Uber v.s. Taxi: Which Saves You More?

If you’ve been following the news lately, you’ve heard that popular ride-hailing app Uber is planning to go public.

Uber is reportedly seeking to raise about $10 billion in a deal that could value the ride-hailing giant at $100 billion. Experts predict it could be one of the biggest IPOs in history.

This news got me thinking about the rise of ride-hailing services over the past few years and how much these apps really cost to use.

If you live in a mid-to-large-sized city, there’s a good chance you’ve tried Uber or Lyft. But even if you haven’t, it’s worth knowing the true cost if you ever decide to one day.

First, what is a ride-hailing service?

Uber’s story began in Paris in 2008. Two friends, Travis Kalanick and Garrett Camp, were attending a tech conference. Rumor has it the concept for Uber was born one winter night during the conference when the pair were unable to get a cab.

The initial idea was for a timeshare limo service that could be ordered via an app. Today, Uber is a platform that hosts drivers and riders. If you want to drive for Uber, you sign up in the app and apply for a background check to be eligible to drive. If you want to ride in an Uber, you sign up inside the app and connect your credit card for billing.

The app works like this: you need to get from point A to point B. You open the app and punch in your point B, the app locates where you are (point A) using GPS, and calculates an estimated fare. Once you confirm your pickup location, the nearest Uber driver gets notified to come pick you up.

Ride-hailing services are different than traditional taxi cabs in a few ways, but one of the biggest is payment processing. In Uber and Lyft, all payments are done through the app.

You hop in the car, the driver takes you to your destination and the app automatically charges your credit card for the fare. You don’t have to exchange money at all.

This hassle-free experience and the fact that most ride service apps are faster to hail than traditional cabs are why these services have exploded in popularity.

How Much Does Uber Cost Compared to a Taxi?

Taxi fares vary by location, and the same can be said for Uber fees. Uber also offers different levels of service, like Uber Pool, where you carpool with a few other passengers, UberX, the original service, and UberXL, a more luxury ride.

For simplicity, let’s look at the most economical option, UberX, in four major cities:

In New York City, a taxi charges an initial fee of $2.50, $0.50 cents per 1/5 mile, and a waiting charge of $0.50 cents per 60 seconds. UberX charges a base fare of $2.55, a per minute charge of $0.35, and a per mile charge of $1.75.

In Philadelphia, taxis charge $2.70 for the first 1/10 mile, $0.25 each additional fraction of a mile, and $0.25 for every 37.6 seconds of waiting. UberX charges a base fare of $1.25, a per minute fee of $0.18, and a per mile fee of $1.15.

In Washington D.C., taxis charge a base fare of $3, $2.16 per mile, and about $2 per every five minutes of wait time. UberX charges a base fare of $1.15, $0.17 per minute, and $1.08 per mile.

In Los Angeles, a taxi costs $2.85 for the first 1/9 of a mile, $0.30 for each additional 1/9 mile, and $0.30 for each 37 seconds of wait time. UberX, however, charges no base fare, $0.15 per minute, and $0.96 per mile.

The cost of your trip depends on a few factors: distance traveled, traffic, and time of day. While taxis and ride-hailing services are similar in these respects, there is one big difference: Taxis charge per mile when moving, but per minute while idling. Whereas Uber charges per mile and per minute regardless of whether you’re moving or idling.

Going to the Airport – What’s Cheaper?

If you’re considering a ride to the airport, Uber will almost always be the best bang for your buck.

There are only three major airports where it’s cheaper to take a taxi instead of an Uber or Lyft: New York’s LaGuardia Airport, New York’s JFK, and Boston’s Logan Airport.

Other Costs to Consider

Tipping – another major difference between ride sharing apps and taxis is tipping etiquette. Most taxi riders tip their drivers around 20 percent. Uber riders rarely tip at all since tipping has only recently become a feature within the apps.

Surge pricing – another difference between ride-hailing apps and taxi cabs is surge pricing. Both Uber and Lyft charge higher fares when there’s higher than normal demand. Think New Year’s Eve or on the fourth of July.

Surge pricing varies by city but you can see increases of 1.5-1.8x the regular rate. So, on a $10 trip, you can expect to pay anywhere from $15-$18. One customer was actually charged $14,000 for a 20-minute Uber ride due to surge pricing. The charges were dropped but it’s a reminder to always check the estimated fares, especially when it’s surge pricing.

A few ways to avoid paying surge pricing: wait until it’s over. Sometimes, surge pricing only lasts a few minutes. Walk outside the surge pricing location. Sometimes even walking a few blocks will put you outside of the surge pricing map.

The Verdict

If your trip is longer and you’ll be moving at faster speeds, ride-hailing apps are your best bet. But for shorter trips in more congested areas like NYC, taxi cabs are still best. But, geographic location matters a lot. Uber is cheaper than taxis in San Francisco, LA, and Detroit, while taxis are cheaper in NYC. Cities like Washington D.C. and Nashville can go either way.

Lastly, if you really want the best deal, take public transit. CityLab did a study in 2018, in Chicago, and public transit was always cheaper than UberX and Lyft.

An average fare cost of $2.69 for public transit compared to $17.90 for Uber and $18.13 for Lyft.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

The Daily Reckoning