Guest Post by Eric Peters
How does anyone make money using their car as a taxi?
Well, we’re not supposed to use that word, for openers. It’s ride-sharing. That’s just a dodge, of course. And there’s nothing wrong with dodging laws outlawing the free exchange of goods of services between consenting adults. If I have a car and am willing to use it to drive you where you want to go in return for a fee mutually agreeable to the both of us, where is the crime?
The taxi cartel objects to ride-sharing, of course – because they have legal monopoly on such services. They do not want you cutting in on their overpriced action. Which is why Uber and the others deny they are taxi services.
And in a way, it’s true. But this is precisely why being an Uber (or Lyft) ride-share driver is probably not good for you.
Here’s why – and it has nothing to do with the free exchange aspect. It has everything to do with the wear and tear aspect.
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And the depreciation and insurance and warranty aspects.
When you drive for a taxi company, as a rule you use their car. This means that wear and tear – and depreciation – are not your problem.
The taxi company owns the car, so its reduced value over time – depreciation – isn’t money out of your pocket. If it’s you car, it is. And the bite is harder if you owe on the car because you could very easily end up owing on a car worth less than what you still owe – because depreciation is greatly affected by the miles you rack up. If you use your car as a taxi – er, ride share – you will rack up miles faster, sooner. And your car will be worth less and sooner, accordingly. To not factor this into your decision to Uber or not is like not considering the cost of interest on a loan. Money out of your pocket affects how much money you have left in your pocket.
Tires – and brakes and fluids and filters – cost money, too.
If it’s not your car, you won’t be paying for all that – the taxi company will. They usually have their own in-house maintenance facilities – in order to lower these costs. And if something big breaks – the transmission, for instance – they deal with it.
But if it’s your car, you’ll be footing the bill for all of these things – and not just in terms of the parts and labor at full mark-up but also the downtime. When the vehicle is in the garage – whether yours or someone else’s – you can’t use it to make money.
Which is costing you money.
Keep in mind as well that maintenance cost go up the more you drive. Instead of a $60 oil change once a year, you may be doing it three times a year – depending on the mileage you rack up. Same goes for brakes and tires – and belts and hoses and wiper blades all the rest of it.
And you must keep up with all this maintenance – and not just to be conscientious. Your warranty coverage depends on maintaining the car as specified. If you use it as a taxi – umm, ride share – it will almost certainly have to be maintained according to the “heavy duty” or “severe” service schedule for the coverage to remain in effect and even then, it may not. Read the terms and conditions. It may well be that warranty coverage is automatically void if the car is used for “commercial” purposes – no matter how conscientiously maintained.
This is not unreasonable.
Most cars – especially most modern cars – are not designed for taxi (whoops! ride-sharing) duty. The majority are front-wheel-drive, which is not as sturdy as rear-wheel-drive. Most don’t come with heavy-duty cooling/brake packages. Your typical Camry/Accord/Malibu are cars designed for ordinary passenger car duty, not the Clydesdale duty of being a taxi, idling for hours on end, enduring pothole strikes and curb scrubs and all the rest.
And if the car you’re using this way isn’t paid for – if it’s a loaner or a leaser – you might also be violating the terms and conditions of that contract, too.
Which brings up another contract – your insurance contract.
Most policies issued to private owners assume – specifically state – that the car must not be used for commercial purposes.
You therefore have two options. The first is to be straight with the insurance company and tell them what you’re doing with the car – and accept the rate hike that will almost certainly come next; this will eat into your profit margin – if there’s any left after you factor in depreciation, wear and tear and double/triple maintenance.
The second option is to not tell the insurance company – and “ride dirty.” This will avoid the premium hike, but if you ever have to file a claim – or have one filed against you – and the insurance company finds out you were ride-sharing, there is a good chance they won’t pay out.
Which means, you will.
Bottom line on this business: It’s not that people haven’t got every right to use their own car as a taxi – whether it’s called that or not. The question is whether it makes economic sense to do so.
For most people, the answer to that question is almost certainly . . . nope.
I’m not so sure it saves the customer any money either. My wife and I used Uber all weekend since it was our 15 Year Anny and we did plenty of drinking. We’ll take taxis next time and see it is any more expensive.
You have a nice case study in Argentina in the 90’s. Taxis where expensive.
The peso peg to dollar, and privatizations left a lot of people out of work. So what they did? Buy a car and start using it as “remise” with their severance money. Basically an phone taxi. Not allowed to pick people on the street (what they did anyway).
Results:
– Most of them ended up two or three years later with a worn out car, without being able to replace it.
– A few “businessmen” that handled the office and phone calls (and diverted the most profitable trips to their own cars), made a little fortune.
– A few of them that had accidents and where not covered by the insurance ended up losing the car and their homes too.
– Taxis upgraded their service, so the difference became smaller (that was good).
– A few cases of rape and robbery by “remise” driver made people opt for the traditional taxi with vetted drivers (you cannot get a driver licence if you have a criminal record)
Taxis may be a cartel in several cities. But the price normally has a reason.
The business of exploiting desperate people by making them do things borderline legal is not new. Nobody should be able build a bussiness on the premise of having people working 12 to 16 hours per day and making (net) less than the poverty line.
Even the most rabid Austrian School Economist wil agree that there is no “free exchange of goods or services between consenting adults” when one side is in need.
In Colorado, the only people ‘allowed’ to drive taxis are Somalis. They congregate at the airport staging area as far as the eye can see. Whites need not apply.
I have recently had a stroke and am forbidden to drive, Uber has not only been a God send to me, but in the long term cheaper than running my own car.
You might check for even cheaper options. My mother was on Medicaid and qualified for 75% off taxi coupons through a City of Boise program.
I’ve been writing for years that ride sharing is a scam.
1) It actually increases traffic congestion. Ride sharing means total vehicle-miles driven per trip increases 50% to 100% – because the driver has to pick up the passenger. This is true for taxis, but less so since they do a lot less driving around looking for fares.
2) Uber has been losing money hand over fist ever since its beginning. Their prices are lower, but that’s because they’re selling $1 for 60 cents. And that’s with the capital cost and risks taken on by their drivers.
3) The reason taxis have a medallion system is because when taxis were first coming into play, there were so many taxi drivers that the term became synonymous with thief and rapist. The medallion system was created so that there wouldn’t be too many taxis and thus the actual taxi drivers could be professional and make a living
4) SideCar was the pioneer in the “non-elite” ride sharing space – it doesn’t exist anymore.
5) Uber actually started as a way for limo drivers to scam around laws against picking up fares on the street – and incidentally to steal from their limo company owners, because they didn’t own or maintain the limos they drive. But instead of sitting around waiting for the limo company to call or between scheduled pickups, they could offer their company cars (with gas included) for people using the Uber app.
6) Uber SUV/Black/ whatever they call their elite levels – is probably profitable both for drivers and Uber. It is the UberX/hoi polloi services which are money losers for all involved, but the scam for this generation of bubble is “revenue” – even if revenue is losing with every sale.