How much does a Lyft driver earn?
brent-noorda.blogspot.com
brent-noorda.blogspot.com
That's not quite the right logic. Most people do not go out and purchase a vehicle just to become a Lyft drivers. Certainly that's not what you should do.
A better economic analysis is to look at Lyft as a way to make your existing personal car a more productive asset. The car is a sunk cost. What you should analyze is the incremental costs of fuel and wear-and-tear for the additional miles driven vs. the Lyft proceeds.
Econ geek footnote: This is assuming there is little-to-no opportunity cost for being a Lyft driver. But for the unemployed that holds true. Lyft may be a more compelling option for unemployed/underemployed car owners.
But that's a likely direction.
And if you're trying to make much money from Lyft, you're probably driving it much more for Lyft than for yourself already.
Doesn't that $9100 a year median include a bunch of fixed costs (or at least costs that wouldn't grow linearly with the mileage driven)? e.g., the lease/cost of car itself, insurance, etc. I'm not saying this would take the profitability of being a Lyft driver from pretty terrible to great, but it does seem like a pretty significant oversight.
Right, my point is that those costs are essentially fixed w.r.t miles driven, not that you wouldn't need those things. If you drive 36000 miles a year as a Lyft driver your car payment is still the same as someone who drives 12000 miles a year, whereas the author's model assumes the payment would be 3x as much. And re insurance, I know insurance companies take mileage into account in determining insurance premium, but it's certainly not the only thing in the formula.
http://www.gsa.gov/portal/content/100715
EDIT: Found further clarification. "The TDY mileage rates consider the fixed and variable costs to operate a car (gasoline, insurance, wear and tear, etc.) and are intended to reimburse the average expense of using a POC for the official government travel."
(Where I come from, Australia, there are tax breaks that make 3 year old cars fresh off company-car leases pretty commonly available - many people structure their salary package in a way the strongly encourages them to lease a new car every 3 years, and off-load the previous one for often 35% of its original purchase price - and to have those cars get all their required dealer servicing done using pre-tax salary.)
But I don't know, if you're exceeding 12k miles working for Lyft, im sure the cost/benefit analysis takes on a whole new life.
Second, $9100 is the median number, not the mean or "best price available." The article lists other cars that have numbers closer to $5000-$7000, and all the numbers are lower if you keep the car for longer than 5 years.
Finally, the article says that "Depreciation is the largest cost factor by far," and that it contributes about half of the cost of ownership. Buy a 1-2 year old car, and your cost of ownership will drop considerably.
You're implying that you will driving 30 miles each hour, on average. That is a ridiculous overestimation for the type of urban driving Lyft will involve. I'd guess closer to 15-20 in off-peak periods, and perhaps something close to 10 miles on average. That brings maintenance expenses down to $7.60/hr from $22/hr.
On top of that, the car will be starting and stopping i.e. engine start/stop cycles far more during urban workload if you're a taxi driver, that also increases the number of times your car will be visiting the shop for maintenance as the life of the car increases.
Cars with high long distance journey motorway miles will last far longer than a car working out its life in a city. This can affect resell value if you own the car rather than lease.
As a fairly experienced second hand car owner/purchaser I'd far rather buy a motor with 100k+ motorway miles than 50k city life on the clock.
Hey look at that, car use more fuel when driving in the city. Who knew?
Same thing with oil, if you drive on the highway you don't have to change it that often.
Brakes, in the city you stop much more often requiring more frequent brake changes (braking also happens to wear out your tires faster)
Every time you step on the gas you're applying force to metal, this means things more twisting force slowly fatiguing the metal.
Transmission, every time you shift you wear out the clutch a little.
Idling is also hell on your engine, you idle far more in the city than on the highway.
To buy a car and use it exclusively for Lyft may not make sense.
In a best-case scenario you'd be picking up someone whose destination is where you were already headed, in which case your 80% of the payment would be pure profit. If you drove that person for a full hour, to a place where you were already headed, and they paid you $43.75, then you really would get that $35/hour that Lyft advertises for drivers.
In the end, these estimates are hard. Lyft themselves probably have real good data on the matter. Maybe they'll give us some real numbers, and show us how they can be cheaper than cabs while simultaneously (if their advertising for drivers is to be believed) paying their drivers a lot more than typical cabbies.
The capital cost of buying a taxi medallion?
Even idling half the time, that's 17.50-5.25=$12.25, better than many pizza delivery / the average urban courier rate. Delivery drivers often get far less than $35 while having to pay their own vehicle costs.
The calculus changes a lot just based on that single number, average speed. I'm sure the $35/hr number would be far higher if everyone was going on freeways between trips and racking up the miles like crazy (assuming Lyft incorporates distance into its pricing heavily)
However, I wonder if there are any arbitrage opportunities by combining Lyft with something like Flightcar (where you don't own the vehicle).
2. There are also special legal requirements from the driver, e.g. taxi drivers license.
3. Insurance requirements are different and order of magnitude higher for vehicles that provide such transport.
4. In case of accidents/fatalities or police stops, who bears responsibility/liability? The car owner, the company, the insurer, all of the above? How much danger of arrest/confiscation/huge fines is the driver in? Does lyft indemnify their business partners against such incidents?
5. The drivers earnings should be the least concern for folks who sign up for this scheme
Take a $15,000 car with a nice warranty and good mileage. $3 or so per hour for gas. $200/month for registration, insurance, etc. Maybe you'd get to $10 and hour in costs, but I doubt it. And the car would last for 10 years at least.
Also, most people tip their drivers, which is basically tax-free income (at least in Germany).
It would be exceptionally unwise to fail to report income which has been 1099-ed to you, and very unwise to fail to report substantial income merely because one does not have a corresponding 1099 for it, because (particularly in the case where one party has all the information required to reconstruct your income and that one party can simultaneously uncover millions of dollars of under-reporting) audits exist.