Am I misunderstanding, or did the article gloss over the cost of keeping up your car as a driver? They talk about how renting a cab costs a certain amount up-front, plus insurance, plus some other stuff. Then they sort of hand-wave that an Uber driver also has those costs. I don't doubt that the rental fees are expensive, but it seems an unfair comparison when the rental fees pay for maintenance of the car, and they don't include maintenance that Uber drivers have to do. And I don't know of any jurisdictions in the US where you don't need insurance to drive.
I also found it interesting that the rental fees include a 30 cent parking-violation fee. At my office we had a problem with Uber who were constantly parking illegally in front of our building. So they're getting the benefit of illegal parking without paying the (admittedly small) fee that cabbies have to pay. Of course it costs less! Especially if you don't count keeping up your car and the community!
Well, you can factor in car maintenance to your costs as a driver. Given that the drivers would probably own a car regardless (because they need it for other things) the additional wear and tear is almost certainly more than compensated for with the extra income.
Also, if this is self-employment (which it sounds like it is) then the drivers can deduct $0.56 per mile they drive from their taxes.
As for a violation fee, I assume that for cabbies that's to cover the cost of tickets they get, not that it exempts them from receiving them. With Uber, you can judge the risk yourself. Presumably, just like with a taxi, it makes sense to accept an occasional ticket as the cost of doing business.
Overall, it seems like it's economically reasonable to be an Uber driver.
The big difference between Uber and a cab is that the existing regulatory regimes in many cities allow the cab company owners to extract most of the value from their drivers.
> I don't know of any jurisdictions in the US where you don't need insurance to drive
Only semi on topic, but via [0]:
New Hampshire and Virginia do not require motor vehicle insurance. In New Hampshire vehicle owners must satisfy a personal responsibility requirement; instead of paying monthly premiums, and prove that they are capable of paying in case of an accident. In Virginia vehicle owners may pay an uninsured motorist fee. In Mississippi vehicle owners may post bonds or cash.
If Uber drivers were constantly parking illegally in front of your building, it seems that there is not only a problem with Uber, but with your city's parking enforcement. If they are truly illegally parked, nailing them would seem like an easy way for traffic officers to run up their quota.
The article did seem oddly biased. It talks only about revenue for the Uber driver and only about costs for the traditional cab drivers. Some costs would be difficult for their driver to figure out (like depreciation), but couldn't they have asked about gas?
The linked article - http://www.bostonglobe.com/metro/2013/03/30/spotlight/9eVWW7... is a real eye-opener about the costs that traditional taxi drivers have to pay in order to work a shift. I'm no Uber fan but you can see how drivers would prefer working for them.
The long-term question is, will Uber stay a better-behaved taxi service owner if/when it cracks the market?
Thats true, it seems like a huge expense to for a shift:
Boston Cab charges [the undercover Globe reporter] the standard shift rate of $77, plus an $18 premium for a newer cab, as well as a city-sanctioned, 30-cent parking violation fee. Factor in the sales tax ($5.96) and optional collision damage waiver ($5), and his cost per shift is $106.26, not including gas.
But then you have to factor in that for UberX you have to own your own car, your own insurance and you have maintenance costs associated with your car. Probably still comes out cheaper / have more flexibilty with UberX, but would like to see a more in depth comparison of the costs of both.
Uber doesn't check up too carefully on its drivers' insurance situation, which helps keep costs down. From other articles, it appears that Uber drivers in general don't pay for appropriate insurance.
If a driver does 15 shifts per month (which would be a pretty lazy schedule for most full-time cabbies I've talked to), you're looking at roughly $1500 per month just to use the car. A quick google search indicates that the MSRPs for top-of-the-line Toyota Camrys and Chevy Malibus (just a couple of cars I thought might be well-suited to the task) are around $30,000, which, at 3% over 5 years, would require a monthly payment of about $540. But let's round that up to $600 to cover taxes and anything else that might be rolled into the loan.
As for insurance, I think $200/mo is probably a conservative guess. I pay way less than that as a 20-something male driving a "high risk" vehicle.
That brings us to $800/mo, leaving $700 to cover maintenance. I'm sure maintenance costs would be quite a bit above average given how much the car is driven, but I can't imagine they'd come anywhere near $700/mo, especially in the first five years (the term of the loan). After the car is paid for, you can either continue to drive it if it's cheaper to do that, or you can sell it for a few thousand bucks and start over. Plus, you don't have to buy your own car, since you've already got it, which would save you a few hundred every month.
