How to price car service rides

Competitors’ prices tell you what customers will accept. They don’t tell you whether you make money at that price. Start by adding up what it costs to keep one vehicle on the road for a month:

• The vehicle payment or lease.
• Commercial insurance, often the biggest single line.
• Fuel, maintenance, tires and cleaning.
• Registration, permits and license fees.
• Driver pay, whether hourly, per trip or a share of the fare.
• Dispatch, phones, software and office costs, shared across the fleet.
• Card processing fees on the rides paid by card.

Divide by the miles and hours that vehicle works in a month. Then account for deadhead: the empty miles driving to a pickup and back from a drop-off. Take this example, with numbers made up for illustration. If a car costs $0.90 to run per mile driven, and only 60% of its miles carry a paying passenger, each paid mile costs $1.50 before driver pay or any profit. Prices set without counting empty miles are a common reason a busy car service still loses money.

Most operators use more than one of these, for example zones for local trips, flat rates for airports and hourly for events.

• Zone pricing: your area is divided into zones, with a fixed price for each zone-to-zone trip. It is easy to quote over the phone and customers like knowing the price in advance. The weak spot is trips that cross a zone line by one block.
• Per-mile pricing: a base fare plus a rate per mile, and sometimes per minute. It is fair on long and unusual trips. Set a minimum fare so short trips are still worth sending a car.
• Flat rates for set routes: a fixed price for trips you run all the time, such as the town center to the airport. These are often the trips customers compare, so make them competitive.
• Hourly or as-directed: a rate per hour with a minimum number of hours, for events, weddings and clients who want a car waiting all day.

Charge more for larger vehicles. An SUV or a van costs more to run and is worth more to the customer, so give each vehicle class its own rates instead of one price for every car.

Airport trips are usually flat-rated, because customers compare them directly and because a per-mile price makes traffic their problem. A few things set airport pricing apart:

• Airport fees and parking. Many airports charge commercial vehicles a pickup fee or require a permit. Build it into the rate or pass it on as a line item.
• Flight delays. Track the flight, give a set grace period after landing, and charge waiting time after that. Put the policy in writing when you confirm the booking.
• Meet and greet. Parking and meeting the passenger inside takes longer than a curbside pickup, so price it as an extra.

Small charges add up across a month, and leaving them off trains customers to expect them for free. Decide your policy for each and apply it every time:

• Waiting time after a grace period, by the minute or in blocks.
• Extra stops along the way.
• Tolls, passed through at cost.
• Rush-hour or late-night surcharges, if traffic or driver availability justifies them.
• Car seats, extra luggage or oversized items.
• Gratuity: say clearly whether it is included or not, especially on account work.

Regular accounts will ask for a better rate in return for volume. That is reasonable, but write the agreed rates down per account: the routes, any discount, hourly minimums, and which extras apply. When a call comes in under that account, whoever answers should apply those rates without having to remember a deal made a year ago.

The most expensive pricing problem in a small car service is inconsistency. One dispatcher rounds down to win the job, another forgets the airport fee, and a regular customer notices they paid two different prices for the same trip. Put your rates somewhere every dispatcher works from, ideally a system that calculates the price from the pickup and drop-off, so the quote at 3am matches the quote at 3pm.

Review your rates at least once a year, and whenever fuel or insurance costs change noticeably.