Lyft vs. Uber: An Overview
Sometimes it’s safer or more convenient to leave the driving and traffic headaches to someone else. This idea is what eventually grew into ride-hailing app giants Uber (UBER) and Lyft (LYFT), the two quintessential transportation service companies.
In a race to the finish line, Uber released its long-awaited initial public offering (IPO) prospectus about two weeks after rival Lyft debuted on the public market. These app-based services may seem interchangeable, but there are differences between the two largest taxi alternative network services in the United States.
Lyft operates in the U.S. and Canada. The company sets specific requirements on the vehicles used by drivers and has several different categories or levels of service. The Lyft app for smartphones notifies passengers of the driver’s arrival and gives them an estimated cost in advance.
Uber serves consumers in the U.S. and Canada as well as many other cities worldwide, including those in the European Union (EU), Central and South America, Africa, Asia, Australia, and New Zealand. Uber also sets vehicle requirements and lists several different categories of service. The Uber app helps passengers and drivers find one another and estimates the cost of the ride in advance.
- Uber and Lyft are both ride-hailing apps, and both offer innovative alternatives to taxis and long-established private transportation services.
- Both give passengers a convenient and innovative way to request and pay for rides through their smartphones.
- The companies have considerable differences in their service areas, offerings, and culture.
- Because each company’s drivers are independent contractors with varying vehicle types and personalities, even if you consistently use the same service in the same city, each trip will be different.
- Uber and Lyft also offer food delivery services for people who use their apps.
Lyft launched as a service in 2012. It spawned from Zimride, a company founded by Logan Green and John Zimmer. Zimride, a peer-to-peer rideshare matchmaker for people looking to carpool long distances securely, was sold so that the duo could focus on Lyft. Green is currently the chief executive officer (CEO) and Zimmer is the company’s president.
Going Public and Market Share
On Dec. 6, 2018, Lyft announced that the company had officially filed paperwork with the U.S. Securities and Exchange Commission (SEC) to go public in March 2019. The company’s stock trades on the Nasdaq.
Lyft said it expected to raise $2 billion in its IPO and would offer 30.77 million shares of common stock at an expected $62 to $68 per share. The company eventually priced its shares at $72, trading up before closing at just over $78. Valued at $15 billion in 2018, Lyft raised $600 million in a financing round led by Fidelity Management & Research Co.
Also in 2018, Lyft revealed market share figures for the first time, suggesting that it had 35% of the U.S. ride-sharing market and that it has a majority of the share in multiple markets across the country.
Reuters reported that Lyft was estimating the market share figure to be closer to 40%, as of February 2019. Lyft might have gained market share from Uber as a result of several controversies, many of which took place in the months leading up to the IPO announcement. However, its share fell back toward around one-third of the market in subsequent years.
Lyft’s share of the ride-sharing market, as of July 2021, according to Bloomberg Second Measure.
Operation and Services
Lyft’s website shows the cities where the ride service operates in Canada and the U.S., where it serves all 50 states and the District of Columbia. The company has a set minimum vehicle requirement, and the drivers must pass two background checks before approval with the company.
Automobiles must have four doors with a minimum of five seat belts. The age and condition of the vehicle, among other requirements, vary by state.
The company offers several service classes, which vary by city.
- Original Lyft provides rides in regular vehicles for up to three passengers.
- Lyft XL provides rides in regular vehicles for up to five passengers.
- Lyft Lux provides premium black car service in luxury vehicles.
- Lyft Black is a premium black car service including luxury vehicles.
- Lyft Black XL provides rides in a premium black SUV for up to five people.
Cost of Lyft Services
According to a 2015 study from smartphone app SherpaShare, the average cost of a Lyft ride came in at $12.53. In 2021, though, prices seemed to jump dramatically, due to a pandemic-easing combination of pent-up demand and a shortage of drivers. In July 2021, Lyft’s average transaction value was $27, a 45% jump year over year.
The fee for service varies by city and the class or category of vehicle service chosen; for example, Lyft lists New York City ride costs as $1.55 per mile or $0.71 per minute for the basic Lyft service. Fees have a base charge for each ride and additional calculations for total miles traveled and the minutes of travel time. Also, prime-time service will increase the base price.
Any passenger changes to a ride, once it is under way, will affect the total price. Customers pay through the company’s smartphone app.
Lyft App and Amp
Lyft originally identified its vehicles with furry pink mustaches on the front (called “carstashes”), but it now uses a more subtle system called the Amp. The Amp is a small module that sits on the driver’s dashboard and lights up in a particular color. Waiting passengers get notification of the Amp color in the Lyft app, which is especially helpful when getting a ride after dark or when leaving a venue where everyone is using a rideshare app to get home.
All Lyft vehicles have stickers displaying the Lyft logo in the front and rear windshields. Retiring its mustaches may have been a move toward adopting a more professional look to compete with Uber.
