The way people get around is changing. Companies like Uber offer an alternative solution to the taxi industry in the form of ride-sharing or ride-hailing. So what is rideshare?
- What is Rideshare?
- Rideshare vs. Ridehail
- Rideshare Companies
- Rideshare vs. Taxi
- Pros and Cons
- Taxes and Deductions
What is Lyft? What is Uber? Isn’t that just a taxi?
The landscape of private transportation changed dramatically when rideshare company Uber first launched their services. They offered a premium black car service as an alternative to the traditional taxi ride.
Historically, rideshare was essentially carpooling where the passenger often covered half of the cost of the trip. Both the driver and rider were heading in the same direction and the rider would help subsidize the cost of the trip
Rideshare: an arrangement between a vehicle owner and a person who enters a pickup location and destination through an app or website, for a fee.
Rideshare vs ridehailing
The term “rideshare” is frequently replaced with the word “ridehail”. This can be misleading, as “hailing” a ride usually means flagging down a taxi from the side of the road.
Companies like Lyft, Uber and TappCar don’t allow for hailing and drivers are often prohibited from accepting hails by law. Otherwise, the service would be classified as a taxi service.
Instead, riders must “hail” a driver from the rideshare app of choice on their smartphone.
How Rideshare Works
Rideshare platforms use a smartphone app which connects drivers with passengers in the area. The driver logs into the app to set their status to online, indicating that they are available to accept a ride.
Once the customer has selected a destination and requested the pick up, the driver will get a ping and has the choice to accept or decline the ride.
Once the ride has been accepted and the passenger has been picked up, the driver proceeds to the riders destination.
When the driver reaches the end destination, the trip will have concluded and the passenger will exit the vehicle.
Fare payments are generated in app so there is no transfer of funds between the driver and the passenger.
The app also allows both drivers and passengers to rate each other. This rating system helps maintain a quality level of service and respect between both driver and riders.
Uber and Lyft offer services called UberPool and LyftLine. These services are meant for riders who wish to take a more economical ride to their destination.
The driver will pick up passengers and start heading towards their destination. If another rider requests a ride and the destination is on the drivers current route, the driver can pick up the second passenger and drop them off on the way.
This makes the ride cheaper for the riders and more efficient for the driver.
Rideshare Companies in Canada
Companies that provide ridesharing services are called “transportation network companies”. They provide users with a platform which connects riders and drivers. The big players in the Canadian market are Uber and Lyft, the other remaining platforms (with the exception of RideCo and TappCar) are operating mainly in Toronto and the GTA.
“Drive when you want, make what you need”
Uber was the first successful company to launch in Canada, starting in the Toronto market in 2014.
They are the largest rideshare app in Canada and in the world. In Canada, they operates in Ontario, Quebec and Alberta.
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“Make Money on the Road”
Lyft is Uber’s major competitor in the United States and operates in almost all of the same markets.
Lyft expanded outside the US borders for the first time in late 2017 when they launched in Toronto, Canada. It is currently the only Canadian city Lyft operates in.
“Affordable ridesharing solution in Alberta, Canada”
TappCar is the only competitor for Uber in Alberta, currently only operating in Edmonton and Calgary.
They offer three service types, TappCar, TappCar Van, and TappCar Premium.
“A Ride for Every Occasion”
InstaRyde originally launched before Uber in Toronto but the platform wasn’t successful. They moved to Austin, Texas before returning to Toronto in 2017.
The company boasts having the lowest commission rate on fares, taking only $0.99 from the total amount (+ a payment processing fee).
“Our Drivers Earn More”
Facedrive launched in the fall of 2017 and was the first competitor for Uber in Toronto. The app allows riders to choose a gas, hybrid, or electric vehicle and uses a portion of its proceeds to plant trees to offset greenhouse gas emissions.
Facedrive is also the first company to offer drivers shares in the business after driving with them for a certain period of time.
“Drive with RideCo Earn up to 1.5X More than Uber-only Drivers!
RideCo operates only in Kitchener-Waterloo and offers services like UberPool, where a driver picks up often more than one passenger heading along the same route and they share the cost of the trip.
They set themselves apart from other rideshare companies by paying drivers for long pickups and even a standby fee during peak times.
“Rides at the Tap of a Button”
Taxify is advertising a 2018 launch date in Toronto and will become the fifth company to offer rideshare services in Toronto.
Taxify is the only rideshare app in Canada to allow riders to pay the driver in cash.
Rideshare vs. Taxi
Although similar in terms of basic business model, there are many differences between the taxi industry and the rideshare industry. Both sides move people from destination A to destination B, but both sides take a different approach to solving the problem.
Since rideshare vehicles are generally owned by the driver, they blend in pretty well with the other cars on the street. The only identifier on the vehicle is usually a sticker in the rear windshield or in Lyft’s case, a light up display on the dashboard.
Rideshare operations are lightly regulated, the sign up process usually requires back up checks, vehicle safety certificates, and some markets require drivers to hold a specific license. There is no required training programs for drivers, although some companies require you to attend an orientation before your first trip.
