Advertisement

Lower pay and higher costs: The downside of Lyft’s car rental program

L.A. Times Today airs Monday through Friday at 7 p.m. and 10 p.m. on Spectrum News 1.

It was an advertisement for Lyft that convinced Chris Berry to leave his small town and head to Nashville.

He could make a comfortable living driving for the ride-hailing service, the Craigslist post read, and Lyft would even rent him a car that met the company’s specs.

Advertisement

So Berry, who was a civilian contractor in the Iraq war and had struggled to find steady work since being laid off from an oil field in 2013, packed his bags and sold his 1998 Toyota Avalon to fund the move across the state.

Four months later, the car he rented from Lyft had become more than his source of income — it was also his home. And Lyft was asking for it back.

When his planned Nashville accommodation fell through, Berry resorted to living out of the 2017 Nissan Altima he rented from Lyft for $240 a week. Despite driving 20 to 60 hours a week and giving an average of 45 rides, Berry couldn’t afford to rent an apartment on top of what he owed Lyft.

In April, the car was towed after Berry parked overnight in a spot that blocked a business. It was hauled to an airport car rental lot operated by Hertz — one of Lyft’s rental partners. It took Berry two days to retrieve the vehicle, sleeping overnight in the airport terminal. Strapped for cash after missing a few days of driving, he couldn’t reimburse Lyft for the $113 towing charge and the company demanded he return the car immediately.

“They put me in a very bad position,” Berry said. “I'm now going to be homeless with no vehicle. And I haven’t even been able to make enough money [with Lyft] to get ahead.”

Lyft and its rival Uber have struggled to retain enough drivers to meet demand. As the companies have sought to expand their fleets, they have tried to recruit workers whose vehicles wouldn’t pass company requirements — or those who don’t have a car at all. Both offer short-term car rental agreements to a range of people including those who might have poor credit or are desperately in need of a flexible stream of income.

According to regulatory filings, Lyft has “tens of thousands” of cars available to drivers in 30 cities across the U.S. for short-term rental. The company says those in its Express Drive program have earned more than $1 billion since its launch in 2016. As of March 2019, “more than 180,000 people” had rented a car through Express Drive, and two-thirds of those drivers did not originally have a car that qualified, according to a blog post written by Chief Operating Officer Jon McNeill.

McNeill wrote that the company is expanding the program, hoping to increase driver earnings by offering fuel-efficient cars.

“Someone wanting to drive with Lyft can rent a car for as little as a week and return it, if things didn’t work out,” Lyft spokesman Eric Smith said in a statement. “We’re proud to be able to provide opportunities to those who need them most.”

However, in interviews with The Times, some struggling drivers who rent through Lyft’s Express Drive program say it has made it difficult to get back on their feet. Documents show those drivers are paid less per mile than Lyft drivers who use their own vehicles or cars leased through dealerships. That makes it harder to offset Lyft’s rental and insurance payments in some markets, which start at $219 a week and rise as high as $479 a week in New York. By comparison, ride-hailing drivers in some markets who rent a comparable car from a dealership can pay less than $160 a week, including the cost of insurance.

Lyft also imposes unique restrictions on drivers who rent cars through its Express Drive program, mandating they provide 20 rides a week to keep the car and prohibiting them from making money using their vehicles to work for other services, according to six drivers and documents reviewed by The Times.

Lyft blames its higher rental prices and lower mileage rates on the cost of insurance. The restrictions stem from the policies of Lyft’s rental car partners: Hertz, Avis and Flexdrive, the company says.

Increasing revenue and ride bookings is especially pressing for Uber and Lyft, which are now publicly traded. Neither company expects to turn a profit in the short term, which means investors will pay close attention to growth.

Lyft operates its Express Drive program at a loss but says in regulatory filings that it’s a key way to increase its supply of drivers.

Advertisement

Narrow margins

After his bid to start a business flopped and he had a falling out with his roommate, Sinakhone Keodara started sleeping in the car he rents from Lyft.

On nights with plenty of passengers, he could afford $25 to sleep in a Korean spa in Los Angeles that allowed overnight guests. There, he said, he would see other Uber and Lyft drivers entering the spa after business hours with the same look of shame on their face.

