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Executive Summary:

One of the biggest issues nowadays in the world is the lack of jobs for college students, many are looking for different ways to earn money through side times jobs. The goal of this report is to investigate the financial impact of the use to work under Uber or Lyft  transportation network companies, since they are the two leaders in the transportation industry. Transportation network companies provides paying passengers with drivers that use non-commercial vehicles. Moreover these companies are based on smartphone apps, which allow their customers to request a trip from the nearest driver to their location, driving them to their choice of location. The apps automatically send the request to the drivers and calculate the fare of the trip based on the distance and travel time.

To compare between driving for Uber or Lyft, cash flow diagrams were created to help college students make the right choice. The important aspects that were taken into consideration were gas, milage, surge pricing and time, it was found out that Uber drivers receive an income of  $20,000 per year. On the other hand , for Lyft drivers they receive an income of  $18,500 per year. Even though it looks like Uber driving receive a higher income than Lyft drivers, lyft drivers receive tips and bonus for objectives that they achieve because of their hard work and appreciation.

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Introduction:

Transportation network companies, like all other technologies has advanced and improved over the years. Unlike the usual cab companies where their employees have strict working hours, Uber and Lyft employees have flexible working hours that fit their own schedule. Both companies have their drivers doing the job by a touch of a button, where then the application calculates the fare of the trip based on the distance and travel time. To protect both the driver and the customer both companies have a minimum rating which ranges between 0 and 5, the rating is highly dependent on professionalism, respect, and safety practice during the ride. Companies such as Uber and Lyft have a huge impact on the transportation industry and the economy, they offer great job opportunities for college students that are flexible and can meet their time schedule. Nevertheless they stand as the two major companies in this industry, there is  huge competition between the two companies in term of the customers and their drivers. In this report we will observe the differences between the companies, our unbiased opinion about which company is better to work for will be provided.

Uber and Lyft have similar payment methods that depend on the distance, time, and surge pricing of the ride, all drivers in both companies receive their earnings in a weekly manner . It is important to note however, even though these companies make it sound simple: apply to drive with us and you will make and excellent income. Side cost associated with drive, such as gas and taxes will be counted into our observation considering that it affects your income of each drive. Furthermore appreciation shown by these two companies towards their employees, such as the sign up bonus that can reach up to $1000 will be considered.

Our audience are college students who obtain a 2012 or newer sedan car. Usually they have a hard time balancing work and school, yet they still need a income to cover all of their expenses. Uber and Lyft are design to suit any schedule, since there is no office or boss that controls the employee, basically the employee can start and stop on their own time. Even though Uber and Lyft has their differences, working under one of them will guarantee some amount of an income to cover your expenses and serves as a side job. However, whether this income satisfy college students needs will be discussed in details further in our report.  

Investigation Methods: (Done by Mohammad and Faisal)

In this part of the report the team will analyze the difference between the two companies (Uber & Lyft). Our team provides a full analysis of the trip distance, cost and other factors of each company. Nevertheless this part will cover how the job will start paying back the drivers for their hard work and appreciation. To begin the investigation the team began researching  the main aspects of calculating the trip fare of both transportation network companies. The aspect taken into consideration is the initial cost, service fee, price per minute price per mile and gratuity for their. The two companies provide multiple types of transportation comfort, such as SUV and black cars. However all considerations will be based on the standard type of the two companies UberX and Lyft(Standard), since college students cannot afford expensive cars.

	Uber	Lyft
Base fare	$0.40	$0.50
Service fee	$1.80	$1.95
Price per minute	$0.09	$0.10
Price per mile	$0.90	$0.90
Rider fee	$1.00	$1.10
Gratuity	No tips	10% average

Table 1.0: Important aspects when calculating the total fare of the ride.

Furthermore the team assumed two scenarios to compare fairly between the transportation network companies. The assumptions were based on the a specific ride that starts from Arizona State University Tempe campus to Arizona State University downtown Phoenix campus. The first scenario will be under normal conditions, which do not include the delay of traffic, while the second scenario will be under surge pricing associated with heavy traffic.

