
How much does a Lyft driver earn? - hangonhn
http://brent-noorda.blogspot.com/2013/11/how-much-does-lyft-driver-earn.html?m=1
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abalone
Oh give me a break. He's basing his entire analysis on the assumption that it
costs $22.80/hr to operate a vehicle. They way he comes up with that is by
including the up-front cost of the vehicle.

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.

~~~
pbreit
> Most people do not go out and purchase a vehicle just to become a Lyft
> drivers.

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.

~~~
abalone
Still counts. As long as you would have bought the vehicle for your own use
anyway, it's a sunk cost. Whether or not it's profitable to rent it out via
Lyft depends solely on the incremental costs of the extra driving -- not how
much extra driving you do. And if it is profitable, then driving more is more
profitable, not less.

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FaceKicker
> 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).

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.

~~~
jdmichal
But it's not like his car payment magically disappears when he becomes a Lyft
driver. Or magically stop having to carry insurance. It's a good estimate to
use for cost, especially considering the author did not even own a car and
would have to purchase one.

~~~
FaceKicker
> But it's not like his car payment magically disappears when he becomes a
> Lyft driver. Or magically stop having to carry insurance.

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.

~~~
conductr
Drive 36k miles a year and the car will quickly have a resell value of 0 and
repair costs become more frequent. Insurance is probably the only true fixed
cost that benefits from scale

~~~
bigiain
If you were going to approach this in a purely economic-rationalist manner,
you'd (probably) discover that buying cars new is wasteful - and that you want
to look for late-model full-service-history low-mileage second hand cars in
the 2 or 3 year old range. The original owner will have borne the brunt of the
capital depreciation, and you can drive higher-than-average-yearly-mileage for
a few years while "low mileage" to "slightly high mileage".

(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.)

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yid
> 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.

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.

~~~
fleitz
Urban driving incurs a higher cost per mile driven, and unless you're driving
a hybrid increases fuel costs.

~~~
yid
Which is why UberX was originally advertised as being "hybrid uber". As for
the higher cost per mile of urban driving, I genuinely would love to see a
source.

~~~
fleitz
[http://www.fueleconomy.gov/feg/PowerSearch.do?action=noform&...](http://www.fueleconomy.gov/feg/PowerSearch.do?action=noform&path=7&year=2013&make=Honda&model=Civic&srchtyp=ymm)

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.

~~~
yid
Thanks for the information, and just so you know, my tone wasn't intended as
skeptical. I genuinely wanted sources.

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tommaxwell
Uber just announced that it has struck deals with auto manufacturers to chop
$100-200 off monthly payments for those that are approved to drive for them.

[http://techcrunch.com/2013/11/24/uber-driver-car-
financing/](http://techcrunch.com/2013/11/24/uber-driver-car-financing/)

------
kevingibbon
I think your missing the point. You are calculating this on the basis that you
were buying and using your car exclusively for Lyft. If a driver is already
paying for a vehicle, all of these expenses can be shared with personal use.
This is the 'sharing economy'.

To buy a car and use it exclusively for Lyft may not make sense.

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brent_noorda
Nice feedback on my blog post, y'all. Thanks. Estimating exactly how much a
driver receives from Lyft, versus that driver's expenses, is really difficult.
So I took some shortcuts with easily searchable published data and ended up
with just $3.45/hour. In a G+ discussion it came up that if you could
externalize most ownership expenses (e.g. driving your dad's car), it would be
reasonable to get up to $17/hour with all my other estimates being the same.

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.

~~~
vilhelm_s
> 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?

~~~
brent_noorda
Good point. I hear an SF medalion can go for 300K.

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KaoruAoiShiho
@Brent Noorda, awesome! You've identified a market opportunity to provider a
more consumer friendly and driver friendly alternative! Give back to the
community! All you need is some servers and lattes.

~~~
brent_noorda
Given what the drivers and passengers put into it, it does seem that Lyft's
20% cut seems high - but that 20% is also what justifies backing from the
investors. If so, then there's room for a service doing the same brokerage
deal for, maybe 10% or 5% (if they cut out the lattes), advertising itself as
"cheaper than cabs, AND cheaper than Lyft". Maybe Craig will offer a really
crappy UI and do it for free?

~~~
twistedpair
Sounds like a good ole fashioned race to the bottom.

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verteu
Profit = marginal revenue - marginal cost. You've counted all vehicle
maintenance as a "cost of Lyft driving". For people who already own (and
maintain) a car, this is not the case.

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exue
For people already with a car, the variable costs of driving (maintenance,
fuel, etc.) is usually 25-45 cents (lower end is a economy car getting 30mpg
city, higher end is a less fuel-efficient, less reliable car). Using 35c/mile,
and an average urban driving speed, that's $5.25/hour.

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)

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hansy
I'm going to agree with the majority here and say it's probably a bad idea to
buy a car just to do Lyft.

However, I wonder if there are any arbitrage opportunities by combining Lyft
with something like Flightcar (where you don't own the vehicle).

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giorgosts
1\. In most places it is illegal to provide transport for a fee without a
special state-provided license.

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

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somberi
Even if Brent may have overestimated the cost of operating a vehicle, assuming
he makes 2X of his projection, that is still less than L.A minimum wage ($8
today. Increasing to $10 by 2016.)

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pbreit
This is poor analysis. The writer takes an artificially high number ($9100),
divides it by an artificially low number (12,000) and then multiplies it by an
artificially high number (30 mph) resulting in just about the highest number
possible.

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.

~~~
brent_noorda
At $10/hour expenses (your estimate) and $26/hour income (the original
article's estimate) the Lyft driver is now netting $16/hour.

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artag
According to IRS, $0.58 per mile is fair comp (for driving your own car).
[http://www.irs.gov/uac/2013-Standard-Mileage-Rates-
Up-1-Cent...](http://www.irs.gov/uac/2013-Standard-Mileage-Rates-Up-1-Cent-
per-Mile-for-Business,-Medical-and-Moving). In city, you can hardly drive over
35 miles/hour and you stop frequently. Even if you drive 10-20 miles per hour,
that's $6 - $12. per hour.

~~~
sliverstorm
The IRS is definitely lowballing it though.

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cornycrunch
There's no conceivable sum of money you could pay me to put an ugly pink
mustache on my car. Why do they think this mustache fad is still funny?

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mschuster91
It is also possible to drive a used car, which can drastically lower the
initial and operating expenses. This way, even "luxury" cars are a viable
option to drive.

Also, most people tip their drivers, which is basically tax-free income (at
least in Germany).

~~~
darkstar999
Tips are taxable income in the US.

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joshfraser
Meanwhile, [http://techcrunch.com/2013/11/24/uber-driver-car-
financing/](http://techcrunch.com/2013/11/24/uber-driver-car-financing/)

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fks
I know Uber drivers count driving/car costs as business expenses for a tax
write off. Something to think about...

~~~
brent_noorda
Lyft drivers could surely benefit from the tax deductions as well. I assume
they report their Lyft payments to the IRS? This complicates the "how much
they earn" formula further.

~~~
patio11
Lyft sends 1099(-K, presumably)s to drivers who make over $20k from 200+
transactions a year. This is the same reporting system used by Stripe and
Paypal. (I have lots lying around.)

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.

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akaashachreja
Ugh, this post is a minefield of logical fallacies

~~~
brent_noorda
Logical fallacies? No. I take my logical fallacies very seriously. But factual
fallacies? Perhaps, since it is based on some assumptions and guesses.

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kellros
Lyft. Someone is being taken for a ride! +1!