But nights when he had $25 to spare were rare, Keodara said, because he was paying close to $1,000 a month to rent the car and $60 a day for gas.

Until the weekly rental fee is paid, Lyft puts a hold on drivers’ accounts, preventing them from withdrawing any income. Keodara said he at times had to overdraw his bank account to fill the tank. After getting a second job, Keodara now rents a room in a boardinghouse.

Uber and Lyft drivers participate in a one-day strike to protest for better wages and working conditions near Los Angeles International Airport on Wednesday, May 8, 2019.
Uber and Lyft drivers participate in a one-day strike to protest for better wages and working conditions near Los Angeles International Airport on Wednesday, May 8, 2019. (Genaro Molina / Los Angeles Times)

Across California, homelessness is a reality for many workers. Some consider themselves fortunate to have a car to sleep in.

In Los Angeles County, more than 15,000 people sleep in their vehicles, according to Safe Parking LA — a program that secures lots for people living out of their vehicles. More than a fifth of the 250 applicants each quarter are under 40 and working full time, including those who drive for Uber and Lyft, said program director Emily Kantrim.

Kantrim said some people choose to rent a car to drive for Uber and Lyft because a vehicle can serve as shelter. But that’s a temporary fix, she said, and the high cost of renting the car makes it hard for people to find a more permanent solution.

“Is this actually going to propel someone to move forward in their lives?” Kantrim said. “These solutions with Uber and Lyft are not pathways forward.”

For Keodara and others like him, the fees charged by Lyft are hard to offset because the company pays drivers who rent cars through its Express Drive program less than all other U.S. drivers, according to emails The Times reviewed. The exact difference in pay varies from market to market, but rates range from 5 cents to more than 20 cents less per mile for drivers who rent through Lyft.

Though Lyft’s website tells drivers their insurance is “covered” by their weekly rental payments, the company told The Times the discrepancy in mileage rates also reflects the cost of insurance.

That difference can add up. Eve, a full-time Lyft driver in Los Angeles who asked that her last name not be used for fear of being deactivated, at first found Express Drive to be a good option compared with using her own vehicle. When she first signed up, the pay was on par with what she made using her own car. But in November, the company cut per-mile rates by 10 cents. Driving 50 to 60 hours a week, she makes about $100 less than she did before the company lowered rates.

Advertisement

In April, Lyft slashed per-mile rates for Express Drive workers to 55 cents a mile in San Diego and some other markets — 3 cents lower than the benchmark defined by the IRS as the cost of operating a car for business purposes. In San Francisco, Lyft cut Express Drive pay by 10 cents a mile on May 13. In parts of the Bay Area, the per-mile price ranges from 38 cents to 46 cents. Lyft drivers who use their own cars in the area earn 60 cents to 68 cents a mile.

The company contends that the IRS calculation isn’t an appropriate barometer for drivers’ costs because they are paid a combination of a base rate and a per-minute rate, in addition to the per-mile rate.

“On average, Express Drivers renters earn over $20 per hour,” a Lyft spokesman said in a statement.

Restrictions and requirements

When the program launched in 2016, Lyft allowed drivers to use the cars as much as they liked when they weren’t working for the service. As of May 13, the rental agreement for drivers who rented a car through Lyft’s partner Flexdrive now covers 750 personal miles a week in the Bay Area. Drivers rack up an average of 450 personal miles a week, according to the company.

In emails to drivers, the company has attributed the changes to “rising costs” that “have made Express Drive a more expensive program for us and our partners to operate at a break-even price.”

“We know Express Drive is more than a rental — it’s how you pay the bills,” one email reads. “Our hope is that as operating costs go down in the future, we can pass the savings back to you.”

It’s an expensive program to operate and, in its original form, brought in negligible revenue in 2016 and 2017. Lyft, which last year lost $911 million on $2.2 billion in revenue, said in regulatory filings its overall losses may force the company to “update the pricing methodologies related to our Express Drive program which could increase prices, and in turn adversely affect our ability to attract and retain qualified drivers and riders.”

Lyft points to its Express Drive program — with rentals of as little as seven days — as an example of the flexibility of its platform. But those who participate in the program must abide by additional rules.