The Lyft app gives the passenger an estimated total cost for a ride at booking. In some cities, the app can show the exact price of the door-to-door service.
Lyft and Food Delivery
Lyft has entered into the food delivery game. Its major fast-food partner is Taco Bell. In July 2017, the company tested a new feature called Taco Mode, which allowed a user in Lyft transit to press a button on their app and direct the driver to the nearest Taco Bell. Interestingly, the service was only available between 9 p.m. and 2 a.m.
Taco Mode was expected to roll out to all devices in 2018, but many drivers and customers expressed disapproval, because of issues like messiness in vehicles and a general concern about the company’s focus on driver satisfaction.
Lyft Driver Environment
Lyft riders can tip their drivers through the app at the time of destination payment or up to 72 hours after the ride is completed. Drivers keep 100% of their tips. Lyft passengers can also split the cost of a ride with fellow passengers through the app, as long as they do so during the ride—not after.
Lyft has managed to avoid many of the controversies faced by rival Uber. Perhaps this is partially due to the company’s smaller size and limited operation sphere. However, in 2017, a New York labor group accused Lyft of wage theft. The Washington Post reported that drivers claimed the service was cheating them on their fare by deducting money for drivers’ trips on interstate highways.
Uber was founded in 2009 by Travis Kalanick and Garrett Camp as UberCab. After Kalanick’s resignation as CEO in 2017, Dara Khosrowshahi took his place. Ronald Sugar was named chair in August 2018.
Uber is a much larger company than Lyft and has received negative press for everything from sexual harassment lawsuits to its use of software to track Lyft drivers. Uber settled a class-action lawsuit by former and current employees of color and female workers. The claim cited events of discrimination and harassment. The $10 million settlement came after the firm fired 20 employees for harassment in 2017.
The FBI also opened a probe in 2017 into the company’s use of software to track Lyft’s drivers. An article in The Wall Street Journal stated that investigators were looking into Uber’s use of software to get information on drivers who work for both companies and discover information about Lyft’s charges for service.
Going Public and Market Share
Uber filed paperwork for its documents for an IPO on Dec. 6, 2018. After delays, the company filed final documents to be listed on the New York Stock Exchange (NYSE). The offering was expected to be one of the largest of 2019. The multinational ride-hailing company was valued at $120 billion by Wall Street banks and reported $11.27 billion in 2018 revenue.
Unfortunately, the actual opening was anticlimactic: Uber’s IPO price was $45. When the opening bell rang, shares opened at $42. They closed at $41.57.
The company and its stock have had a bumpy path ever since. Uber may have also lost market share in the early months of the CEO leadership of Khosrowshahi, who assumed the top spot at the company following the departure of Kalanick, co-founder and former CEO, in June 2017.
A 2019 survey completed by Business of Apps found Uber’s market share to be around 68%. It has maintained that share as of July 2021. The company’s S-1 IPO filing shows that the service provided 1.5 billion trips in the fourth quarter of 2018 alone.
Both companies have nondiscrimination policies in place, so make sure you contact the company and file a complaint if you feel as though you’ve been affected.
Operations and Services
Uber serves hundreds of cities in dozens of countries, including the U.S. and Canada, as well as other cities around the globe in Central and South America, Africa, Asia, Australia, New Zealand, and the EU. Depending on your location, Uber may be your only taxi alternative option. In the U.S., the service lists more than 300 cities, from Las Vegas, Chicago, and New York to Fargo, N.D., Pensacola, Fla., and Kalamazoo, Mich.
Like its counterpart, Lyft, Uber offers several classes of service whose availability varies by city.
- UberX is the basic sedan service for everyday rides for up to four people.
- UberComfort provides newer cars with additional legroom.
- UberXL provides affordable SUV service for groups of up to six people.
- UberSUV provides luxury SUV service for groups of up to six people.
- UberPool allows customers with different starting and ending points who are traveling in the same direction to share rides in sedans and share the cost.
- UberBlack provides rides with professional drivers in black town cars for up to four people.
- UberBlack SUV provides luxury rides by professional drivers for up to five passengers.
- UberWAV provides rides in wheelchair- and scooter-accessible vehicles by drivers trained in assisting passengers.
- UberTaxi lets you hail a yellow cab from the Uber app.
Even if you choose UberX, the lowest-cost option, you will not get picked up in a clunker. Uber has minimum vehicle requirements for drivers in each city. For example, in Los Angeles, vehicles must be no more than 15 years old and have four doors. The automobile must be in good condition with no cosmetic damage and must have working air conditioning. Further, the car cannot be commercially branded and must have passed a vehicle inspection in the location of operation.
Cost of Uber Services
Uber’s fares consist of a base fare plus a time and distance rate, and fares vary by vehicle type and city of service. Surge pricing during times of peak demand will increase the fare.
