Wednesday, November 20, 2013

How much does a Lyft driver earn?

The internet must have told Lyft I’m unemployed, because I keep seeing ads like this:
and this:
and this:

Sign me up! I’m gonna lyft it, lyft it higher

$35/hour sounds pretty sweet! It’s nowhere close to what I use to earn as a programmer, but neither does driving for Lyft present all the hardships of the programmer life (fresh lattes, free gourmet meals, ergonomic sit-stand desks, full health insurance, gym membership, unlimited vacation, clothing-optional Fridays, etc…)

Hoo boy!  I’m ready to join Lyft and earn me some $800 this weekend!!!

But wait a second. The Lyft “Become A Driver” page tells me I have to supply my own car in good working condition. I guess the internet forgot to tell Lyft I don’t own a car.

Oh well, that’s just a minor setback. I was planning to buy a car anyway. Only now I can really afford a new car because at $35/hour this new car will practically pay for itself, in, oh…  how long?

But wait another second. If I’m supplying the car myself, and (as I soon learn) the gas myself, and my state-required insurance, and car repairs, and car washes, and on and on (please tell me I don’t have to buy my own pink mustache), what will I ultimately be earning as a Lyft driver? 

Maths: Let’s Estimate My Net Hourly Lyft Income


According to this Consumer Reports article, “the median car costs more than $9,100 a year to own” over the first five years of ownership driving 12,000 miles a year. That means the median cars costs about 76 cents per mile driven ($9100/12000). I’m just guessing that I’ll average a speed of 30 miles/hour while I’m doing my Lyft job.  So my expenses will come to about $22.80 per hour (0.76*30).

I’m also guessing (just guessing, mind you), that “make up to $35/hour” means I won’t always be making $35/hour.  I’m betting that about 25% of my time is spent between customers (between dropping one off and picking up the next) so I expect I’ll average about $26.25/hour ($35x0.75) - although driver feedback pages like this tell me I’m estimating a little high.

So with expenses of $22.80/hour, and income of $26.25/hour, as a Lyft driver I will earn about $3.45/hour.

$3.45/hour!!! That’s not quite the $35/hour I was hoping for, but it’s something, right? And you do get to tell strangers “come ride my pink mustache” as you fist-pump them for donations, right?

Seriously, $3.45/hour isn’t a lot, even for an unemployed programmer. It makes me wonder how cab drivers have managed on such measly wages for so many years. But wait one more second. If cab drivers traditionally earn more than this, then I'm starting to figure out these other ads Lyft sends me:



Economics of the sharing economy - It’s nice to share

I'm starting to get it now. Lyft is an example of what investors are calling “the sharing economy”. I share my car with strangers. Strangers then share their money as a donation to Lyft. Lyft then shares 80% of that donation with me. So much sharing!

Let’s break down those shares. My $26.25/hour represents 80% of customer donations, which means the customers donated about $32.81 for that hour of my work. Lyft kept 20% of that donation, or $6.56. It breaks down like this:

  • $22.80 (69.5%) – Cost of car, gas, repairs, etc… (all the up-front costs are mine)
  • $3.45 (10.5%) – My profit. This is what I keep. Yea!!!!
  • $6.56 (20%) – Lyft keeps this.


At first you might think this is an unfair rip-off of the driver, who is responsible for nearly all of the expenses and labor, and who only earns $3.45/hour while Lyft earns almost twice as much just for keeping a few servers running to support their mobile app. But then you realize that Lyft has high expenses too: fresh lattes, free gourmet meals, ergonomic sit-stand desks, full health insurance, gym membership, etc…

New Motto of the Sharing Economy

After thinking this through, maybe Lyft isn’t the job for me. I’ve looked at other “opportunities” in this new sharing economy (e.g., Uber, Homejoy, Instacart) but they all come down to the same “disruptive” business model: Charge the customer a fee for connecting with low-cost independent workers, externalize costs to those workers with whom you share a portion of the fee, and pocket the difference.

Maybe I’m looking at the wrong profession. Maybe I should look for a different career, like, oh... branding and marketing.  Maybe Lyft can be my first customer, because here’s a great slogan I’ve created for them:


Lyft. Someone is being taken for a ride!

34 comments:

  1. I don't think buying a car just to be Lyft driver is a good idea. It's about being able to supplement your income with the car you already have.

    ReplyDelete
  2. Good point, meaning that not all of the expenses for car ownership can be accounted for by Lyft driving alone.

    The most-profitable cases (for the driver) involve using someone else's car, like your parents'. Profit in this game is all about externalize expenses to someone else.

    ReplyDelete
  3. Hi! Please support our petition to develop a Lyft app for Windows Phones. Sign it here http://t.co/uAv6X24upn. Thanks!

    ReplyDelete
  4. I'm a driver in a new market. Since we are (for now) paid whether we are on the road or not, it's a pretty great deal. I agree that being a driver is not as appealing once you are driving the entire time.

