Driving passengers with Lyft can be a source of decent income. But exactly how much? This is a constant topic of debate among gig drivers! Here we sketch out ways to calculate how much Lyft drivers earn in Canada.
Lyft pays drivers on a trip-by-trip basis. Each trip’s payment is a sum of 3 parts:
Fare: The driver receives a ride fare which factors in a base rate + time + distance.
Bonuses: Lyft sometimes offers drivers extra amounts (in real time or scheduled) for specific busy times & places – Personal Power Zones, Ride Streaks, Guarantees, and Ride Challenges.
Tips: Many Lyft passengers do not tip. But when they do, Lyft passes on 100% to the driver.
So: Lyft pays its drivers Fare + Bonus(es) + Tip for each trip.
Income Per Hour
For convenience, drivers often use a quick method of measuring income in dollars per hour. This is computed by dividing the total amount paid by Lyft in a single day/week by the number of hours online (logged into the app).
Example: (Day) Lyft pays me $135. I was online for 6.25 hours. So I “earned” $21.60/hour. (Week) Lyft pays me $955. I was online for 47.5 hours. So I “earned” $20.11/hour.
True “Work-Hours”: In reality, some online time is often used for non-work activities (e.g. sitting reading email, doing a small errand, or posting in the Gig Café). In the above example (where I earned $135 on one day), let’s suppose I used about 30 minutes between rides for various other tasks. And I consumed another 30 minutes going to/from my regular starting location (the gig equivalent of commuting). So even though I was online for 6.25 hours, I was actually “working” for only 5.25 hours. We think this is a more realistic way to measure “work-hours”. In this case, I actually earned $25.71/hour.
Of course, this method oversimplifies the estimation of income. For one thing, it does not factor in expenses. Nevertheless, calculating average “income per hour” is a useful way to understand comparative earning rates.
To arrive at net (actual) income, I must subtract all gig-related expenses from my total Lyft income. These expenses fall into 4 general categories:
Operational Expenses: Costs directly tied to my Lyft mileage. In other words, the more I drive, the more I pay. This is mainly fuel. (Remember, driving passengers involves a lot more kilometers than delivering meals or groceries.) I probably should allocate 15-20% of what Lyft pays me to cover fuel (unless I drive a hybrid!)
Fixed “Overhead” Expenses: Costs which remain the same regardless of how many kilometers I drive (e.g. monthly data plan, annual vehicle registration, private car insurance).
One-time Expenses: Costs such as purchase of a smartphone or a set of winter tires. Also, there will be car repairs along the way. And if I get a ticket (or even worse, have an accident), I must include this as a one-time expense.
Depreciation: The more I drive my car, the less it is worth. I must be realistic about this significant hidden expense.
Business/Personal Balance. It is essential to analyze my car’s total kilometers, and determine what percentage is for gig driving and what percentage is for personal use. Assuming the balance is 50/50, then all amounts for fixed expenses, one-time expenses and depreciation should be reduced by 50% before subtracting them from my Lyft income.
One additional complication: Lyft collects GST/HST from passengers for each ride, and includes it in the total amount paid to the driver. This must eventually be turned over to the government – usually once a year. (For this purpose, each driver must obtain a business registration number from the CRA.)
For example, when Lyft pays $500 into my bank account, not all of it is mine to keep! Perhaps $460 is mine, and the other $40 is GST/HST which I owe Revenue Canada. (The tax percentage varies from province to province.)
(Something to remember: I don’t have to pay the government 100% of the GST/HST which I received from Lyft. There is a formula whereby I can keep a percentage of it, to offset the GST/HST on my business expenses.)
A Sample Income Calculation
Let’s apply all of the above factors to calculate the net (actual) income of an average part-time Lyft driver.
I drive about 20 “work-hours”/week
Lyft pays me $500
$460 is my own income ($40 is GST/HST)
I drive the same work-hours for 50 weeks/year
Lyft pays me 50 x $500 = $25,000
Subtract GST/HST 50 x $40 = $2,000
My total annual Lyft income = $23,000
I use my car 50/50 for Lyft/personal
Fuel: 15% of my Lyft income = $3,450/year
Fixed Expenses (monthly & annual): Average $400/month x 50% = $200/month = $2,400/year
Depreciation: I bought my car for $15,000. I will sell it in 3 years for $6,000. Depreciation is $9,000 ($3,000/year) x 50% = $1,500/year
My total annual gig-related expense = $3,450 + $2,400 + $500 + $1,500 = $7,850
My net annual Lyft income (total income minus expense) = $23,000 – $7,850 = $15,150
At tax time, I can write off many of my expenses, reducing my income tax:
Without deducting expenses, if my Lyft income is $23,000, my income tax might be $4,000.
But by smartly deducting expenses, I might reduce my taxable income to $15,150, and then pay only $3,000 income tax.
That’s a tax saving of $1,000 – which theoretically I can then “add” to my net income.
My final net annual Lyft income (for 20 work-hours/week) = $15,150 + $1,000 = $16,150
Is the Hourly Rate Better Than Minimum Wage?
All of these computations may be a bit oversimplified. But if they are accurate for my situation, here is how I would calculate my actual hourly income (after covering all gig-related expenses):
I drive 20 work-hours/week x 50 weeks = 1,000 hours
My final net income (before paying income tax) = $16,150
My average income = $16.15/hour (BETTER THAN MINIMUM WAGE)
Of course, in every situation there may be some variables which increase/decrease this average hourly amount. Each driver must do their own calculations based on their own realities.
However, at Gig Drivers of Canada, we believe many Lyft drivers can earn MORE than $16.15/hour. As time goes by, you will gain experience and benefit from useful strategies in the Gigapedia and Gig Café, and your hourly income will increase.
Conclusion: Should I Drive for Lyft?
If you can get a full-time job somewhere for $25/hour and you really need the money, you would probably be wise to take that job!
If you can only get a job at around minimum wage (doing cleaning work, stocking shelves at a grocery store, or working in a fast-food restaurant), you should seriously consider driving with Lyft.
If you prefer the security of salaried employment, but are able to do a part-time job on the side – driving with Lyft may be perfect for you!
By the way, the Gig Café (11 Facebook Groups) is a GREAT place to learn how other drivers across Canada make more money driving passengers with Lyft – including a group specifically for Lyft drivers.
Please remember that Lyft’s payments vary slightly from one province to another, and even from one city to another. So it is important that you study the Lyft Website for specific information about the location where you plan to drive.
Ready to Start?
Once you are confident Lyft may be a good fit for you, then you might as well go ahead and take the next step: SIGN UP! It only takes a few minutes to set up your Lyft Account, providing basic information to establish your driver profile.
Don’t worry – Lyft does not require fees or deposits, and there are no binding obligations or legal traps. At any point along the way, you can pause to get answers to your questions. But if you’re ready to move forward, the sooner you sign up and launch the registration process, the sooner you’ll be out on the road earning money.
(Note: When you click the link to go to Lyft’s sign-up page, the sign-up address will automatically include a Referral Code DOUG36244. This tells Lyft you were referred by Gig Drivers of Canada. We would be grateful if you will use that sign-up page (or enter the Referral Code in the sign-up box), so Gig Drivers can receive recognition and a small referral reward to help cover our expenses. Thank you very much!)
PLEASE HELP US IMPROVE THE GIGAPEDIA by liking/disliking this article (below). And we invite you to contribute comments (at the bottom under Leave a Reply) — correcting mistakes or providing additional information. GigDrivers.ca will use this feedback to constantly update the Gigapedia. THANK YOU!