Not exactly an in-depth look at the issue, but it seem likely that you're better off owning your own vehicle.
Unrelated, but my worry (for the drivers, anyway, both full-time and casual) is that given the low barriers to entry, a lot of people who own vehicles already will see how they can make some decent money on a casual basis with just slightly higher maintenance costs, and before long, there will be enough UberX drivers that the amount of time spent waiting to get a fare will bring the hourly wages down considerably. Maybe they'll limit the number of new drivers after a point or something, I have no idea, but I'd be concerned about that if I were a driver.
Not exactly relevant, but I was chatting with one UberX driver a few weekends ago, and she told me that the company sends each driver a monthly spreadsheet of metrics for that driver, allowing them to track their own performance. I thought that was interesting.
>As for insurance, I think $200/mo is probably a conservative guess
Conservative? I think you are severely underestimating the cost of obtaining insurance that covers the liability of injuring multiple passengers that you are transporting around as a "for hire" driver.
Much like AirBnB, people seem to overlook this cost and responsibility. That will change when an Uber driver slams into another car with 5 passengers, killing someone, or an AirBnB user, there "illegally", burns down an apartment complex. It will be the end of these businesses.
I'm not saying that these models can't work. But right now, much of the cost advantages come from working around regulations.
the ridesharing companies provide insurance on top of personal insurance. Both Uber and Lyft have $1M liability + casualty insurance while you're transporting passengers, and Lyft has $1M policy while you're not (don't know about Uber on that one).
The insurance premiums for these companies (I know Lyft partners with Met Life) probably is adjusted downwards relative to taxis, because of several factors, but the biggest one being that the drivers own their own cars and are out of it if they wreck it, so there's a good reason not to drive dangerously. A larger proportion of Uber and Lyft drivers have been driving american streets for longer periods, and also have educations, for whatever statistical benefit that confers. Finally, the taxis are, in the end, smaller companies, so the rideshares can negotiate better deals and also provide far more statistical data to the adjusters, which enables a narrower margin.
>Both Uber and Lyft have $1M liability + casualty insurance while you're transporting passenger
Well, I'm not going to claim to be an expert on such matters, but I believe $1MM is the minimum that is offered for liability insurance on a driver's policy here in Canada. I'm not sure how far that'd go if you killed multiple passengers in a vehicle accident, especially if you were found negligent.
Again, this isn't to say that these are insurmountable problems, by any means. You can insure anything for the right price. But how many people are actually sufficiently insured? And how many users are checking, or even care? I can't see this not being a problem in the future.
A quick google search indicates that the MSRPs for top-of-the-line Toyota Camrys and Chevy Malibus (just a couple of cars I thought might be well-suited to the task) are around $30,000, which, at 3% over 5 years, would require a monthly payment of about $540
The car you want to be driving for this task, if you are making a new purchase, is a used hybrid. A used honda insight goes for ~$16k, monthly payment on a five-year is $250/month with not very good credit, gets 34mpg while running, and you don't have to really worry too much about making payments in case you lose your job, your car, or both.
Do other cities have limits on the number of cab licenses, like the medallions in NYC? Those are often owned by the large cab companies, and not available to purchase since they are at the cap, so there is not even any option to go it alone.
UberX drivers are also paid as contractors, so there is no withholding on their paycheck and they must make up the difference themselves. Does anybody know if this is the case for regular cabbies?
In many places, drivers are independent contractors, and most of what the company does for them is deal with the equipment, vehicle insurance and the licensing. Pretty much everything else is the cabbie's responsibility.
That said, regulations are different everywhere, so while this is probably the most common arrangement in the US, other setups are not necessarily illegal.
All these drivers talk about liking how they can work when they want. It makes me wonder if Uber ever goes into Surge pricing on times where the demand is low, but the supply is even lower, like Sunday mornings.
(Also, the close button on site's popup "please sign up to be spammed" window is almost invisible with dark grey on black. So scammy.)
I was hanging out with a buddy while he experimented with this. The quoted fare dropped from over $30 at around 2am (when all bars are legally required to close in my state) to around $20 about 30-40 minutes later.