The first scenario is comparison between Uber and Lyft for a trip from Arizona State University Tempe campus to Arizona State University downtown Phoenix campus under no delay of traffic. As shown in Fig. 1A the total time from the pick up destination till the final destination takes about twenty minutes which is ten point six miles.  However, in this case since there is no delay of traffic the surge pricing would be one. To calculate the total fare of the trip the following equation would be used:

Uber during normal conditions:

Total fare =(Time$0.09/min+Mileage$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)Surge pricing

Total fare = (20$0.09/min+10.6$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)1

Total fare =$14.54

Lyft during normal conditions (assuming 10% gratuity) :

Total fare =(Time$0.09/min+Mileage$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)Surge pricing+10% tip

Total fare = (20$0.1/min+10.6$0.9/mi+$1.95 service  fee + $0.5 base fare +$1.1 riders fee)1 +1.509

Total fare =$16.60

From the calculations above it is clear that customers will favor Uber over Lyft,  since it cheaper and it doesn’t require a tip. However this report discusses the drivers, therefore the team is going to determine how much the drivers get in return for his service. According to ‘IWU’ that Uber takes commissions out of the trip fee, after the deduction of the riders fee the drive will receive eighty percent of the total price of the tip and Uber takes twenty percent. In the other hand, according to ‘Lyft’  the company takes commissions out of the trip fee, after the deduction of the riders fee the driver will receive seventy five percent of the total price of the tip and Lyft takes twenty five percent, keeping in mind that the driver keeps one hundred percent of the tip.

Uber during normal conditions:

Driver's income = (Total fare trip-Rider's fee )80100

Driver's income = ($15.54-$1 )80100=$11.63

Lyft during normal conditions:

Driver's income = (Total fare trip-Rider's fee-Tip )80100+Tip

Driver's income = ($16.60-$1.1-$1.509 )80100+$1.509

Driver's income = $12.07

By observing the calculation, the opposite could be said about the drivers. Lyft drivers will receive a higher income per ride mainly because of the trip factor. However, Uber income isn’t lower than Lyft’s income by a huge difference, but we must keep in mind that the total trip fare calculation. Uber total fare is cheaper than Lyft fare, therefore the customers will prefer Uber over Lyft.

The second scenario is similar to the first scenario, the same trip will be done. Furthermore, in this scenario traffic delay will be included which will cause a change in the surge pricing. As shown in Fig. 1B the total time from the pick up destination till the final destination takes about thirty six minutes which is ten point six miles.  However, in this case since there is delay of traffic the team will assume that the surge pricing would be one point three. To calculate the total fare of the trip the following equation would be used:

Uber during traffic conditions:

Total fare =(Time$0.09/min+Mileage$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)Surge pricing

Total fare = (20$0.09/min+10.6$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)1.3

Total fare =$18.90

Lyft during traffic conditions (assuming 10% gratuity) :

Total fare =(Time$0.09/min+Mileage$0.9/mi+$1.8 service  fee + $0.4 base fare +$1 riders fee)Surge pricing+10% tip

Total fare = (20$0.1/min+10.6$0.9/mi+$1.95 service  fee + $0.5 base fare +$1.1 riders fee)1.3 +1.962

Total fare =$21.58

Uber during traffic conditions (assuming 10% gratuity):

Driver's income = (Total fare trip-Rider's fee )80100

Driver's income = ($18.90-$1 )80100=$14.32

Lyft during traffic conditions (assuming 10% gratuity):

Driver's income = (Total fare trip-Rider's fee-Tip )80100+Tip

Driver's income = ($21.58-$1.1-$1.962 )80100+$1.962

Driver's income = $16.78

As shown above surge pricing has a huge effect on the total fare price and the income of the drivers. It can concluded that the customers prefer Uber over Lyft for the reason that it does include tips and is cheaper, nonetheless the opposite can be said about the drivers since they receive a higher income when working with Lyft. By doing these calculations gas and taxes are not taking into consideration, in the results section of this report depreciation will be considered.   