    Also, drivers receive 1099s, which means they'll pay both employee and employer taxes. Based on what you've outlined, I'm betting the taxes (20-30%) would put drivers in the negative.

    ReplyDelete
    Replies
    1. expense the mileage

      Delete
    2. You would actually pay nothing in taxes, very likely, and probably even take a deduction on your other income. taxes are fun.

      Delete
  5. I am wondering how much drivers have made per day in the Dallas,Tx market. I plan on working everyday from 7am to 5 or 6pm.Is it realistic to make 20-$25 an hr? If so, I am going to rent cars to do it

    ReplyDelete
    Replies
    1. That is kind of brilliant, if you can get away with it, since the profit gimmick here is all about externalizing costs. If you're renting a car, and using it as a full-time paid driver (probably against the TOS, but let's go with it), then the rental agency is paying most of the cost of the goods, and after the first hour or so you're all profit (minus gas). Well played!

      Delete
    2. There are now companies like Breeze (formerly Zephyr) that rent cars to Lyft, etc drivers.

      Delete
    3. You can't use a rented vehicle to drive for Lyft. It has to be a vehicle you actually own.

      Delete
  6. This is a stupid article and a complete waste of my time.

    ReplyDelete
  7. The Consumer Reports article uses bad math.
    Gasoline: $3.50 per gal / 25mpg = 0.14/mile
    Maintenance: $600/10,000 miles = 0.06/mile
    Depreciation: $20,000/200,000 miles = 0.10/mile
    Insurance: $500 per yr/10,000 miles = - 0 - (you had to have it anyway)
    ----------------
    0.30/mile
    Using your 30mph avg, which sounds about right, 30mi. x .30/mi. = $9 per hour in costs

    So $30 per hour - $9 per hour in costs = $21 per hour net wage

    Even $15 per hour wouldn't be a bad wage, so I actually think it works.

    ReplyDelete
    Replies
    1. tires alone are 400 to 600 a year then a tune up yearly is about 300 then then a oil change every 3000 miles thats another 12x30=360 wipers per year 30 head lights tail lights 75 per year maintainanice is about 1400 a year and your house hold ins. wont cover a commerical auto donation or not and if your car is a red carpet lease or you lease from a dealer be ready to pay avg.50 cents a mile you go over 12,000 miles a year and in the mean time you work for peanuts to supplament your income you are taking money out of the pockets of ppl who drive for a living supporting there familys you tell there kids they cant have new shoes for school or no 3 meals a day only 2

      Delete
  8. The best thing I've read about these "ride sharing" services! Way to go! Brilliant!

    ReplyDelete
  9. during a week I probably average about $15/hr (after taxes) that's with driving a few hrs in the evening Monday through Thursday and about 8 hours Friday -sunday (which are the busiest time where I average about 20$/hr after taxes. I make sure that I save about 30% in savings for taxes.

    ReplyDelete
  10. Im a part time lift driver. Its best to do this part time anyway. I make air 400 dollars a weekend and thats after gas sense I drive a gas saver.

    ReplyDelete
  11. @chris J. How many rides would you say you have to average for the listed amount? Also, what is the payscale and average tip. Thanks for your help!

    ReplyDelete
    Replies
    1. @chris, the short answer to your questions is "I don't know". Based on this Sherpa report (http://blog.sherpashare.com/post/87531863589/the-latest-sherpa-national-averages) an average trip is 2.7 miles, lasts 8:20 minutes, and pays (gross, I think) $10.80, or $4/mile (and much higher than my guess of about $1.31/mile). Based on Uber's numbers (https://medium.com/@felixsalmon/the-economics-of-everyones-private-driver-464bfd730b38) an SF driver is netting $1.45/mile. Neither of those fully back up my guess that they're actually paid for driving about 2/3 of the time. The payscale is "80% of what is collect, minus expenses". As for tips, I believe one of the app selling points is that they avoid tipping, but it's still possible. So now you have your longer answer too: I don't know.

      Delete
    2. Why not rely more on the per mile and per minute charges that are constant (until changed) instead of guessing at miles per hour and relying on what CR says is a median car, which has nothing to do with car requirements? For Denver (where I live and where they claim $20/hr earnings), the rate is $1.41 per mile and $0.14 per minute (excluding additional fees and tips). Your 30mph estimate is a lot faster than the averages you quote here. I do concede that this is hard to estimate, as it is difficult to determine how much dead time there really is. I agree that their claims are probably high, and costs are something most will ignore when they try this out. But with careful planning and some entrepreneurial strategizing, success seems feasible. If this is not for you, as a programmer, I have an app idea we can partner on and make bazillions (minus costs ;-)

      Delete
    3. Bazillions? Need investors? I'm in! (I have to figure out somewhere to invest all the money I'm earning from PosteriorMates)

