To calculate a taxi fare, add up the base fare (minimum fare), the charge for kilometres and minutes beyond the allowance included in it, the waiting charge and any fees for extra services, then add the demand surcharge, subtract the discount and round the result. As a formula: fare = base fare + (km − free km) × rate per km + (min − free min) × rate per min + waiting + zones + extras + surcharge − discount. Below we walk through how taxi fares are calculated step by step, how to set your own rate per km and in which order percentages are applied, with a worked example.
How to calculate taxi fare: the basic formula
Most tariffs are built from the same elements.
| Element | What it is | Example setting (illustrative) |
|---|---|---|
| Base fare (minimum fare) | The minimum price of a ride | 60 |
| Free kilometres | How many km are included in the base fare | 2 km |
| Free minutes | How many minutes are included in the base fare | 3 min |
| Rate per kilometre | Charge for each km beyond the allowance | 14 |
| Rate per minute | Charge per minute of riding or idle time | 3 |
| Waiting | Charge per minute of waiting at pickup beyond the free minutes | 2, first 3 min free |
| Extras | Child seat, luggage, pet, driver requirements | +20 or +10% |
| Surcharge | Price increase during high demand, at night, on holidays | +10% |
| Discount | Promo code, personal discount, loyalty program | −5% |
| Rounding | The step to which the total is rounded | up to the nearest 5 |
One important detail: free kilometres and minutes are deducted from the ride at the very start. Only what exceeds the allowance is charged. The company also chooses how the allowances work together:
- "AND": the per-km charge starts once the free kilometres are used up, and the per-minute charge starts once the free minutes are used up, independently of each other;
- "OR": paid metering starts as soon as either allowance is used up.
The "AND" option is gentler on the passenger; "OR" is more profitable for the company.
How kilometres and minutes are counted: three algorithms
The same "rate per minute" can mean different things depending on the tariff algorithm. A company usually picks one of three:
| Algorithm | What is charged | When it fits |
|---|---|---|
| By distance and time | Both kilometres and minutes at the same time, for the whole ride | Large cities with heavy traffic, where time is the main resource |
| Kilometres while moving, minutes while stopped | Above a speed threshold, kilometres; below it, idle minutes | The classic taxi meter scheme |
| Kilometres plus manual idle time | Kilometres only; minutes only while the driver has switched on idle mode | Small towns where idle time is rare |
In the second and third options, a minute means a minute of idle time, not of riding. So when you switch from one algorithm to another, the rate per minute has to be revised.
In which order percentages are applied
When several percentages are involved, their order starts to affect the total. In Tonotel it works like this:
- The base price is calculated: base fare, kilometres, minutes, waiting, zones, intermediate stops.
- Fees for options and requirements: the percentage is taken from the base price. If there are several percentage fees, they are added together and applied to the base once, not on top of each other.
- Surcharge: the percentage is taken from the amount including fees. Only one surcharge applies: the first matching one by priority.
- The calculated price is fixed.
- Discount: the percentage is taken from the amount including the surcharge. Discounts do not stack: one is applied by priority (promo code, then the customer's personal discount, then the loyalty program).
- Rounding according to the company's rule, for example up to the nearest 1, 5 or 10.
If you set up fares in other software, make sure you find out its order: with identical percentages, a different order produces different amounts.
Example: calculating a taxi fare step by step
Take the illustrative tariff from the table above (the "by distance and time" algorithm, allowances combined with "AND") and this ride:
- distance: 9 km, travel time: 18 minutes;
- waiting at the pickup point: 5 minutes;
- the passenger ordered a child seat (+20 fee);
- a +10% surcharge applies in the pickup area due to a driver shortage;
- the passenger has a promo code for a 5% discount;
- rounding: up to the nearest 5.
| Step | Calculation | Amount |
|---|---|---|
| Base fare | includes 2 km and 3 min | 60 |
| Kilometres | (9 − 2) × 14 | 98 |
| Minutes | (18 − 3) × 3 | 45 |
| Waiting | (5 − 3) × 2 | 4 |
| Base price | 60 + 98 + 45 + 4 | 207 |
| Child seat fee | +20 | 227 |
| 10% surcharge | 227 × 0.10 = 22.7 | 249.7 |
| 5% discount | 249.7 × 0.05 ≈ 12.49 | 237.21 |
| Round up to 5 | 240 |
The total is 240 units. Note that if the surcharge were calculated on the base price without the fee, it would be 20.7 rather than 22.7. On a single ride the difference is tiny, but across thousands of rides a month it adds up.
How to set your taxi rate per km
The rate per kilometre is not a number copied from competitors; it is the result of a calculation. A simplified approach:
- The vehicle's cost per kilometre. Fuel, scheduled maintenance, tyres, wear, insurance, all converted to 1 km. Suppose (for illustration) this comes to 7.
- The driver's earnings per kilometre. How much the driver should earn per kilometre for the work to be worth it. Say, 5.
- The company's commission. If the company takes 15% of each order, the driver keeps 85%.
- Rate per km = (cost + driver's earnings) / driver's share = (7 + 5) / 0.85 ≈ 14.1. Round to 14.