Research:

Uber:

In usual time:

0.18 per min + 1 per mile + 1 rider fee

Rush hour:

(0.18 per min + 1 per mile + 1 rider fee)*Surge pricing

         Driver income:

        Total ride fee without the rider’s fee, and uber takes 20%

ASU Tempe to ASU Phnx should have a fare around $13.9

Rush hour of 50 min

$20.52

Lyft:

Initial cost $0.5

$1.95 service fee

$0.1/min

$0.9/mile

Minimum ride cost $3.5

+tips

Lyft takes 25% since the driver is joining after jan 1st

ASU Tempe to ASU Phnx should have a fare around $14.52

$26.2 without tips

After 25% is $19.65

Rush hour/Surge price of 1.3

Results and Discussion:

Assumptions:

For the calculations below, it was assumed that the student will drive the 10.5 mile ASU Tempe to ASU Downtown campus route 5 times a day, 5 days a week. These five rides include four at the regular price and one at the surge price per day. In order to determine the net cash flow for the student’s expenses and income, the number of miles driven per year, the initial cost of buying a car, the lifetime of the car, the gas mileage, and the student’s income and taxes are needed.

Choosing a Service:

The number of miles driven by the student can be calculated as follows:

Reg. Price: 4 rides/day*5days/week*4 weeks=80 rides/month*12 months=1040 mi/year

Surge Price: 1 ride/day*5days/week*4 weeks =20 rides/month*12months =260 mi/year

Based on the distance driven at each price, the monthly and yearly wages can be calculated:

Uber

Reg.:80 rides/month *$14.54/ride =$1163.20/month = $13958/year

Surge: 20 rides/month *$18.90/ride = $378/month = $4536/year

Total: $1514.20/month & $18494/year

Lyft

Reg.:80 rides/month *$16.60/ride =$1759.60/month = $15936/year

Surge: 20 rides/month *$21.58/ride = $431.60/month = $5179/year

Total: $1759.6/month & $21115/year

Choosing a Car:

According to the website, idrivewithuber.com, Phoenix Uber drivers must own a car from 2004 or newer. Based on the most popular models driven for Uber, this report will compare the 2005 Toyota Prius, 2005 Honda Civic LX, and 2006 Ford Fusion. It will be assumed that the car will be sold after it has reached a total of 125,000miles. Prices for buying and selling cars were found on cars.com.

Table 2: Car models vs Expenses

	2005 Prius	2005 Civic LX	2006 Fusion
Purchase Price ($)	$6777 (91,000mi)	$5999 (103,470mi)	$8996 (78,051mi)
Salvage Value ($) at 125,000mi	$2172.50	$2083	$1910
Purchase Price -Salvage Value ($)	$4604.50	$3916	$7086
Distance to Lifetime End (mi)	34,000	21,530	46,949
Lifetime (Years)	2.70	1.71	3.73

From the data in table 2, the depreciation and gas consumption costs were calculated as follows:

Dep.=(Buy Price-Sell Price)/lifetime

Prius

Dep.= $4604.50/2.70yr= $1705.37/year=$142.08/month

Civic

Dep.=$3916/1.71yr = $2290.05/year = $190.84/month

Fusion

Dep.= $7086/3.73 = $1899.73/year =$158.31/month   

It was assumed that gas would cost $2.105/gallon, the average price of gas in Arizona for 2016 according to phoenixgasprices.com. Consumption was calculated as follows:

Consumption = 12,600 mi/year*1/Gas mileage*Gas Price/gallon

Table 3: Car Models vs. Gas Consumption

Model	Gas Consumption Per Year (Gall/yr)	Gas Consumption Per Month (Gall/Month)	Gas Price Per Year ($/yr)	Gas Price Per Month ($/Month)
Prius	227	18.92	477.90	39.83
Civic LX	360	30.00	757.80	63.15
Fusion	450	37.50	947.25	78.90

Taxes:

According to the tax calculator from smartasset.com, the following assumptions can be made:

Uber Income:

$18494.40/yr - $814(federal) - $1415(FICA) -$296(state) = $15969 after taxes

Lyft Income

$21115/yr - $1151(federal)-$1615(FICA) - $372(state) = $17977 after taxes