      Delete
    4. Sorry, $0.17 per minute. Here's my estimate: using Shirpa's averages, the average would yield 19.44 miles per hour (60/8.33 min = 7.2 rides per hour x 2.7 miles = 19.44).
      19.44 x 1.41 = 27.41 + 60x0.17 = $37.61/hour revenue if one could drive continuously for the entire hour. Lyft's cut would bring it to $30.09, so if they're estimating $20 for me, perhaps they do expect the 33% downtime you suggest. So the key is to maximize driving efficiency by working the busiest hours (or living close to the driving action), and minimizing the costs of your car, i.e. not buying a new car for this job specifically. My car (2005.5 VW Jetta TDI) uses 14.4 gallons x $3.70 for diesel per tank ($53.28), which covers about 575 miles at 40mpg (mostly city driving). 53.28/575 = 9.3 cents per mile, a bit less than the CR avg quoted above. Great for mileage, though not the cheapest car to own. Obviously the cost details will depend on one's car. I think it makes sense to start at the base rate and subtract costs ($1.41 - 20% - 0.093 for gas, etc) and add in time spent driving at the 66% rate. There's clearly a lot to consider. With my car costs, location, and an efficient strategy I think it could work well for me. Thanks for letting me think out loud.

      Delete
    5. I need an app developer!

      Delete
    6. Sam, your math looks reasonable. Maybe during that 33% downtime you could be developing an app :)

      Delete
    7. Would love to but I'm working on a masters in international relations.

      Delete
  12. You can't use a rented vehicle to drive for Lyft. You have to use a vehicle you actually own.

    ReplyDelete
  13. Now that I've had time to think about it, my opinion has changed. I now love the sharing economy: It’s Nice to $hare

    ReplyDelete
  14. Like all business this business is not for everyone. Uber and Lyft work for me, even though I think they should offer more incentives to the drivers.
    First off, I already own a small business.
    Second, I already have a nice SUV that I recently paid off. So, I can easily drive 6 hours a day 5 days a week or whenever I feel like it.
    I had to pay insurance anyway. The only additional expenses are: More car wash, maintenance and fuel. But those expenses can easily be taken care of from my profits.
    The first week I started driving for Uber I noted that $15/hour was not an overstatement not an internet scam. $15/hour was actually the minimum so a very good start.
    Having said that, your analysis about shared economy and including the price of buying a car a way off and very negative or out of context I think. It's like adding all the expenses of getting a bachelor degree (4 years college for $150,000 loan, and all related expenses during such period), then you deduct all that from your new "programmer job and benefits" averaging $30/hour. I'm sure your profit there would be under 0 (I'm no economics expert but it's obvious).

    Nevertheless, I still like your article because it offers some very realistic perspective for all the independent contractors out there. And shortly after starting to drive for Uber I realize that I'm still fighting big corporations because they rarely respect their most important assets. Going through the following situations explain it all:

    1- In 8 hour shift, I had to driver about 4 hours around to pick up customers or try to be on the right spot to get a customer.

    2- At least twice a day I'll get a call from a client who won't show up after I drove at least 30 miles. And I'll get paid 0 for such ride.

    3- I'm not a typical driver. So my background allows me to identify each customer and to behave as professional as possible in order to provide a very professional service. However, most people I pick up seem not to care at all about the driver, it's like the app does everything.
    Worst, both companies (Uber and Lyft) have about the same attitude since they don't really communicate with the drivers, even when they do need assistance.

    4- Uber and Lyft make 20% but I'm not sure they work enough for it since the driver does most of the work.
    And I agree with you that running some servers, upgrading apps and marketing (not so good enough so far) can justify such expenses compared to everything the driver has to go through to get the job safely done.

    Now, since both companies are new and they are very much innovative, let's give them some time to get it right. At the end, I love their service because the true winner is the CLIENT!

    For now, I think I won't take for granted the fact that I didn't have that extra income.

    ReplyDelete
  15. UBER only paid the $12 or $15 for the first two weeks of starting in a new market.
    I spent 7 hours in our downtown on the weekend. I only had 3 rides sent to me.
    I made about $6.00 after UBER took their share. So, you can make money if you get rides. UBER takes to much of a cut. They need to rethink this app.

    ReplyDelete
  16. Dos any one know if lyft ever hiresor Contracted an older driver such as 52yearsold? or just young guys?

    ReplyDelete
    Replies
    1. Yes they do. I am a 54 year old woman and I drive for both LYFT and uber.

      Delete
  17. Lyft drivers are now paid per ride, with 80% of the suggested donation going to the driver, and the rest to Zimride/Lyft. This averages about $18/hr throughout the week - dependent upon the times/days you drive. Friday and Saturday nights are the most popular times of the week, so those who drive during those times likely have a better opportunity to earn a higher average per hour.


    ABBE,
    Maidisto

    ReplyDelete
  18. This writer for The Verge tested Lyft, and figured he got $14/hour. A suprising amount of that seemed to be Lyft supplementing drivers with extra money as part of their need to build their driver numbers, and at the same time to compensate for having too many drivers. Does that make sense?
    http://www.theverge.com/2015/11/16/9732284/uber-destinations-rideshare-driver-app-overhaul

    ReplyDelete