I spoke too soon regarding Lyft in the first article because within a few days my wife was complaining about it and stressed that she wasn’t going to be able to complete it. Three weeks after she started the $750 bonus returned and I signed up with her referral. New data are in and now I will share my thoughts.
I gave 75 rides in 57 hours and covered 1,195 miles. I included miles I drove to pick people up and return home because you have to return home. For this work I earned $665 after Lyft’s 20% cut. This means I made $11.67 an hour before expenses or taxes. At the 54 cents per mile deduction it looks like I only have to pay tax on $20 of earnings.
Cost of operation
Many people may neglect the cost of maintenance because it is an infrequent expense whereas gas is regularly needed, has a display on your dashboard, and has prices displayed at stations every few blocks. Coincidentally during my month doing Lyft I got an oil change, tires, and new air filters. Assuming a 30 cents a mile cost of operation for gas and depreciation my earnings would be $306 or $5.37 an hour.
Who are we kidding, I’m not going to drive around for 57 hours if I’m only making $5.37, I signed up to complete the bonus and quit, so let’s see the numbers. Anyone can get a bonus, just sign up with this link and meet the requirements listed here. However, my wife was a driver so she referred me so I will show you the earnings with both bonuses as well. Our bonus was $750 after 75 rides which is a good value at $10 a ride. LA currently has a bonus of $2,000 after 500 rides, but that is only $4 a ride.
- $18.52 an hour with the driver bonus.
- $31.69 an hour with the driver bonus and my wife’s referral bonus.
Pretty good for some extra income, but by no means a get rich quick scheme.
My Lyft region is Orange County and perhaps it is not as active as most, so I tried to play into Lyft’s guaranteed hours program. During certain hours of the week Lyft offers a guaranteed rate of $20 or $25 an hour. I wasn’t driving past 10PM and rarely after 7PM, so the hours I participated in were always $20. In order to qualify for the guarantee you have driver mode on for 50 minutes of the hour, drive at least one person, and accept at least 90% of the rides during the week. At the end of the week all the revenue from the guaranteed hours is summed and if it is below $20 times the hours then they add the difference. Example: I qualified for 7 guaranteed hours but only received $110 in rides and tips, then Lyft will add $30 to get me to the $20 an hour rate.
This was great because there were times when I had to wait 40 minutes to get a ride while there were other times when I got 6 rides in two hours. I found Sunday mornings are a great time to get lots of rides.
People I met
My favorite thing about Lyft is talking to the riders. They must have thought I wasn’t too bad because my final rating was 4.82 which is average. Here are some of the stories and thoughts I have.
- I drove a blind kid to his friend’s house 15 minutes away. He was really friendly and sociable. He uses an iPhone with the screen always off and swipes around from one app to another very quickly which it speaks information to him, it was very cool. I don’t think I would have had this experience had I not been a driver.
- I drove lots of Indian contractors who are new to America and starting to find a place to live for the duration of their contracts. Their wages are not as high as an American, their firms take a cut, and their cost of living is as high as anyone else’s in the area.
- One guy was really aggressive at referring people to Uber. He convinced me to sign up by changing his location to an Uber inspection facility. However, the car didn’t pass because it has tint on the front windows. He said he has referred about 30 people in 3 years which would be around $7,000 in extra income annually, not bad!
- There were many rides which were under two miles. In my region this ride will cost $6.95 ($5 min plus $1.95 trust and service fee). I was thinking these people should consider biking and save their money. Other times I drove people to jobs that likely paid $10 an hour which means their ride is taking a significant portion of their day’s income.
When I started the Lyft app would show the rider’s destination if they put it in, but with a recent update I am only able to see it after arriving. This led to two 50 mile trips to LA in the course of my 75 rides. The fares were high, about $50 each, but I was more interested in getting to 75 rides. One person had me take them to LAX which we arrived at only 10 minutes before departure. That was a bit stressful but the conversations we had were good.
LA is outside my region and the minimum price was $3.50 which was surprising when I saw it, but not a problem. Also, I needed to drive back home which costs miles which cost money.
Thoughts on Lyft’s and Uber’s business model
Lyft and Uber are flush with money and are certainly splashing it everywhere. Let’s breakdown how much money Lyft earned from my 75 rides. Each ride has a trust and service fee so that is $145 for them and they received 20% of my fares which is $165. So they earned $310. However, they paid out $1500 in bonuses and gave me around $60 in guaranteed hours. That means I helped them use $1250 of their free flowing money. On top of that, there were hours during the weekdays which they offered 50% off rides which are also coming out of their overflowing pockets. So how do they make money? Well, there are drivers that carry on past the bonus period and that helps Lyft, however if you really drive a lot you can be a power driver which offers 10% or 20% bonus at which point Lyft would not get a penny from you and only get earnings from their trust and service fee.
Here is my theory on how Lyft and Uber will survive – automated cars. Right now the 80% of the fare goes to drivers, but who wants to pay a driver when you can have a machine do it. Tesla gathers data from all its cars which help improve its autopilot feature, but Teslas are likely concentrated in high-income areas like California. Lyft and Uber have tons of data from cities all over the world and once they have a fleet of automated cars I bet they will be very good at deploying them. They will likely need lots of data scientists and lots of industries will also. If interested you may want to think about more education. Luckily there is not a monopoly in this market so lower prices may be a result as well as higher profits. However, all the drivers will be out of work which may be the case for many workers in many industries. This is a fascinating topic to me and I wonder if the government will have to start providing basic income for everyone.
Now you know the economics behind Lyft and know that is isn’t worth quitting your day job to pursue until the machines takeover. I would recommend trying Lyft, you will get to meet all sorts of people and hopefully earn a sizable bonus. Finally, owning a car is expensive. See if you can bike and walk more and maybe you will get to a point where you can save a lot of money by eliminating your car or lots of the miles you drive.