Each vehicle class has a minimum fare so that it is worth a driver’s time to pick up customers, even for very short rides. In some cities, Uber does not provide up-front fare estimates but rather calculates the total charge after the ride. The UberSUV option is the most expensive of the offerings, while UberX charges the least expensive fares.
The SherpaShare study found that in May 2015, the average Uber trip was $13.36. In July 2021, it was $20, a 20% increase from one year ago.
Uber App and Beacon
Uber uses a light-up Beacon, similar to Lyft’s Amp, to help passengers identify their ride. Mounted in the front windshield on the passenger side, the Beacon allows passengers to easily spot their ride from a distance. Drivers also display placards with the Uber logo in their front and back windshields. The apps themselves help drivers and riders identify each other as well, providing license plate numbers and descriptions of the cars.
After requesting a ride, the Uber app shows all nearby drivers, their photos, automobile specifications, and the license number of the car. The app also allows customers to estimate their fares in advance and determine driver arrival and location.
Uber and Food Delivery
Uber launched Uber Eats in 2014 to compete with other services, like GrubHub and Postmates. Uber gained a major partnership when McDonald’s announced in December 2016 that it would venture into delivery with Uber Eats. In December 2017, the company announced that the service was profitable in 40 out of 165 cities in which it operated. Currently, Uber Eats is available in more than 6,000 cities worldwide.
Uber Driver Environment
According to Uber, as of December 2018, they had 3.9 million registered and approved drivers globally. Uber drivers are a combination of professional drivers and nonprofessionals who have passed driving record checks and background checks. They submit photos for a badge ID and the notification app.
Uber did not solicit tips earlier, but as of 2017, it lets customers add tips to their fares and allows drivers to accept cash tips. Uber allows riders to split fares with friends through the app.
Workers have claimed low wages and poor workplace culture, but Uber is working toward improving conditions. In the U.S., it instituted a program of driver rewards based on a certain rating status.
Pros and Cons of Lyft and Uber
There are some key differences between Uber and Lyft. Uber can be less expensive than Lyft for the average journey—research suggests that Uber is the cheaper company, with the average trip costing $20 compared with the $27 you would spend for an average Lyft trip. Also, Uber can be used around the world, whereas Lyft is only available in the U.S. and Canada. Both companies have been criticized for paying drivers poorly and not providing job security.
In reality, the difference between the two companies is less important than the variation between the drivers who provide rides. Adaptive pricing means that either company may be cheaper at a given moment and location, and that the only accurate way to compare them is to open both apps on your phone.
Lyft, Uber, and Workers’ Rights
Both Lyft and Uber have become prime examples of the gig economy at work. Their workers are not guaranteed a minimum wage, supply and maintain their own vehicles, and have few if any benefits.
That is becoming controversial in some cities where the companies operate. In 2018, New York City mandated a $17.22 minimum wage for drivers. In 2019, California legislators passed California Assembly Bill 5 (AB5), a law classifying ride-sharing drivers as employees, not independent contractors. The state’s voters later reversed that by voting in Uber-sponsored Proposition 22 in November 2020.
On Aug. 20, 2021, Alameda County Superior Court Judge Frank Roesch ruled that two sections of Proposition 22 were unconstitutional and that the measure as a whole was unenforceable. Uber and Lyft announced that they would appeal, and Prop 22 remains in effect as the matter winds its way through the courts.
What is the difference between Uber and Lyft for drivers?
Lyft allows riders to tip drivers up to 72 hours after the trip is over, while Uber riders can choose to give their drivers a tip either in cash or before the trip is over. Uber has faced criticism for the way it pays its drivers, but it has pledged to make changes to improve these conditions. Lyft has managed to avoid some of the controversies that have plagued Uber, although the company was accused of deducting money from drivers when they drove on interstate highways.
How is Lyft different from Uber?
There are some key differences between Uber and Lyft. Both operate in Canada and the United States, but Uber’s reach also expands into other cities around the world. The average cost is also different, with Uber ranking lower than Lyft for an average trip.
Which is cheaper: Lyft or Uber?
Determining which service is cheaper depends on the type of service you intend to take. According to average ride costs, Uber is the cheaper company, with the average trip costing $20 compared with the $27 you would spend for an average Lyft trip.
Can multiple drivers share an Uber or Lyft car?
You can have multiple drivers on the same Uber or Lyft car as long as they meet the requirements in their cities, including anything related to insurance, background checks, and minimum ages.
The Bottom Line
Uber and Lyft are both ride-hailing apps, and both offer innovative alternatives to taxis and long-established private transportation services. Both give passengers a convenient and innovative way to request and pay for rides through their smartphones.
The companies have considerable differences in their service areas, offerings, and culture. Because each company’s drivers are independent contractors with varying vehicle types and personalities, even if you consistently use the same service in the same city, each trip will be different.