Cash Smarter

September 6, 2017  by: Aaron Crowe

Week of Lyft Doesn’t Offer Hope for Sharing Economy

Week of Lyft Doesn’t Offer Hope for Sharing Economy

I’m a fan of the sharing economy. After a week of riding Lyft, however, I’m not so sure about it — at least for those doing the sharing.

The service was great and I was happy with the cost and speed of the trips I took. But from the standpoint of the drivers and the money they make to push driving for Lyft into a viable job — even part-time work — I don’t see it as a long-term solution to helping people improve their incomes much.

I used Lyft regularly for a week because my car was hit by a hit-and-run driver and it needed to be in the repair shop for a week. My insurance company offered me a rental car or up to $200 in free Lyft rides, with more money for Lyft rides available if I needed it. I work from home so I only needed it to run a few errands, and I only used about $100.

Here are some of the surprising things I learned about Lyft and the sharing economy from drivers, and from a ridesharing expert I interviewed:

Fulltime driving isn’t enough

My first driver was a DJ, about college age, who told me he drives 60 to 80 hours a week for Lyft. He didn’t earn much money, he said, and the driving takes away from his passion of making music.

This led to a college-age discussion about how much money you need, and if working in a job that doesn’t fulfill your passion is worthwhile. His goal was to find ways to turn his musical interests into earning money, and to drive less.

The value of a driver’s time didn’t seem to be computed on many levels by Lyft, though I got differing opinions on the value of driving for Lyft when working 40 hours or more per week.

Bonuses are key

Another driver, a former fulltime taxi driver in San Francisco, told me that working 40+ hours per week only allows him to earn money to live on if he meets Lyft’s bonus goals. The more trips a driver makes, the closer they can get to earning a Lyft bonus. That makes short trips more profitable, he said.

Lyft explains its Power Driver Bonus in detail on its website. It has various requirements, including giving rides at peak times, having a 2011 or later model car, a high acceptance rate and bonus tiers.

For people who driver 40 to 50 hours per week for Lyft, the bonuses are accessible and equate to providing 60 rides per week, says Harry Campbell, owner of The Rideshare Guy, a blog and podcast about ridesharing and a driver for Lyft and Uber.

Lyft takes a 25 percent commission from drivers for each fare, and they can get 10 percent to all of it back by meeting the bonus tiers, Campbell says.

Is extra, part-time pay worthwhile?

Other drivers told me that working occasionally for Lyft was exactly what they wanted. Working 20 hours or less per week was enough to give them money for a few extra expenses in life:

  • One driver I rode with told me he was picking up rides on his way from Santa Barbara to Reno so he could pay for gas along the way.
  • A retired firefighter drove about 15 hours every two weeks as a way to earn some extra money for incidentals his daughters need at college, and as a way to network.
  • A recent college grad told me he drives three to five hours per day on weekdays as his only source of income. He lives at home with his parents and volunteers in a field he hopes to get a job in.

For them, the part-time money was worth their time. But for the DJ who was driving full-time for Lyft, it was paying his bills but wasn’t worthwhile on another level.

What are a Lyft driver’s expenses?

LyftI didn’t talk to any drivers about their expenses as a Lyft driver, though one woman explained how she avoided maintenance, insurance and other costs by renting a car through Lyft that requires her to drive 40 hours a week. I didn’t want to intrude on their finances, but was curious what their costs are as drivers.

Campbell estimates that gas, insurance, maintenance, vehicle depreciation and other costs of doing business as a Lyft driver add up to 20 to 40 cents per mile. For a driver logging 1,000 miles per week, that’s $200 to $400 in expenses per week. If you don’t own your car yet, a car payment is a major expense.

Other than the immediate cost of gas, most of the expenses are delayed, leaving drivers to trade equity in their car for cash now, Campbell says.

Destination unknown to driver until pickup

Before that full week of using Lyft, I thought that drivers could see on their phone app where a ride was going to before deciding to accept it. Why take someone only two miles if the fare was only going to be about $6?

The reason, Campbell says, is that Lyft doesn’t want drivers cherry picking rides. That could leave some areas underserved.

This especially came to light for me when I was seeking a final ride on a Friday at 4 p.m. to pick up my car at the body shop. The Lyft app told me that my driver would arrive in 30 minutes, which was cutting it close for me to get to the shop before it closed for the weekend. The Lyft driver was about 20 miles away and stuck in commute traffic.

I could have canceled the ride, but after five minutes of hailing it I would have been charged a cancellation fee. The rider pinged me that he would be late, but I decided to keep the ride.

He arrived in about 40 minutes, and I made it to the repair shop on time after an 8-minute ride of about three miles. The fare was $8. How was that fare worth the driver’s time? The whole trip took him about 50 minutes.

“Lyft should never allow that drive to happen,” Campbell says.

The driver may have chosen the drive because he was desperate for a fare, or he had good intentions after accepting it and didn’t want to cancel. Drivers aren’t charged a cancellation fee, Campbell says, but they’d likely get nasty emails from the company if they cancel too many rides.

I tipped the driver $10, knowing that it still probably wasn’t worth his time.

Midday rides aren’t profitable

I live in a suburban area about 30 miles east of San Francisco. Most of the rides I took were in the afternoon on weekdays — not exactly rush hour and not in a busy metro area such as San Francisco.

Tuesday, Wednesday and Thursday afternoon drives have the lowest demand, Campbell says. For drivers to make more money, they should drive during peak times when surge pricing is in place, he says.

“You sort of have to be strategic in when and where you work to make good money,” Campbell says.

But even with that selectiveness, many drivers are making closer to minimum wage, with the average pay for Lyft and Uber drivers equal to what a service industry worker earns, he says.

There are still plenty of people who want that type of pay, and to set their own hours, says Campbell, who doesn’t see ride sharing services going out of business soon even though they’re losing money. Uber lost $3 billion in 2016, though this year its losses have been less than anticipated.

For a job that pays about the same as a coffee barista — without the job benefits — driving people around in your car doesn’t sound as exciting and care-free as Lyft and Uber ads make it seem. Subtract 20 cents a mile or more for your costs, and pay a 25 percent commission to Lyft, and your time is worth a lot less than you’re getting.

Will the sharing economy continue with underpaid workers such as the drivers I ran into using Lyft? Probably. But I think we’re all a little poorer for it, and I’ll be a better tipper from now on.

0 likes Sharing Economy , Work # , ,
Get The E-Book
learn to
be the
expert in
your field
Fill out the form below to get the book FREE as well as updates from

Recommended by MyFinance

Share: / / /
Search All Articles