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

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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

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The Lyft IPO is Rigged!

This post The Lyft IPO is Rigged! appeared first on Daily Reckoning.


Consider this alert your fair warning.

This week, you’re going to see A LOT of publicity dedicated to hot technology companies like Lyft, Uber, Pinterest and Airbnb.

That’s because all of these companies (and a few more) are on deck to go public through an initial public offering (IPO). This is typically how new stocks are added to the market and how individual investors like you and me can invest in new companies.

However, today I’m warning you to ignore the hype.

That’s because when it comes to IPO investing, Main Street investors like you are ALWAYS at a disadvantage…

Here’s What You Need to Know About the IPO Market

Let me start off by saying that I have a lot of experience with IPOs.

Back when I was at the hedge fund, it was my responsibility to handle all of the IPO business that our firm took part in.

I would go to the road shows, grab lunch with the executives of the new companies, place calls to the brokers in charge of the deals, and I would literally call in favors that were owed to our hedge fund to ensure the best treatment possible when it came to the hottest deals.

So when I say this market is rigged, I know exactly what I’m talking about.

Here’s how the typical process works…

A company decides that they want to sell shares to the public for two primary reasons:

Reason #1 To Go Public — The company wants to sell shares to raise capital so they can open new stores, hire more workers, or become a stronger business.

Reason #2 To Go Public — Company insiders — AKA founders and private equity owners who got in before you or I ever had a chance to invest — want to sell part of their position at a top-dollar price to lock in a big profit.

Unfortunately, the latter accounts for a large portion of these transactions. And unsuspecting individual investors who buy these shares are usually the ones handing them their profits.

That’s because the men and women on Wall Street — with their millions of dollars in research capabilities and their endless connections — know exactly which IPOs are strong businesses looking to grow and which are full of insiders looking to cash in on their investment.

You on the other hand probably do not have these insights, which puts you at a serious disadvantage when it comes to making money from these exciting transactions.

But that doesn’t mean all hope to cash in on IPOs is lost!

Here’s How YOU Can Profit on the Market’s Hottest New Stocks

To profit from the market’s hot new stocks — like the Lyft IPO that is getting so much attention right now — you need to know how Wall Street approaches these events.

Most Wall Street firms get their allocations of new stock at one price from the broker, for example $35 per share. Once the stock starts trading in the market, the successful ones move sharply higher — maybe starting to trade at $45 or more.

Therefore, these institutions have a BIG incentive to sell these shares and lock in a profit. And that’s what they do!

So you don’t want to be buying in the first few days or weeks after a successful IPO prices. Because in other words, the big institutional investors are SELLING.

But wait a few weeks and after the dust settles, then these same institutions start building their real positions.

This happens after they get a chance to do all of their research, see how the stock is trading, and check in on the managers and see if anything has changed since the company went public.

If these institutions still like the stock after all of this research, they start buying stocks over time. That’s when you want to jump in with them and ride the stock higher — not when the stock is hyped up on its first day of trading.

Bottom line: the whole IPO game is rigged in favor of the big guys on Wall Street.

However, with the right playbook, you can still make money alongside these investors over time. You just need to be patient.

Consider this your fair warning.

Now let’s get to the other most important stories to start your week…

5 “Must Knows” for Monday, March 25th

Apple vs. Cable — Today at 1PM Eastern, Apple Inc. is holding a “special event” to announce new service-related products at its headquarters in Cupertino, California. Early reports indicate that two services expected to be announced include a streaming video service and a premium subscription to its News app. Today’s event is just another example of Apple creating a “moat” around its business, keeping competitors at bay.

New Boeing Details Emerge — New details emerge daily about the status of the Boeing 737 MAX, which not only impacts Boeing’s stock price, but also the prices of airlines globally. The two most recent reports state that Boeing rushed development of the aircraft in order to beat Airbus’ rival plane to market, and that Boeing is currently testing software changes to the plane to avoid future accidents. Stick with The Daily Edge as we continue tracking this story.

Earnings on Deck — There are plenty of exciting earnings reports scheduled to be released this week. On Tuesday, Cronos Group, Carnival, McCormick and KB Homes reports earnings.

On Wednesday, Paychex, Lennar, Five Below, Lululemon Athletica and PVH report earnings.

On Thursday, Accenture and Restoration Hardware report earnings.

And wrapping up the week on Friday, Blackberry and CarMax report earnings.

U.S. Economic Check Up — On Thursday, the Commerce Department is scheduled to publish its most recent estimate of gross domestic product (GDP) growth — a growth measure of the overall economy.

According to the WSJ, the first estimate showed the economy grew at a 2.6% annualized rate in the fourth quarter from the previous three months. But new services-sector data showed Americans’ spending in this area slowed sharply in the fourth quarter, suggesting the economy lost more momentum at the end of 2018 than previously believed. Economists polled by the Journal expect that growth was a slower 2.4% pace.

Trump Proven Innocent — We try to stay away from politics here at The Daily Edge. After all, our job is to make you money, no matter what side you lean towards. However, the headline-grabbing Robert Mueller investigation concluded this weekend and found insufficient evidence that President Trump obstructed Justice. This is good news for anyone with money invested in the stock market right now, as turmoil in the White House certainly wouldn’t be good for investor confidence.

Have a great week!

Here’s to growing and protecting your wealth!

Zach Scheidt

Zach Scheidt
Editor, The Daily Edge
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