Those who have traveled to New York City know that the streets are teeming with yellow cabs. These ubiquitous vehicles are constantly patrolling looking for those who need a ride.

To the casual observer it seems that these vehicles can be owned by anyone, driven by anyone, and must rake in a lot of money not for the driver, but for the cab company. But take a few minutes to dive a bit deeper; there is a lot more than meets the eye when it comes to making money with a cab in NYC. In order to fully understand the modern functioning of the New York City taxi industry, we have to take a look back at how it evolved.

Back during the Great Depression, which lasted from through most of the s, working men were laid off by the thousands every day.

With basically nowhere else to turn, thousands of those men became NYC taxi cab drivers. Almost overnight the number of cabs on the road exploded, and suddenly supply was far greater than the demand. The cab industry was destined for destruction, so the government stepped in to regulate it. In , New York City created the taxi cab medallion system. A medallion, generally speaking, is a piece of metal that signifies an achievement, award, or certification. The NYC cab medallion is a piece of metal that is attached to the hood of the car signifying that the vehicle is legally able to operate as a cab in New York.

Currently there are about 13, medallion cabs in NYC. That is to say, the city rarely creates new ones.

This regulation helps to keep the supply of cabs down, and the cab companies in business. The Taxi and Limousine Commission TLC regulates how much a cab can charge per mile or per minute, determines a cab company's leasing fees for drivers, monitors routes taken by the drivers to ensure they are not artificially inflating the price , and much more.

In essence, a cab company or a cab driver can only make as much money as the government allows them to make. Much like any other commodity, medallions fluctuate in price almost daily. And they had to be bought in pairs. Most people have heard of the on-demand car company Uber Technologies Inc. Is Uber The Future Of The Taxi Industry?

But Uber is putting a dent in the value of medallions. If you want to get into the cab industry in NYC, you have to pony up around a million dollars just for the rights to operate the vehicle. So why would anyone buy a medallion? It seems like a waste of money on the surface. But if we dig down we can see that there are some very good reasons. The primary reason that the medallions cost a lot is simply the scarcity of them.

Uber Drivers Say They're Making Less Than Minimum Wage - Business Insider

People want them, they are hard to come by, and people are willing to pay that much for them. Just like a rare piece of artwork, a precious jewel, or an ounce of gold: But there is an additional underlying reason. And that reason is low interest rates.

When the economy went south in , the price of a medallion bucked the trend and starting increasing rapidly. By , the value of one had doubled. By , the value had tripled from the price. Those in the taxi business look at the price of a medallion not as a cost, but as an investment. In order to get that same low risk, you would have to invest in a treasury bond. You may be wondering how a cab driver, and cab company, makes money. It does vary based on who owns the vehicle, how they have their business set up, and a variety of factors.

But for the most part a cab company owns the vehicle. Remember that those fares are set by the TLC, and the amount that a cab company can lease the vehicle to the driver is also set. This lease amount varies depending on the day of the week and whether or not it is a daytime or an overnight shift. Remember, the drivers are considered independent contractors, so all expenses are on them and not the owner of the cab.

How NYC's Yellow Cab Works and Makes Money | Investopedia

The real winner here, of course, is the cab company. The risk, however, runs in line with the fact that other companies, like Uber, can destroy the value of that taxi medallion. And while the past decade has been great for those who own the medallions they have seen exponential growth in the medallion value all while their income stream has remained stable , the future may not be so kind.

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How NYC's Yellow Cab Works and Makes Money By Sean Bryant September 25, — 1: The Early Days of the NYC Cab In order to fully understand the modern functioning of the New York City taxi industry, we have to take a look back at how it evolved. The Basics of How the Government Regulates Cabs in NYC A medallion, generally speaking, is a piece of metal that signifies an achievement, award, or certification. But it takes money to make money when you own a cab in New York City.

The Going Rate for a NYC Taxi Cab Medallion Much like any other commodity, medallions fluctuate in price almost daily.

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Why Do Medallions Cost So Much? How the Transaction Actually Works You may be wondering how a cab driver, and cab company, makes money. The Bottom Line The risk, however, runs in line with the fact that other companies, like Uber, can destroy the value of that taxi medallion. Driving a taxi cab is far from a glamorous business, but in many areas of the country, it's a business that involves a lot of money.

New York City was supposed to be the stronghold of the taxi industry. Yellow cabs are ubiquitous, an inexpensive and familiar way to traverse the concrete jungle. TAXI is one of the largest taxi medallion lenders in the country. TAXI reported earnings on April 29, but it waited more than a week to file its quarterly report with the SEC.

Now that we have the full financials in hand, here Recently, medallion values have been decreasing, which could Once you use a ride app like Uber in New York, you may never want to go back to hailing taxis. However, taxis are still a better deal in some situations. In some ways, the Uber app ensures a safer ride for passengers, but in certain cities, Uber's standards are lower than those of state-regulated cabs.

The use of E-Hail apps to arrange taxi pick-ups is reshaping the personal transportation industry, and creating a new set of industry players, and rules. Along with gaining access to self-driving technology, Uber will benefit from access to the trucking industry and the partnership with Volvo group. Putting 13, taxi drivers out of work wouldn't be ideal, But its tough to ignore the appeal of a city with less congested traffic and less pollution.

Learn about oligopolies and the current state of the U. Explore how the Airline Deregulation Act changed Learn the definition of illegal insider trading while reviewing the people who can be involved and the regulations and consequences Find out how and why lower interest rates for leasing new automobiles have helped spur more consumers to lease cars instead An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

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