I should add one anecdote, there is a guy in San Diego who is using ridesharing to try to make $150,000 in the year and start up a company. In order to do this, he has to make ~3k a week, and I think it's impressive that he's been consistently doing this for about 3 months now. It will take a serious toll on him (we're talking 50-60 hour weeks, and I am not sure he's taking getting sick into account) and I seriously worry about some his business judgements. Nonetheless, he is on track and about a quarter of the way there.
"As self-employed, independent contractors, though, UberX drivers receive a Form 1099-MISC...Subsequently, UberX drivers are hit with a 5.6 percent tax deduction for each mile they drive...if he or she drove 100 miles, he or she will be taxed $56 (5.6 percent tax x 100 miles driven)."
Why is this the case? In my experience with 1099s, they have nothing to do with miles driven. In any case, I don't understand how 5.6% of 100 = $56. Could somebody please elaborate on this?
The deduction is $0.56/mile, for a $56 deduction (not a tax) for every 100 miles driven. The deduction is in lieu of the separate deductions for gas, wear and tear, insurance, etc., so the driver must choose either to take the mileage deduction or to separately deduct their driving-income expenses.
It's not clear why UberX drivers are being hit with a deduction by Uber on their 1099s, since they--not Uber--are the ones that get the deduction. It sounds like the writer is simply confused about what is actually happening. Based on the magic math of the rest of the article, I'm guessing that the writer doesn't know what they're talking about.
Considering they mentioned several times "5.6 percent per mile driven" I'd go with confused camp... Otherwise you'll drive 100 miles and get a 560 percent tax break!
There is a $0.56 per mile deduction for business miles, which is $56 per 100 miles. This is not deducted from their take-home income as the author seems to think.
Damn, $300/night. So that's like 9 grand/month if you work every night. And probably can under-report tips and meet interesting people too instead of wasting hard earned cash buying rounds at overpriced bars and lounges on weekends.
Beats working for a Boston IT company where you make about 100-120K a year but get taxed like crazy.
I drive for both Lyft and Uber: Most passengers don't tip, and even when they do they usually use the app, so there's very little under-reporting. In my experience: The most cash tip I've ever recieved was $20 for returning an iPhone to a user, and the most cash tip I've ever gotten in a night from just rides is on the order of $10, and I'd say about 80% of my nights net $0 cash tip.
You do, however, get a really nice tax advantage if you drive a fuel efficient car, the federal deduction is $.55/mile, and I estimate my operating costs (fuel, maintenance, but not depreciation since my car already has 115k), to be about $.20/mile.
It might be neat for priceomics to do a report on this. Hey, priceomics, want to interview me?
presumably the driver meant 'cash tips' because the app very much allows tipping, although it's also possible the driver was not entirely knowledgeable of the process.
It's more important among lyft drivers to not accept cash tips because it's a safety issue; as a community, accepting cash tips can lead to danger if pink mustaches become a target for crime. Usually I refuse cash tips and relent only if they insist (this mostly happens with service industry clients).
In San Diego, there is a driver that donates 50% of tips to charities; she has a blog where she posts her tallied earnings for transparency on the process.
UberX (the subject of the article) deliberately does not support tipping, and drivers are instructed not to accept tips. There's an automatic tip on rides booked through "Taxi" requests on Uber, but that's not the same thing.
OK, according to a reddit AMA[1] from a few months ago, UberX drivers can accept cash tips as long as they explain at length that it's not required.
But there's no way to do it from the app, and I'm thrilled that Uber is making a go at trying to maintain good service from their drivers without an expectation of tipping. For one thing, it makes their prices even more competitive vs. local taxi rates.
And probably can under-report tips [...] Beats working for a Boston IT company where you make about 100-120K a year but get taxed like crazy
By that logic you could just become an IT contractor and under-report your income. I would not necessarily put "allows me to easily commit tax fraud" as a benefit of job, but YMMV.
Uber's Kaitlin Durkosh confirmed UberX drivers receive up
to 80 percent of each fare. "On average, uberX drivers in
Boston make about $25.93 an hour, which equates to nearly
$54,000 a year (gross income), if drivers work 40
hours/week for 52 weeks/year... gross income can be even
higher if partner drivers decide to work more than 40
hours/week, Durkosh continued.
At $26/hour, it's only $300/night if you work 12 hour "nights." I'll guarantee that when she says $26 per hour, she's assuming a solid hour worked without breaks. And, actually, it's deeply unlikely that any driver makes an average of $26 per hour over a 12 hour shift, 5 days a week -- the average is going to be inflated by the fact that most drivers work during the high demand hours around rush hour and Friday and Saturday night, when not only are rides more frequent, but surge pricing goes into effect.
