
Driving for Uber and Lyft - sus_007
http://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/
======
rm999
This article rests on the premise that operating a car costs a fixed 50 cents
a mile. But several uber drivers have told me the economics work out pretty
well for them because they already need their cars, so IMO using 50 cents a
mile is an unfair assumption.

Looking at the operating cost of a car is complicated with many variables, but
the standard 50 cent estimate is NOT a marginal cost, i.e. you don't actually
spend an extra 50 cents to drive a mile. The annual AAA driving costs brochure
puts the per mile cost (gas + maintenance) at 14 cents a mile for a small
sedan, and 17 cents for a big sedan, plus ~3 cents a mile for depreciation
(see "decreased depreciation"). Moving from 50 cents to 20 cents a mile brings
his estimate pay from 7 dollars an hour to 12.40.

Brochure link: [http://exchange.aaa.com/wp-
content/uploads/2017/08/17-0013_Y...](http://exchange.aaa.com/wp-
content/uploads/2017/08/17-0013_Your-Driving-Costs-Brochure-2017-FNL-CX-1.pdf)

edit: to be clear this math is if you already own a car and are driving on
off-times for additional income, which (in my experience) is what a large % of
uber/lyft drivers do. It's also what Mr. Mustache was doing in his test.

~~~
amorphid
Quick and dirty math. Let's say a new Kia Soul has 200K miles of useful (as an
uber car) and costs $20K USD. The driver drives 2500 miles per month, getting
25 miles per gallon $4/gallon. Insurance is $100/month. And every 5000 miles
there's $100 of maintenance to do.

20,000 USD / 200,000 miles - 10 cents per mile.

200,000 miles / 25 mpg = 8000 gallons

8000 gallons * $4/gallon = $32,000

$32,000 USD / 200,000 = 16 cents per mile

200,000 miles / 2500 miles/month = 80 months

80 months * 100 insurance/month = $8000

$8,000 / 200,000 miles = 4 cents per mile

(200,000 miles / 5000 miles) * $100 maintenance = $4000

$8000 maintenance / 200,000 miles = 2 cents per mile

10 + 16 + 4 + 2 = 32 cents per mile.

That's my best guess while typing on my phone in a Chipotle. 32 cents sounds
like best case, so 50 cents seems like a conservative & realistic plan. Cars
have ways of eating ones money in expected ways, and I didn't account for
costs associated with driving for Uber/Lyft, such as needing a good cell phone
plan, self employment taxes, etc. Did I make any math errors? Anyone wanna
tweak those numbers to be more realistic?

~~~
BeetleB
Gas is not that expensive in most parts of the country. It's been a while
since it hit $3/gallon where I live. That portion likely should be 10-12
cents/mile.

Maintenance/repairs is always hard to predict...

~~~
amorphid
True. Gas prices can be spikey, and a few years ago I was paying over
$5/gallon, so I went up a bit.

------
habosa
So in a way driving Uber is like taking a loan from your future self. You have
a car and need money. Uber gives you good gross pay. 5 years down the road
when you have to sell or repair your car, that's when you have to pay up for
all the wear and tear.

It's really a shame to see who gets rich off this. As a rider, these services
are incredibly convenient. But I wish I wasn't basically relying on unpaid
labor.

~~~
Retric
Something I don't think people really think about in the Uber equation.
Driving also has a massively higher risk of dying than sitting on the couch,
so it's part loan part Russian roulette.

It's not just traffic, Taxi drivers have double the risk of being murdered as
cops, without any of the benefits.
[http://www.syracuse.com/opinion/index.ssf/2015/01/by_the_num...](http://www.syracuse.com/opinion/index.ssf/2015/01/by_the_numbers_job_with_the_number_1_murder_rate_taxi_drivers.html)

~~~
moonka
When it comes to finances, people have a shockingly hard time figuring out the
true cost of things. I've seen this a lot with things such as driving and
income taxes. As he mentions, this informational asymmetry works to
Uber/Lyft's advantage, so I doubt we will see any changes from them.

~~~
imjk
Can you explain what people confuse about income taxes?

~~~
moonka
In my experience the confusion surrounds 2 things. How brackets and deductions
work. Many people don't understand that once your income goes into a higher
bracket, you are only taxed at that higher bracket for the income that pushes
you into it. For deductions, I've met a lot of people who think that it works
essentially as a credit, rather than just saving you your tax rate on that
portion.

~~~
Domenic_S
It's wording like that that's confusing. Once your income goes into a higher
bracket, you are only taxed at that higher bracket for the income _that falls
within that new bracket._ The income that _pushed_ you into that bracket is
taxed the same way.

(and AGI does affect deduction phase-outs so there's that complication...)

------
enraged_camel
There are two major problems with the sharing economy that most people don't
mention when they write articles about it.

