Rapidly growing ride-share companies are changing how people get around cities. The top two, Uber and Lyft, and some newer companies hoping to capture part of the market are giving taxis and other hired transportation a serious run for their money.
They are also creating flexible, money-making opportunities for people who are out of work, retired, underemployed or really anyone who wants to make a little extra on the side.
Getting started is pretty easy. The requirements for Uber include that you be at least 21 years old, have auto insurance and pass a background check. You also need to have a relatively new four-door car in good condition.
But just how much can you make? Lots of drivers love the income — supplemental income, anyway — the flexibility and independence the work provides.
How it works
The details vary, but in general terms, drivers are self-employed and use their own cars. Through a smartphone app provided by the ride-share companies, drivers can connect with people who need rides. The app determines the fare, which may be affected by time of day, distance and city. The app bills the credit card on file for the passenger, and then pays the driver a percentage of the total fare, with a commission going to the ride-share company.
But there are a number of factors to know before you jump in.
Things to consider
- The situation is in flux. Before investing in a new car or quitting your day job, understand that pay, costs and working conditions for ride-share drivers are fluid. So, for instance, in New York City, Uber recently cut its fares to undercut traditional taxi fares, angering many Uber drivers. An up-and-coming competitor called Gett then raised the commission it offered its drivers in an effort to lure away dissatisfied Uber drivers, the Verge reported. Uber’s fares were created to be all-inclusive — no tipping — but the company recently started allowing drivers in some places to post signs encouraging tipping. Lyft and some other services allow for electronic tipping — and drivers keep 100 percent of tip income.
- The industry faces powerful opposition: In many cities, ride-share companies are meeting resistance from taxi companies and other entrenched interests. In addition, they are under pressure from groups that want to impose stricter insurance requirements, advocates for the disabled who want them to provide better access, and others who want to bar them from prime locations, such as airports.
- Insurance may have gaps. Drivers must have auto insurance. While Uber and Lyft provide coverage that applies when the driver is logged into the app, it does not apply between rides. The National Association of Insurance Commissioners lists questions drivers should ask of their insurers and their ride-share companies.
The dynamics of driver pay
Drivers report a wide variety of pay, and earnings vary by city and by driver. According to I Drive With Uber, a blog that serves the community of ride-sharing drivers, Uber drivers make an average of $19 an hour. But you can see from the comments on the blog that not everyone agrees with that assessment.
Some are surprised to learn the difference between gross earnings and what they have left over after subtracting expenses — like fuel, maintenance, tax and insurance — and the company’s commission.
The Washington Post interviewed one disillusioned Uber driver:
“I thought 80 percent of the fares was a very good deal, but in reality Uber was making more money than I was,” said [Demek] Dagnachew, 49, who quit the job last month. “I had to pay taxes, gas, mileage and for car maintenance and repairs. I was spending time and making $3 per hour.”
For comparison, taxi drivers and chauffeurs in 2015 earned an average salary of $27,050, or $13 an hour, according to Bureau of Labor Statistics numbers. The top 10 percent of taxi drivers had an average pay of $37,970, or $18.25 an hour.
The main players
Here’s a quick look at the top ride-sharing companies.
Uber serves the most markets and keeps adding more. It owns several operations, including limousine and taxi services, in addition to UberX, the fast-growing lower-cost service that lets drivers use their own smaller cars to transport riders.
An Uber FAQ for drivers provides general information. But since it’s hard to get at the nitty-gritty about requirements and pay on the company’s site, we suggest checking the I Drive With Uber blog for more details, which include requiring that drivers have three years of driving experience in addition to the auto insurance, clean background check and minimum age requirements mentioned previously.
Uber provides these useful links:
Lyft executives claim that the company is steadily stealing ride-share market from the behemoth Uber, according to a recent Forbes article.
If the company seems less present, it’s just that Lyft cars used to be identifiable by the big, pink mustaches drivers hung on the grill of their vehicles; in 2015 the company replaced the furry symbol with a tasteful dashboard magnet.
Lyft explains in detail how fares are calculated and driver pay is handled here. Like other ride-share companies, Lyft raises rates when and where demand is heaviest (known as surge pricing). Although the company takes a 20 to 25 percent commission from the total fare, it pays “power driver” bonuses to drivers who put in the most time on the road, allowing some drivers to recoup all or part of the commission.
According to the company site, here are the main requirements:
You must be at least 21 and own an iPhone or Android phone. As part of our approval process, you’ll undergo a DMV check, plus a national and county background check. This will require a Social Security number, in addition to an in-state driver’s license that is at least a year old.
You could also check out these up-and-coming ride-sharing companies:
Pay: Claims vs. reality
Company claims about driver pay don’t always pencil out. Financial writer Felix Salmon says Uber is a decent second job, but he estimates that a driver would have to work 58 hours a week to make $75,000 a year in San Francisco, one of the nation’s most expensive cities to live.
“If you have a Monday-to-Friday day job, but it’s not enough to make ends meet, then you could probably earn an extra $400 per week, net of gas, by working 16 hours a week on Friday and Saturday nights,” Salmon says. “That’s $20,800 per year.”
Lyft claims its drivers make $35 an hour. But when I used Lyft’s earnings calculator to estimate earnings for driving 20 hours a week in a few random cities, first trying Seattle, Los Angeles and Milwaukee, I was told: “You could make $400 a week!” That’s $20 an hour. In New York, finally, the calculator said I’d earn $700 a week — $35 an hour — driving 20 hours.
It’s a very dynamic market, and if you look around, you will find that drivers are creating and sharing all kinds of strategies for making money through ride-sharing companies. So we leave you with this last piece of advice: Get on sites where you can ask questions, eavesdrop on conversation and complaints, and get a reality check. Here are few to get you started:
Would you consider driving for a ride-share service to earn extra money? What factors do you find most appealing or off-putting? Share with us in comments below or on our Facebook page.
Kari Huus contributed to this post.