December 22, 2006

CuriousGeorge: Why are taxicabs so expensive? I'm trying to wrap my mind around the math that results in me paying $10 to go 3 miles.

Any cabbies here? I know the price is an issue of fuel, vehicle maintenance/insurance, licensing, down-time and other issues. But I still can't comprehend why the rate is so high. And since I'm on the subject, why is the price regulated, instead of allowing competitors to set prices? I live in Boise, Idaho, in case that helps.

  • Why not Ask A Cabbie?
  • Well, this is extremely rudimentary but I've always figured for a cabbie to make a basic $30K/year, working 5 days a week, he/she has to make $115 a day. Then there's cab maintenance, insurance, taxes, and whatnot to be taken care of, and maybe a good chunk funnels into the cab company (they have to run dispatch, advertising, capital expenses, etc). So yeah, $10 for 3 miles, but there's probably a lot of idle time spent not making any fare. Maybe the elasticity of the price (i.e. more business for lower price) might be a valid issue in some places.
  • I don't know why, but cabs in Buenos Aires were darn cheap. You could pretty much go anywhere you wanted to for five bucks or less. Of course, they use smaller, more fuel efficent cars than we do and as rolypolyman details above, the taxes and insurance are probably less than in the states. BTW, if you get a chance to go to Buenos Aires, go. It's a great city. Just wait for the Bush twins to leave.
  • danielo, it's been my generic observation that they vary from city to city. NYC cabs seems surprisingly cheap to me (compared to SF) Las Vegas is more expensive cabs than you'd think....
  • Well, beyond the issues of fuel, vehicle maintenance/insurance, licensing and down-time, there is the fact that the cabbie is trying to make a wage. It'd be interesting to know how much cabbies make, but I'd imagine that the busy hours are offset by the slow ones.
  • Hmm. I posted while others were posting. So yeah, me too.
  • Taxis usually have a basic flag rate plus a charge per mile so the average cost per mile for very short trips would be higher. And I don't think cabbies are making a killing either.
  • Apart from paying for the time when the driver is on duty but has no fare, there's also the barriers to entry that many cities have, whether licensing fees, or the study of local geography, or what have you. These barriers restrict supply (allowing the drivers to charge more), and the drivers have to recoup them too. Which is why some cities have expensive officially licensed cabs, and cheaper second-tier operators. The price is regulated because cab companies or driver co-ops have cut a deal with the city. It can be in their interests to do so. Forty years ago my late granddad was the president of the Auckland Taxi Co-operative. At that time we had a very regulated, restricted taxi regime. And every year, my granddad would go down to the district court to appear before the magistrate and argue against each application for a new license from aspiring drivers. Everyone owns a car, and thus is a potential taxi driver, so taxi operators need these barriers to maintain their margins.
  • Taxis are for suckers (wasn't always the case, but it is now).
  • Because people will pay that much.
  • If the only alternative is to rent a car to go a few miles, taxis make sense, especially if you're in a city you don't know well.
  • Taxis are pretty expensive here - the flag rate alone is 660 yen during the day, and just a quick inner Tokyo trip is usually 2,000 - 3,000 yen. All prices go up after midnight when the trains stop. Hence the popularity of all night Manga cafes and coffee shops - much cheaper to wait until the trains start again at 6am than catch a taxi home. For a city in which not many people have cars the reasons taxis are expensive is because they can be. Although sometimes you can be lucky enough to get a discount.
  • Or if you think about it: how much would you have paid the bus to go three miles. $2? And so would $30 other people. The taxi has only you. You have to factor in wage (not even minimum for many drivers), gas, the fee they pay to the taxi company, and the massive rent on taxi liscences (in the thousands per year in Toronto), waiting around time. When you think about this, $10 for 3 miles sounds really cheap. And if it isn't, why not take the bus? Or walk - it's only 3 miles. (If you are transporting heavy things, taxi is still cheaper than delivery from somewhere like Ikea).
  • Lara - in Toronto, I believe most make at or below minimum wage. They work extremely long hours - and because they are "self-employed" that's allowed. Our system is exascerbated by the criminal nature of taxi liscensing. They are suposed to be available to drivers upon application and a small fee, but they are inheritable and sellable (like for $35,000) like property, which means that we now have a group of taxi moguls who live off them like nobles off their estates. They lease the liscenses the drivers for thousands of dollars a year - then drivers have to provide their own cars, maitenence, everything, and still pay the massive costs for a liscense. The Toronto Star did an investigation on this years ago - a few articles reprinted here - I don't know if anything has changed.
  • I drove a taxi for a short time,,6 months. The companies here,Denver, you are a contract driver. You paid for your gas,and insurance and worked your own hours. But you leased the cab and their radios,well, now they have onboard computers, and it was pretty high dollar amount. I think I was leasing at $175 a week. So right off the bat you had to make good money just pay for expenses. You have to have good driving skills,of course, but you also must be able to read a map(some people are lost at that), you have to know the city very well and have a good memory. You need to know major attractions, common destinations and shortcuts or alternative routes. To stay driving a cab you need to know where and when to hangout, which taxi-que lines(waiting line are profitable. I thought I would like shuttling around the bar crowd, until some jerk puked in my cab,which grounded me for the evening,,you can't be picking up people in a freshly puked in taxi. I was an innercity delivery driver for twenty years in two different metroplitan cities, and driving a taxi was the hardest to make a reasonable profit from. After two cabbies were shot in the back of the heads, I decided six months was all I wanted to do.
  • The best tour of Vegas I got was from the cabbie on the way to the airport.
  • Here, you are charged an initial base fee, plus a fee for every eighth of a mile, plus a fee for each minute. You might expect the time fee to only count up when there's no mileage counting up, but not so. The time fee and the mileage fee both count up independently. I don't know how reverse counts on the mileage fee, but I have had a cab that missed a turn from a one way street, and upon realizing he missed it, reversed half a mile to the correct turn (with the way the streets are here, it was definitely cheaper for us for him to do that rather than try to find a new route).
  • (like for $35,000) Seems cheap to me. Want to buy one in Sydney? Run you AUD$300K plus. (Letters page, scroll down)