Drivers who rent a car through Lyft cannot drive for any other gig economy company, an option many contractors rely on to make ends meet. Lyft also mandates drivers perform at least 20 rides a week. That’s counter to the drive “whenever you want” language on Lyft’s website, and to the arguments ride-hailing companies have used to justify classifying drivers as independent contractors rather than employees.

Many of the restrictions Lyft places on Express Drive workers run counter to a recent National Labor Relations Board opinion, which concluded a group of Uber drivers were contractors because they were able to drive for competitors and there were no other restrictions on their use of their car or penalties for not driving for Uber. “Together, these three features of the Uber system imbued drivers with significant control over their earnings,” the opinion reads.

Lyft says the restrictions come from rental car partners and are influenced by insurance requirements. However, Uber drivers who rent a car through Hertz don’t have any minimum ride requirements, though they are allowed to drive for only one service at a time, according to an Uber representative. Hertz declined to comment and said the terms of partner agreements were confidential.

Uber sold its auto-leasing program, Xchange, to car-rental start-up Fair in 2017 after losing about $9,000 a car, according to the Wall Street Journal. Uber now offers short-term leasing through partners Fair, Hertz and Getaround.

Renting a car to drive for Uber through Fair starts at an average of $130 a week if drivers expect to work for a month, and $185 a week with an option to renew if not.

Still, ride-hailing rental rates exceed those from dealerships.

Jos Cashon, a student and an L.A. Uber and Lyft driver who also occasionally sleeps in her car, said she pays $340 a month for a 2010 Prius financed directly through Toyota. (Insurance costs an extra $200.)

“I don’t know how people are surviving on that,” Cashon said of the cost of renting a car through Lyft.

At 1 a.m. Jos Cashon, 28, works on social media to promote a one-day strike against Uber and Lyft before bedding down for the night in her car.
At 1 a.m. Jos Cashon, 28, works on social media to promote a one-day strike against Uber and Lyft before bedding down for the night in her car. (Genaro Molina / Los Angeles Times)

To help drivers cut down on rental costs, both Uber and Lyft offer bonuses for performing a certain number of rides. Until recently, Lyft’s bonuses came with many conditions — some rewarding drivers for giving more rides when demand is high. In the past, for instance, Lyft reduced weekly rental payments by $85 if a driver gave 25 rides during peak hours, had a 90% acceptance rate and completed 75 rides in total.

The company did away with those extra conditions because drivers complained they were too complex.

Bonuses now include reductions in rental payments of $75 if a driver does 85 rides and $200 if they manage to hit 135 rides in a week in some markets.

Drivers who rent through Lyft also qualify for the same bonuses personal vehicle drivers do, the company said.

Fair covers rental payments if a driver does 70 trips a week and offers a $305 bonus if drivers complete 120 rides in a week. Uber drivers renting from Hertz also get a $305 bonus if they complete 120 rides each week.

Jason Howard, a full-time driver in Las Vegas who was asked by Lyft to speak to The Times in response to requests for comment, said the program has helped him pay off personal debt. Howard said he earns an average of $900 a week, but cautioned that Express Drive is designed for people who are able to work full time and put in the hours to qualify for the bonuses of $140 or more, like those available in Las Vegas.

“It’s not super-easy to go out and get 95 rides every week,” Howard said of the number of rides needed to qualify for the bonus. “There’s a lot of people that use Lyft’s Express Drive program to get a car because you put $250 down and now you’ve got a car. If you’re only doing 30 to 40 rides per week, you’re not going to make any money ’cause that’s not what the program is really designed for.”

Lyft requires drivers to provide at least 20 rides a week to keep the car. It may not seem like much, but for those who rely on the car for a place to sleep, the threat of losing their roof because of illness or a family emergency is daunting.

Soon after he started driving for Lyft, Berry returned to his hometown to tie up loose ends and fell ill. He wound up extending his trip by several days.

Advertisement

“The first thing I get is browbeat because I don’t have 20 rides” that week, Berry said. “I mean, you’re talking a barrage of emails.”

Berry hasn’t yet returned the car to Lyft. He’s looking into driving for Uber through Fair, or renting a cheaper, older car to drive for UberEats. But first he needs $500 — enough to cover the deposit for another vehicle that can serve as his workplace and residence.

Advertisement
Advertisement