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Uber vs. Taxi: Which Is Cheaper?

Last updated: June 19, 2019
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We have seen a huge rise over the last decade in ride-hailing apps like Uber and Lyft. On-demand rides, once a service provided only by taxi companies, quickly became something almost anyone could book instantly no matter where they were.

But taxi companies haven’t gone anywhere. Due to the rise of Uber, they’ve innovated and gotten better than ever before. They also have maintained a war against Uber in many cities, one that is more complicated than a lot of people realize.

In this article we’ll look at the rise of Uber, the roots of the Uber vs. taxi debate, and examine how some cities have chosen to handle this confrontation. We’ll also dive into more practical questions, like which service is cheaper, which cars are more reliable, and more.

The Rise of Uber

When the Uber car service began in 2009, it was launched almost as a luxury service. Instead of hailing a cab, the new app made it so a customer could book a black car, driven by a professional driver, all right from their phone. For people who lived in major cities and wanted to ride in style, it was a cool service and showed the promise of what smart phones could do.

While Uber even at that time was viewed as a possible disruptor of the taxi industry, it was their introduction of their UberX service that totally changed the game. The service allowed anyone with a car 10 years old or newer to drive for Uber, as long as they had a safe driving record and could pass a background test.

With the new service, Uber made it so almost any newer car on the road could become an on-demand taxi. Traditional taxi service began to drop off as more and more people grew comfortable with the idea of taking an Uber ride, and as Uber didn’t have to pay cities to operate — like taxis usually do — they were able to quickly offer much more competitive prices.

While the company was founded in San Francisco, UberX made it so the app could really work anywhere there were cars and people who needed rides. The service grew so fast it eventually hopped over American borders and is now available all over the world. This is another bonus for Uber users — whether you’re in Boston or London, you can use one app to quickly find rides.

But it’s led to some sticky situations with traditional taxi companies, and the cities that got revenue from those taxi companies.

How Cities Are Handling the Uber vs. Taxi Standoff

jesse bowser 6060 unsplashWhen trying to understand the battle that has been waged between Uber and traditional taxi services, it’s important to understand the entire context of the situation. This battle has often been framed as “new exciting business takes on stodgy, old company that won’t innovate,” but there is a bit more going on here, and taxi companies have some very legitimate qualms regarding fairness.

Taxi Medallions and Cities Losing Revenue

In most cities in this country, taxis are able to operate only if they are licensed by the city. These operating licenses are called “taxi medallions” and can be purchased or rented from the city. They aren’t typically cheap, either — in New York City, for example, a medallion to operate a yellow cab in the city cost over $1 million in 2013. (That since has dropped to around $200,000 — still not a small amount of money.)

These medallions brought in major revenue for cities and allowed them to control the amount of taxis on their street. If cities wanted to push people toward public transit, for example, or were worried about traffic congestion, they might limit the number of new medallions that went out in a given year.

When Uber came on the scene, however, they operated in a hybrid space between “private car” and “taxi” and thus didn’t feel the need to pay for any medallion of any sort. Many cities were fine with Uber when they were really more of a private car service, with people booking black livery vehicles.

When UberX came on the scene, however, taxis were being outcompeted, and cities no longer had any control on the number of taxis on the road. Taxis not only struggled to compete with pricing, but they also couldn’t match the workforce. Medallions were so expensive, and the only thing an UberX driver needed to get on the road was a working car and the ability to turn a smartphone on. Uber drivers paid some small fees to the company, but that was it.

On top of that, another issue facing taxi companies was that the workforce that may have traditionally been local taxi drivers were now getting started with Uber instead.

Cities That Took a Stand Against Uber

Several cities in the United States and abroad have taken a stand against Uber. This has annoyed customers who like to use Uber, and Uber drivers, but for taxi companies who want a fair shake, it’s been a blessing.

Austin has been locked in a several year battle with Uber, though the app recently became available statewide as a part of a compromise between the city of Austin and the app. New York City has flirted with Uber bans, as has London in the UK.

In most of these instances, Uber has had to negotiate some sort of revenue sharing deal or fleet limiting deal with the city in order to operate there. That doesn’t really help the taxi companies, but for the city governments, it allows them to have some more control over the situation.

