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The Truth about Uber and Lyft, from an Ex-Cabbie

Pitfalls in the 21st century ride-sharing business

Written by Briton Ryle
Posted September 5, 2014 at 11:04AM

We’re all familiar with how advances in wireless and internet technology have changed the way we work. Many can work out of their own homes from their computers without travelling to an office. Heck, we can even work out of a different country altogether, as I do myself. taxi cab nyc

Thanks to the smartphone revolution, we can now add a new place from which we can earn an extra buck or two… our own cars. Transportation services like Uber have been expanding their chauffeured-vehicle-for-hire service across the country and around the world, while Lyft Inc recently announced its “Regular-Folks-As-Taxi-Drivers Service” in New York this past July.

With just a smartphone and a car, almost anyone can sign up and start making some extra cash in their spare time. It’s just that simple.

But might it be too simple?

While everyone talks about the opportunity to make an extra buck or two as an independent driver, the risks associated with it are kept rather hush-hush. Having been an ex-cabbie myself in years gone by, I just might surprise you with how many risks there actually are.

The Competition

One of the first things every entrepreneur should consider is usually the thing they consider last, with many not even giving it any thought at all… the competition. If you don’t know what your competition is offering, you may walk into the business with a false sense of just how profitable it will be.

As a chauffeured-vehicle operator, your direct competition is obviously taxis which are numerous and faster. But don’t forget the growing market share that vehicle-only services have been stealing. Zipcar and Car2Go are just the two largest national outfits. Yet there dozens of smaller regional operations in the larger cities. Here’s what they’re offering:

• Zipcar allows its members to “drive cars by the hour or day (gas & insurance included) in neighborhoods, cities and airports across the globe”, the company describes its service. “Choose from sedans, hybrids, vans and more. Membership starts as low as $6/month.”

• Car2Go: “Just take it, drive it, park it. Simple and straightforward,” the company extols its convenience. “You only pay when you use it. No monthly fees or rental subscription packages. No reservations required. And our one-way model means there is no need to waste the time you’re paying for by returning the car to the same location that you began your trip.”

This is just one car-sharing category to choose from, namely cars owned by rental companies. Yet there is another car-sharing category that allows customers to rent vehicles owned by private individuals.

• Getaround: “Choose from 1000's of cars shared by people in your neighbourhood,” the company explains its service. “Getaround is free to join. No monthly or annual fees. Convenient hourly and daily rentals. All Getaround rentals include full insurance coverage and 24/7 roadside assistance.”

To private car owners wishing to list their vehicles for rent, the company promises: “Listing your car is free… You can choose when to rent, who to rent to, and for how much. Rent your car when you want to. Set a repeating weekly schedule or… block off days your car isn't available. Getaround car owners make thousands a year sharing their car with our trusted community.”

• RelayRides: “Connecting vehicle owners whose cars would otherwise be idle with people who need a car,” the company outlines its service. With “tens of thousands of car owners and hundreds of thousands of renters… owners are able to make hundreds – or even thousands – of dollars a month by simply and safely renting out their cars,” while “renters have access to an unparalleled selection of vehicles at prices up to 40% lower than other car rental options”.

Really, then, the car-sharing sector is growing rapidly with every possible variance you can think of… from renting company-owned vehicles to renting from private owners, from vehicle-only rentals to chauffeured-vehicles for hire.

As a consequence of all these options, determining which type of service is right for you as a passenger or as a car owner is getting tougher, especially where incidental costs are involved.

Count the Costs

In any venture, often what makes or breaks an entrepreneur are those surprise costs that were never thought of beforehand.

Take vehicle wear and tear. You may lend your immaculate vehicle to a car-sharing service only to get it back with a few extra scratches to the body or cuts to the upholstery. And even if the driver renting your vehicle is pleasant and friendly to you, he may not be so pleasant and friendly with your car. Unexpected transmission and brake repairs can be costly.

Even if you drive your vehicle yourself with companies like Uber and Lyft, back-seat spills do happen. Just have a chat with a taxi driver who’s worked the bar circuit on a Friday or Saturday night and you may hear some messy stories that would make you think twice about picking up strangers in your freshly detailed car.

There is yet another cost which is rarely considered at all but could well be the most important one… your time. Taxi drivers and chauffeurs often complain of the long wait times between trips during which they are not earning a dime. If you already have a regular day job, you might not enjoy keeping yourself on stand-by all evening when you could make better use of your time getting some much needed rest or recreation.

With all the competition out there as covered above – and others we haven’t covered like buses, subways and taxis – just how much business there be for your vehicle or for you as a chauffeur needs to be assessed.

Liabilities

Finally there are the liabilities to consider, especially in the case of traffic accidents. If you’re the driver, does your insurance provide adequate coverage? Some insurance companies make a clear distinction between vehicle uses, separating commercial driving from pleasure driving, and possibly requiring you to have a professional chauffeur’s license; not to mention charging more for commercial insurance.

If you lent your vehicle out to someone else who then gets into an accident with it, or damages it in another way, might there be a dispute with the renter which can drag out in court? Just ask a car rental office how many court cases they have on their hands.

Then there are the dreaded traffic tickets: parking in the wrong zone, speeding to get to your call on time, perhaps one too many stale-yellow lights. And of course the increased risk of fender benders and accidents simply by being out on the road so much; it’s just the law of averages.

There are yet other liabilities besides financial ones. Essentially, a liability is anything that puts you at a disadvantage. In the case of working as a chauffeur, your lack of knowledge of traffic patterns and city locations could be a major liability. How happy would your passengers be if you have to stop at a gas station or text your friends to get directions? And if you’re late, goodbye tips.

Fatigue is another liability. Getting a call toward the end of your availability window to go someplace you’re unfamiliar with in traffic you’re not accustomed to for a short trip that only pockets you $10 can really get your nerves up.

Consider All Sides

The intent of this piece is not to cast a negative light on the whole car-for-hire sector; rather to shed some light on some areas many may have overlooked. There’s much more to it than simply picking someone up, driving them somewhere and collecting some extra cash.

If you’re considering such a venture, go on a fact-finding mission first. Go for a ride in two or three taxis and have a chat with your drivers. Ask them all the ins and outs of chauffeuring, from dealing with traffic, to dealing with passengers, to dealing with time and fatigue.

And don’t forget to ask them this one question, perhaps the most important question of all: If you had the option to do anything else besides drive cab, would you take it?

There are two sides to every business opportunity. Companies will always paint you the rosier one of the two. It’s up to you to go out and discovery the other side.

Joseph Cafariello

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