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For day trips and long distances, research the price from the tourist office in the train station before negotiating the price with the taxi driver and be willing to walk away. When negotiating indicate where you wish to go, how many passengers and how much you are prepared to pay. Then start haggling to the price you are prepared to pay. At the end of the trip make sure that all the passengers have left the vehicle before handling the monvey to the driver and walk away. Be firm with the taxi driver if he is being pushy and be aware that Tourist Police are often nearby if there are problems.
Service taxis are usually minibuses which cover a set route for a fare of 50 piastres (went up from 2-5 in May 2008) or 5LE on the West Bank if you have one of the pickups 'special cars' to yourself, eg after 8pm. However trying to work out their route and destination is definitely problematic. These minibuses have a haphazard route and usually only the Egyptians themselves know the itinerary and the areas that they service. Most of them do either an end to end trip in Luxor or a circular route. Give it a go, it can be an adventure and fun and you will see parts of Luxor you wouldn't normally see. You can always get a taxi back to your hotel.
To the extent possible, travellers should avoid renting cars to be driven inside the town. Taxis and horse carriages (caleche) are cheap and will deliver you any where and will also be on call each time you leave your hotel.. The driving style in Luxor and Cairo requires a honed and acquired skill and is not for the faint hearted. It is also hard for non-locals to rent cars as often foreign driving licences are not recognised by the local police and you could expect hassle in this regard.