I make an average of > $25/hour over 30-40 hours (on lyft, for which I have 12 weeks of data). During surge pricing the hourly on uber goes to nearly $40 - $50/hour, but i only have one weekend of data for this, and the hours are cherry-picked (there's a lot of strategic "do i use lyft, do i use uber, or do I use both" going on.
Okay, but presumably Durkosh, an Uber representative, is reporting data, not anecdotes, when she says that the average is $26/hour, right? Are you suggesting that she's underreporting the true average, or that she doesn't know what the average amount they pay their drivers is?
No, I'm suggesting that it is very reasonable that this is the true average. May not be the true median, though, given the 80-20 principle and uneven distribution of skill.
Cool. Sorry if I was confrontational -- the article irritated me on the grounds of sloppy journalism and wide-eyed ingenuousness, and I took it out on you.
no worries, I didn't take your comments to be confrontational at all; and the article irritated me too, which is why I'm here offering better information!
30-40 hours per week over 12 weeks (I lyft full time while I'm waiting for the IRS to issue 501(c)(3) status for my nonprofit). There are weeks I've put in 45 hours. I'd say the first four weeks or so I didn't know what I was doing, so I averaged around $20/hour. More recently I've been doing $30/hour: I put in about 40 hours and make $1000 after gas and an average mechanical burden on my car.
One caveat: The lyft system has been thrashing a lot over this time period; since they have been expanding clientele, expanding drivers (not necessarily evenly), then they changed their compensation policy to have "happy hours" with discounted rates, at which time the algorithm to calculate "prime time" rates started to go really crazy, flipping between +200% to -20% over the course of 45 minutes, then they got rid of the happy hours and went straight 20% off (and tempered the prime time algorithm), then they removed their commission, then they added a $1/ride bonus...
It's been really crazy keeping up with all the changes, but what's interesting is that I've found by ignoring the part of my brain that wants to be consternated about this and pressing forward and honing my driving strategy has basically led to a reasonable income trend that is basically independent of the craziness.
It's interesting that Durkosh didn't say, "the average driver who works 40 hours/week makes $54,000." I wonder what the average income of those who actually try to work 40+ hours/week are.
>Damn, $300/night. So that's like 9 grand/month if you work every night. And probably can under-report tips and meet interesting people too instead of wasting hard earned cash buying rounds at overpriced bars and lounges on weekends.
>Beats working for a Boston IT company where you make about 100-120K a year but get taxed like crazy.
Looking forward to your follow-up post, noname123, "Why I became a coke dealer." :)
Thanks for the suggestion, logicallee, unfortunately I'm just a sensitive artist who wants to meet new peeps in the city. Coke dealing sounds too stressful, a bit too much for me to handle, I'll leave that to the professionals.
>And probably can under-report tips and meet interesting people too instead of wasting hard earned cash buying rounds at overpriced bars and lounges on weekends.
That's one way to put "if you work every night, you won't have a social life."
Yes, it turns out you can make a lot of money if you pay no taxes and no money towards insurance. Your money is earned as a negative externality imposed on everyone else.
I'm not sure why you assume that the drivers pay no taxes given that they're provided tax paperwork by Uber. No doubt some don't but, then, no doubt some regular full-time employees don't either. As for driver liability insurance, it's provided by Uber: http://blog.uber.com/uberXridesharinginsurance
The few I have asked have expressed to me that tipping isn't really a thing with uber, and while they would accept a tip it was not necessary or expected.
Surely insurance companies exclude driving for hire or similar from the insured uses of vehicles in the USA? They certainly do in UK. If you drove as an unlicensed taxi-driver and took a consideration you'd be driving without insurance.
I talked with a BOS driver who had a Toyota Sienna and participated in UberX and UberXL. For UberX, they take 20%, and for UberXL they take 28% (he also mentioned he ended up being paid the same on both tiers.)
I really like how this article answers the question in the headline in the first few lines.
Too many launch into an in-depth discussion and seem to forget that the article may just be browsed over quickly.
I also found it interesting that the rental fees include a 30 cent parking-violation fee. At my office we had a problem with Uber who were constantly parking illegally in front of our building. So they're getting the benefit of illegal parking without paying the (admittedly small) fee that cabbies have to pay. Of course it costs less! Especially if you don't count keeping up your car and the community!