Rideshare platforms like Uber operate as the “dispatcher” connecting riders and drivers via a smartphone app. Everything but the ride itself takes place in the digital realm on a trip. The rider requests the ride on their smartphone, and payment is made and remitted through the companies technology
Taxi drivers usually work for the taxi company and often work in set shifts. For the most part, drivers do not own the vehicles they use for work. The vehicles are branded with the company logo and have a beacon on the top of the car which indicates that the vehicle is available when the light is on.
The taxi industry it heavily regulated by cities and drivers must be trained and have clean background checks. Taxis require licenses from the city that are often limited in supply and very expensive.
Working with a taxi company means working with a live dispatch team. The dispatch team coordinate rides and help drivers with any issues they may have on the road. Riders will either call in their pick up request or they will “hail” a driver from the side of the street
Taxi drivers benefit from peak hours, such as rush hour or at bar closing times, when rideshare services can often be double or triple the price.
The Pros and Cons of the Rideshare Industry
Working as a rideshare driver is a really great way to either make some extra income, or to make a full time income. Rideshare offers a flexible time schedule and the opportunity to be your own boss. Just like with anything else, rideshare also has its share of downsides.
Work when you want. With rideshare platforms, you can choose the time you want to work.
No Cash in Car. Rideshare payments are all made in-app, although you may occasionally receive a cash tip.
Surge pricing. When rides are in high demand, prices go up, when prices go up, drivers earn more.
Low overhead costs. Operating expenses include gas,maintenance, and wear-and-tear.
Driver Ratings. Riders will submit a rating at the end of the trip, a bad rating could lead to deactivation.
Taxes become complicated. Filing your taxes as a rideshare becomes challenging as you are now working as a contractor.
Annoying riders. The late night bar crowd, the backseat eater, the chatterbox, and the crazies!
Difficult to contact support. Rideshare companies are can sometimes be difficult to contact.
How do Taxes and Deductions Work?
As a rideshare driver you are an independent contractor and not a employee, which means you will be responsible for paying your own statutory deductions like EI, CPP, and federal and provincial income tax.
As you are technically a business, that also means that you can deduct expenses to lower your taxable income, and therefore pay less taxes.
Some expenses you can deduct are:
- License and registrations fees
- Vehicle Maintenance & repair costs
- Car cleaning supplies
- Car washes
- Cell phone and plan
Typically you can only deduct a portion of these expenses that are directly related to your time working as a rideshare driver. This is why it is really important to keep track of your kilometres.
For instance, if you drive 20,000 km in a year and 5,000 km were while driving rideshare, you would typically only deduct 25% of all your gas, repairs
You should consult an accountant to help understand what expenses you can deduct and how you prepare your taxes, or use a software like H&R block to do the calculations for you.
You will need an HST number as a rideshare driver, which you get from the CRA. HST is charged on every fare and that extra 13% is included in your take home so you will then need to remit that HST to the CRA.
However, you can deduct the HST from your business expenses and you won’t have to hand it all over to the government.
For example if you collected $1,000 in HST from rideshare fares and you paid $400 HST from expenses, you will only have to give the CRA $600.
Again, it is a bit more complicated then that, especially if you have another job so be sure to talk to an accountant or use a tax filing software that will sort it all out for you.
More info on Rideshare Taxes
Canadian Rideshare Taxes: Deductions and Expenses for Uber Drivers
Canadian Rideshare Tax Returns: GST, HST, QST for Uber Drivers
Canadian Rideshare Taxes: Uber Drivers and Income Taxes
Insurance for Rideshare Drivers
Insurance has been changing since the launch of rideshare companies in Canada. Each province has its own regulations on insurance and some companies have now offered rideshare endorsements for drivers on their policies.
As required by new laws, all the major rideshare companies now have commercial liability policies. These policies cover both riders and drivers in the event of an accident or injury.
There is some debate about what happens when the rideshare companies pay losses to a passenger or other party for damages. As rideshare drivers are independent contractors, the contract they have with companies like Uber typically contain an indemnity clause, whereby Uber could come after the driver to recover any losses they paid out. There hasn’t been a history of this action yet but the rideshare landscape is still new and evolving
More info on Rideshare Insurance
Lyft and Uber Insurance: Rideshare Requirements & Policy in Ontario
Rideshare Safety Comes First
Despite the looser vehicle guidelines and requirements to become a driver, it is generally safer to be a rideshare driver and rider. This is because you typically don’t deal with cash so there is less of a concern over theft, though there have been reported cases of robberies typically where the drivers phone is stolen. Given payment is completed in-app, there is also no concern that the rider will jump out of the vehicle without paying.
When a trip is placed, the rider can see the drivers make, model, and license plate of the vehicle. The drivers name and picture are displayed in the app, this has proven helpful when crimes are reported.
Rides are tracked in real time with GPS and a receipt is emailed to the rider immediately after the trip. Both the rider and driver can see the date, time, pick-up/drop-off location and the route taken in the app after the trip is completed.
Here is quick video from RideGuru explaining the basics of rideshare.
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