Uber vs. Taxi: Which Service Is Cheaper?

antonio dicaterina 738197 unsplashSo we’ve got a better understanding of the history of Uber vs. taxi services, but if you’re like any other traveling person you’ll just want to know: Which is cheaper, cab fares or Uber fares?

Like all things, it all depends. Taxi fare is usually set by a minimum fare, which might include any city taxes or fees. Riders are then charged by the mile or, if sitting in traffic, by idle time.

Uber fares used to work similarly, but as the app has gotten better, they now operate where Uber will basically estimate the fare based on your trip information (as it knows how far you have to go), then lock in that price before you even leave.

While riders do like that they know what they’re going to pay ahead of time, research shows that taxis are often the more affordable option.

Of course this is all dependent on cities, but according to research from Consumer Reports, taxis are frequently cheaper, especially on shorter trips (defined as under $35).

Still, those prices will be close, and for most people, the ease of booking an Uber will offset the dollar or two you might save on a short trip with a taxi.

The biggest variable in pricing is surge pricing.

Surge Pricing

Surge pricing is Uber’s way of handling either low supply of drivers or a high demand of riders. If the roads are jam-packed and Uber is struggling to get enough drivers on the road, they will enact surge pricing to encourage drivers to get out there (and also to make money during periods when lots of people want to travel).

Surges are not small amounts, either. During periods of very high demand, say after a major sporting event, surge pricing can result in Uber charges that are beyond double or even triple the normal fee.

In most cities, riding a taxi cab will come with a set fare rate, no matter how busy the roads are, how much it’s raining, etc. While some cities may charge a small fee during rush hour, they won’t come anywhere close to what is charged during peak surge pricing times.

Uber does tend to be cheaper for many trips, especially longer trips. But during periods of surge pricing, taxis are more affordable by a long shot.

Apps to Help You Find the Cheaper Fare

Again, this can all change based on where you are and when you want to ride, so it’s hard to pinpoint exactly which service will be cheaper.

Luckily, there are now apps for that.

RideGuru and What’s The Fare, both available on iPhone and Android, are two apps that can quickly let you evaluate Uber pricing and taxi pricing for a given trip and make an informed decision about which ride will be cheaper for you.

You can also use this handy Uber calculator to estimate the cost of your next trip.

Other Differentiators

While pricing can be close, one way that rideshare services do stand out is their ability to process payment through the app, letting you get dropped off at your destination, hop out of the car, and not worry about finding cash or fumbling for a credit card. The Uber app also allows business profiles and personal profiles, so you can easily track business expenses and pay with a different credit card with the touch of a button.

While many cab companies now accept credit card payment (and some ambitious taxi companies are adding PayPal, Apple Pay, and other forms of online payment to try and compete), for many you still have to swipe the card and negotiate payment when the ride is over. That takes time.

Uber vs. Taxi: Vehicles

taton moise 476736 unsplashWhile Uber does like to promote the idea that its fleet is newer, sleeker, and more up-to-date than traditional taxi services, the fact is that most taxis will be better maintained than Uber cars, especially UberX cars.

UberX cars must adhere to rules, like being newer than 10 years old and having regular vehicle inspections, but they are owned, operated, and maintained by individual owners.

Those cars will not have the dedicated maintenance support that comes with transportation network companies. For major taxi companies, there will often be a central hub with a certain number of cars, all of which are operated and maintained by the company.

To score a point for Uber, though, Uber drivers are pushed to keep their vehicles in excellent shape — and to provide excellent customer service — by the app’s rating system. If their vehicle is in bad shape, a rider can leave a negative review, which will most likely be looked into by the company.

Cab drivers will have more support, but if they don’t take care of the vehicle, many cab companies don’t have a quick rating system to let the company know.

Uber vs. Taxi: Find the Right Choice for You

There is no easy answer to the Uber vs. taxi debate. It’s a complicated issue and raises questions about innovation, city governance, fair business practices, and more. Even with a simple question — “Which is cheaper?” — there is no simple answer.

But you can still make an informed choice. Understanding how taxi and Uber pricing works, how the surge pricing model can affect prices, and how Ubers and taxis operate will allow you to make the most informed decision for yourself.

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