First, the overwhelming majority of gigs don't teach you any marketable skills
whatsoever. So over the course of your contracting, you may as well be
unemployed. This hurts most people's chances of finding gainful employment,
and ends up being a massive hidden cost above and beyond car maintenance and
similar expenses directly related to running the gigs.

Second, because you make so little, you also save very little, if any, for
retirement. Since saving for retirement is all about compound interest, people
who run gigs while young instead of looking for full-time employment are in
for lots of pain and discomfort later in life. In fact I suspect we're
witnessing the creation of yet another underclass, consisting of people who
will probably have to work until they die. Lots of Baby Boomers (who were
unfortunate and/or made poor choices earlier in life) are already in this
situation and it will only get worse.

As an aside, one thing I don't get about the gig economy is how the workers
can afford health insurance. I assume most don't have any, or they are on
their parents or spouses' plans because even the cheapest plans are really
expensive and I doubt your average Uber driver can afford them.

~~~
antisthenes
1\. They're young so they go without or buy the cheapest possible one.

2\. On their parents' plan

3\. Don't make enough and get huge subsidies from the marketplace.

Retirement and lack of any marketable skills is the bigger issue, however.

------
ewjordan
$0.50 of vehicle costs per mile does not compute. If you're spending $30 a day
on gas and driving 250 miles, you can just rent a car for the week at a daily
rate of $30 or less, and come out with $60/day in costs rather than his stated
$125, which makes the whole thing quite a bit more profitable. Probably
profitable enough that my poor as shit unskilled and unemployed college self
would have been better off doing that than tutoring during the summers.

Am I missing something?

~~~
astura
~$.50 a mile isn't a made up number, it's what the federal government has
calculated as the cost of driving for business purposes. Actual value is 53.5
cents a mile.

[https://www.irs.gov/newsroom/2017-standard-mileage-rates-
for...](https://www.irs.gov/newsroom/2017-standard-mileage-rates-for-business-
and-medical-and-moving-announced)

Students are usually under 25 thus largely are unallowed to rent cars.

I doubt using a rental car for this type of business is allowed under the
terms of a rental contract or under Uber's rules.

Insurance isn't free.

~~~
baddox
I don’t think it’s necessarily appropriate to use that figure to calculate
your actual costs as an Uber driver, especially if you’re not driving full-
time. It seems like the 53 cent figure is amortizing the entire cost of the
vehicle, fuel, and maintenance over its entire lifetime. If you’re in college
and just drive for Uber on occasional weekends, it doesn’t make sense to
include all of the fixed costs of the vehicle in your profit calculations.
Note that the IRS figure for variable costs per mile is 17 cents.

~~~
astura
I don't necessarily disagree with you but I certainly couldn't afford an "Uber
eligible" car when I was in college. Are college students overspending on cars
just to drive for Uber?

~~~
ams6110
Is it feasible to pass their inspection in a borrowed car and actually drive
something else?

~~~
astura
That would be a terrible idea. It obviously violates Uber's driver's agreement
so you risk getting kicked off the platform or at the very least confusing
your passengers who are looking for a red ford focus and you're driving a
white Chevy Cavalier. Not only that but if you get into an accident with a
rider you're going to be in a world of hurt. Uber's insurance company would
certainly deny the claim and so would yours, assuming your insurance policy
covered ride sharing in the first place.

~~~
ams6110
> It obviously violates Uber's driver's agreement

As if Uber is a poster child for following rules and regulations.

------
erikb
TL;DR: What everybody expects: You basically don't make money if you really
calculate the whole cost package.

I honestly believe that it must be lower than $5/hour so I'd say even MMM
might've forgotten something.

~~~
jaggederest
I think he's actually wrong.

It's definitely higher than marginal $5/hour, it's just not $5 net profit per
hour. You take into account the fixed costs of owning and maintenance on the
vehicle (which don't entirely vary directly with mileage driven) and it
becomes a smart economic choice to drive Uber even if you're "losing money"
each hour - because your marginal gross profit is higher than if you were
sitting on the couch.

~~~
hyper_reality
I think you're right, and the article's claim that the drivers' ignorance is
being taken advantage of is an unpleasant thing to say. It assumes that the
drivers are financially naive, when in fact there are many legitimate reasons
why they choose to drive.

Many of them are supplementing their income in between other gigs, or enjoy
driving more than other jobs available to them. Others have done well out of
the referral, bonus schemes and tips that the author mentions. There are
various other factors and incentives which the author does not seem to have
taken into account. Much as I dislike the corporate practices of Uber,
implying that the drivers are miscalculating the cost of driving and are
therefore ignorant is a smug overgeneralisation.

~~~
astura
That's Mister Money Mustache's writing style. I don't care too much for him
myself either but he writes for his audience.

~~~
prawn
I liked when he talked about being a retiree, but also about being able to
work like an executive from the back of a car to the airport.

