on ride-sharing and commuting instead of spending $675 per month on a car payment, insurance and gas.

An asset that sits around

One argument that KPMG makes against owning a car is the economics behind it. The average price of a new car in the U.S. was $31,252 in 2013. That new asset loses 11 percent of its value the minute you drive it off the lot. It then sits idle approximately 95 percent of the time, either in your driveway or in the parking lot at work.

To take advantage of that downtime, mobility-on-demand services popped up in urban settings, where car ownership can be an expensive hassle. ZipCar launched in Boston in 2000 and was acquired by Avis for $500 million in 2013. Car sharing services in the United States now have more than 1.2 million members who share 17,179 vehicles.

Increased urbanization is only expanding the opportunity to share rides, since vehicle ownership tends to be much higher in urban areas. In 2007, for the first time, more people in the world lived in urban areas than rural ones. Sixty-six percent of the world’s population is projected to live in urban areas by 2050, according to a United Nations report cited in the KPMG report.

People driving less

Could urbanization, environmental concerns, more mobility alternatives and demographic shifts someday make single occupancy vehicles as unpopular as cigarette smoking? Who knows? But they could lessen the demand for new cars.

Fewer people are getting their driver’s licenses when they reach legal driving age in the U.S. Research by the University of Michigan Transportation Research Institute shows that in 1983, for example, 87 percent of 19-year-olds had licenses, and by 2009 that figure dropped to about 75 percent.

KPMG cited another study showing that from 2001 to 2009, the average annual number of vehicle-miles driven by young people between 16 and 34 years old dropped from 10,300 miles to 7,900 miles per capita — a drop of 23 percent.

What the future may hold

The KPMG report looks ahead at efficiencies that could be gained from sharing cars. Rather than sitting idle 95 percent of the time, a shared car might be idle for only 60 percent of the time.

As vehicles are used more efficiently, the demand for additional vehicles per capita could shrink as people become more used to living with just one vehicle. The market for privately owned second and third vehicles could take a hit, KPMG says.

With more shared cars, premium brands could lose market share as cars are seen less as a status symbol and more as a utility.

Instead of driving your own car, it might be more enjoyable to have a driverless car from a car sharing service pick you up at home and take you to you destination while you recline in the back seat and watch TV with your feet up on what would have been the front seat. Where did the front seats go? They’re no longer needed because a computer is driving the car for you.

Think about that possibility the next time you consider buying a second car.

Aaron Crowe is a journalist who covers the auto industry for CheapCarInsurance.net.