Next, test the rate on typical rides. If the average ride in your city is short, most of the revenue will come from the base fare, so calculate it separately: the base fare should cover driving to the customer and a short ride within the allowance. And remember: the higher the company's commission, the higher the rate per km has to be for the driver to keep their earnings.
Tiered tariffs: when a kilometre gets cheaper with distance
For long rides, a flat rate per kilometre often makes the trip uncompetitive. The solution is a tiered scale: for example, the first 10 km at one rate, 10 to 30 km at a lower rate, and beyond that lower still. Each band the ride passes through is charged at its own rate, and you can add a fixed amount for entering a band. Time can be tiered in the same way. For out-of-town and intercity rides, the tiered scale is often combined with a separate charge for the driver's empty return trip.
Upfront price vs taxi meter
There are two ways to determine the final fare:
- Fixed price by route. The software builds the route, calculates the distance and estimated time and quotes a price before the ride. The passenger knows the amount in advance.
- Taxi meter. The driver app measures the actual distance via GPS and the time, including idle time and waiting. The final fare may differ from the estimate.
You can also combine them: in Tonotel you choose a taxi meter mode for each order type: don't use it, always use it, use it only to charge for extra time and distance beyond the upfront price, use it for time only, a separate mode for transfers, and so on. At the end of the ride, the driver sees a receipt with a breakdown: base fare, distance, time, waiting, zones, services, surcharge, discount and total.
Practical tip: for city rides at a fixed price, it makes sense to enable the meter only for extra time and distance. The passenger gets a clear price, and the driver doesn't lose money if the customer asks for a stop on the way or keeps the car waiting.
Common mistakes when calculating fares
- Copying competitors' prices. Someone else's tariff is built on their costs and their commission. If your fleet or driver share is different, the same kilometre may lose you money.
- Forgetting about the pickup leg. The driver travels to the customer for free. If the average pickup distance is longer than the free kilometres in the base fare, short orders earn less than they cost.
- Not recalculating the minute rate when switching algorithms. A riding minute and an idle minute are different things. Carrying the price over "as is" from one algorithm to another changes your revenue.
- Stacking percentages without knowing the order. Percentage fees, surcharges and discounts produce different totals depending on which amount they are calculated from.
- Rounding step too small. Passengers and drivers find it awkward to settle cash amounts like 237.21. Rounding to a convenient step simplifies payment and slightly increases the average fare.
- Not testing the tariff after changes. Every change to a price or zone should be followed by test calculations on several typical routes: a short one in the centre, a medium one across town, a ride to the suburbs.
Tariff setup checklist
- [ ] The base fare covers the pickup and a short ride.
- [ ] Free kilometres and minutes match a typical short ride.
- [ ] An algorithm is chosen and the minute rate is recalculated for it.
- [ ] A waiting charge and free waiting minutes are set.
- [ ] A tiered scale or zones are set up for long rides.
- [ ] Fees for options are specified in every tariff that needs them.
- [ ] Surcharges are ranked by priority, and it is clear which one fires first.
- [ ] Separate night and weekend tariffs are tied to days and hours.
- [ ] The rounding step and direction are chosen.
- [ ] Test calculations have been run on 5–10 typical routes.
The most convenient place to check calculations is the software itself: for example, the Tonotel dispatcher workstation lets you open a step-by-step price breakdown for any order.
Frequently asked questions
How are taxi fares calculated?
A fare usually consists of a base fare (minimum fare) that already includes a few kilometres and minutes, a charge for kilometres and minutes beyond that allowance, a waiting charge, zone surcharges and fees for extra services. A demand surcharge may then be added and a discount subtracted, and the total is rounded according to the company's rule.
How do I set a taxi rate per km?
Work out the vehicle's cost per kilometre (fuel, maintenance, wear, insurance), add the driver's target earnings per kilometre and divide the result by the share the driver keeps after the company's commission. For example, with 12 units for the driver and the car and a 15% commission, the rate per km comes to about 12 / 0.85 ≈ 14.
What is a minimum fare in a taxi?
The minimum fare is the base price of a ride that already includes a certain number of free kilometres, ride minutes and waiting minutes. A short ride is charged at the minimum fare, and everything beyond the allowance is charged at the tariff rates.
Why is the final taxi fare different from the estimate?
The estimate is based on the planned route and the expected travel time. If the taxi meter is enabled for the order type, the final fare is calculated from the actual distance and time: traffic, idle time, extra waiting or a route change will change the amount. On top of that, the total is rounded according to the company's rule.
Is a discount applied before or after the surcharge?
It depends on the software. In Tonotel the order is: percentage fees for options are calculated on the price before fees, the surcharge on the price including fees, and the discount on the price that already includes the surcharge. It is worth knowing the order, otherwise percentages produce unexpected results.
Conclusion
The taxi fare formula is simple: base fare, kilometres and minutes beyond the allowance, waiting, extras, surcharge, discount and rounding. The complexity lies in the details: which algorithm counts the minutes, in what order percentages are applied and how the rate per km relates to your costs and commission. Build your tariff from your own costs, test it on typical routes and keep a step-by-step breakdown at hand, so that you always have a precise answer when someone asks "why this price?"