I know a shitload of people who drive for Uber/Lyft on the side. I’ve talked to some drivers who do it as their sole source of income, and I’ve talked to some others who justified the cost of a new car because they’d make the payment driving for Uber. I remember one driver in particular who bought a brand new Prius so that he could increase his Uber-driving profit margin.
It makes sense, right? Buy a car that runs on farts to cut down on your fuel expense? What about the hidden costs though? The depreciation? The interest on that car payment? The cost of a replacement hybrid battery? Let’s use a case study to analyze the true cost of driving for Uber and figure out if driving for Uber is a sensible step to take on the path to financial independence.
Let’s analyze the 2017 Toyota Prius Three. Let’s assume we bought it brand new, that it’s got all the standard options. We’ll use Kelly Blue Book (KBB) values, and assume that the condition is “very good.” Using KBB, we find that the fair purchase price of a brand new 2017 Toyota Prius Three is $24,863, but let’s assume we’re suave and haggle it down to $24,000.
Just so you know I'm not bullshitting you, here's a screenshot
We also have tax, title, and tag– let’s assume $1200, keep in mind this varies by locality.
Let’s also throw in the interest we’re going to pay on the loan up front. We’ll do this because all the math we’ll run from here on out will be dollars per mile, and the interest is in terms of dollars per month. I’m all about easy math bruh and that fucks up my mathematical fung shui. Let’s say we got good ass credit and got a loan for 3.5% interest. We’ll take out a 60 month note and put down $3,000– for a starting loan balance of $21,000. With this loan, we’ll end up paying $1,922 in interest.
The total cost of our Prius, then, is $27,122, with $4,200 of that paid up front (the down payment plus tax, title, and tag.)
How much does an Uber driver actually make? I know I pay a shit load of money to get my drunk ass from place to place ($100 one time to go 20 miles on St. Patties day in Savannah), but how much does the driver see of that money? This one took some serious digging and talking to people, but let’s lay it out.
Let’s first figure out how much the average Uber ride costs the rider per mile. To do this, I looked at my own ride history. Disclaimer up front– the sample size is only four. Definitely not scientific, but I write a blog that maybe ten people at most look at so fuck it– if this shit blows up I’ll re-visit this. Check out the screenshot below:
So $3.05 per mile is our number. That’s how much a rider pays, on average, to go places using Uber. You know just as well as I do that the driver doesn’t see all of that though; let’s see what kind of expenses you’ll rack up driving.
We’ve got depreciation expense, we’ll have to replace our hybrid battery at some point. Brakes go bad, ball joints go bad, transmissions, engines. Oil needs to be changed. There’s a lot of expense. Let’s hit depreciation first.
Our brand new Prius cost $24,000 before taxes, but how much could we sell it for if we put it on craigslist immediately after driving it off the lot? KBB says $22,700. So right off the bat we lost $1,300 in initial depreciation. Let’s add in taxes and interest expense too, which we determined before was $3,222. Adding all this together, we’re $4,522 in the hole. That first $4,500 we make driving for Uber is going straight to getting us back to even. Of course, if we just buy a cheaper used car we can avoid some of this cost, but I ride in a lot of brand new Ubers.
Now, what about our per-mile expenses? Check out the somewhat poorly formatted spreadsheet below showing depreciation. All the depreciation values I got were from using KBB to determine the value of our car at various mileages.
The first column is number of miles, next is KBB value. The next shows the depreciation between the two mileages (for example, our car depreciates $1,492 between 500 miles and 20,000 miles.) The third is the depreciation per mile. Next is cumulative depreciation and cumulative depreciation per mile.
As you can see, the most rapid depreciation will occur between 50,000 and 100,000 miles (that’s the $.091 per mile depreciation.) After 150,000 miles, depreciation slows down. We’re going to assume that we’ll drive this bad bitch till the engine blows (so we’ll use the $.069 per mile depreciation from the bottom right corner of the spreadsheet.) The next spreadsheet goes over maintenance expenses (we have to maintain our car well to hit the KBB values shown above.)
Hopefully this spreadsheet is a little easier to understand. If you don’t understand it or you think my cost assumptions are totally off-base, blow me up in the comments and I’ll haze myself. Big take away here is the 25 cents per mile total cost, and the big assumption is the price of gas staying steady at $2.50 (if it goes back to 2009 prices your cost per mile goes up to 28 cents a mile.)
Of course, this is just a fraction of the real costs. We still have taxes to pay, and you can bet your ass that Uber takes a cut of what the rider pays. On that note, Uber advertises that their commission is 25%, but the research I’ve done seems to suggest that isn’t quite true. The number I saw is 39%. If you want to know more about that check out the following link: https://www.ridester.com/uber-fees/
Here’s our net income spreadsheet. It accounts for the tax deduction we can make (The IRS lets us deduct 59 cents per mile.) It accounts for our income tax (we assumed 15%, which is roughly the effective tax rate if you make 60k a year.) It also accounts for the self employment tax of 15.3% (if you’re self employed, you don’t have an employer to pay half of your social security and medicare tax.) It does not, however, account for insurance. Driving for Uber will likely drive your insurance cost higher, but only $20 or so per month.
So your actual take home out of that $3.05 the rider pays per mile? $1.17, or just over one third. Fuck.
We have to drive some 4,000 miles just to break even on the taxes, interest, and depreciation. Many of the drivers I know only make a $300-500 or so a month driving, basically enough to cover their car payments. They’re probably driving 500 miles a month for Uber, and it takes them 8 months just to break even. That’s a raw deal.
Then you make $1.17 a mile after that in after-tax profit. But most of the time you’re not fucking driving, you’re sitting around waiting for a fare. And, you have to drive just to go pick up those fares. Uber drivers don’t get paid to drive to pick you up, they only get paid when someone is riding. This $1.17 doesn’t account for that cost.
What about the Uber drivers who don’t drive Priuses? I’ve been in some F-150 Ubers, how much do they make? I’ll tell you, only $1.07 a mile, assuming 16 MPG. If gas goes up to $4, they’re sitting at 97 cents a mile.
At that rate, you’re probably better off trying to create a successful blog to make money. Get Fucked.