~~~
astura
[http://www.mrmoneymustache.com/2013/02/13/mr-money-
mustache-...](http://www.mrmoneymustache.com/2013/02/13/mr-money-mustache-vs-
the-internet-retirement-police/)

------
jimmywanger
I think one of the reasons that he writes this is that cash in the hand is
extremely appealing if you are not in a good economic situation.

For instance, I have some savings, so I can keep the wolf from the door, and I
have friends and family so I always have a place to stay and at least
something to eat. I won't freeze or I won't starve.

Cash on the barrel every night is extraordinarily appealing to those who have
to buy antibiotics for their kids right away, or who have to make the rent
that day.

I've never driven Uber, but I am given to believe that they settle up debts
every day. Just like why waiters/bartenders like doing what they do. They get
a fistfull of cash every day.

~~~
ec109685
Yeah, they offer instant cash out: [https://www.uber.com/info/instant-
pay/](https://www.uber.com/info/instant-pay/)

Your post was a good one, highlighting the problems the “unbanked” /
“uncredited” face that something like Uber is an antitode for.

------
beisner
I've used Uber and Lyft a lot in the last ~4 years, and I've realized that
there are essentially two different types of drivers: professional, full-time
drivers who hyperoptimize, and part-time/after-hours drivers that do it to
pull in a little bit of extra cash. The hypothetical driver best represented
by this article is of the second type, and no doubt that working this way
doesn't really make you a good hourly wage, especially after the hidden costs
mentioned.

I'd like to see an analysis of profitability for drivers in the first
category. I have met drivers who specifically bought Priuses to drive for
Uber/Lyft because of the 50+ mpg and low-ish maintenance costs - just look at
the ride-sharing section of the SEA-TAC parking garage and you'll know what I
mean. Speaking with this sort of driver, they seem to have done the math on
maximizing return based on surge pricing (i.e. driving in the city
Friday/Saturday 7pm-2am), practice driving that maintain vehicle quality and
fuel efficiency, and are extremely time-efficient in parts of the ride that
are within their control.

If even this sort of driver can't make a good wage, then the system is
certainly unsustainable. But if it's possible to make a good wage in this
fashion, I hesitate to pass judgment before seeing a breakdown of the
distribution of hourly earnings across all drivers.

~~~
dunham
I had a lyft driver tell me that there was a MPG requirement to pick up
passengers at SEA-TAC, which is confirmed by the Lyft web site:

"the Port of Seattle will only allow Lyft vehicles with a blended MPG rating
of 40 or higher to pick up passengers at Sea-Tac."

[https://help.lyft.com/hc/en-
us/articles/217879848-Washington...](https://help.lyft.com/hc/en-
us/articles/217879848-Washington-airport-information-for-drivers)

------
mcguire
" _...but I have seen bonuses pop up on my app offering between $100-$500 to
refer other drivers._ "

Whoo hoo! Multilevel marketing!

" _Provide drivers with the details of where the person is going, or at least
how long of a ride it is. Right now, Uber has all this incredibly useful
information at the time of booking, but deliberately withholds it from the
driver._ "

And have all drivers ignore assignments for short rides?

~~~
trowawee
And fall into the exact same issue that people have brought up with cabs
forever - they just won’t go to some neighborhoods/pick up some groups of
people. That’s a very real selling point for ride share companies to people
who live places or are members of groups that get discriminated against in
that way.

------
chubot
This is interesting. So why are there so many Uber/Lyft drivers? Is it because
there is a glut of unused cars in America and they provide a way to monetize
it?

That is, if you aren't actually paying for the car's costs, then it IS your
profit.

~~~
astura
Because

1) People don't understand the true costs of ownership and driving and think
they are yielding the entire cost of the fair.

Or

2) They enjoy driving, getting paid for it is a bonus.

Or

3) They don't/can't have "regular employment" for whatever reason and want to
make some money in their spare time, even if it's just a little. Like some in
college who only works during breaks or weeks when the courseload is smaller.

Or

4) Someone who is employed but only drives when they are bored on the weekends
rather than watching Netflix or going to the pub.

Of course #3 becomes self perpetuating at scale.

For #1 - story time: I had already decided I was going to buy a new car, which
car I would buy, and that I was going to finance it. I was trying to squeeze
another year out of my current car first tho. My sister was absolutely baffled
by this and couldn't understand that this would save me money. No matter how
much I tried to explain it she didn't "get" it.

From TFA: >"Imagine developing a company specifically to take advantage of
people’s ignorance of how expensive it really is to drive their own car. What
would this company look like?“ (the answer is of course that it would look
like very much like Uber or any other ridesharing company)

~~~
chubot
But my question is how people live in the Bay Area on $5 an hour. Where is the
difference coming from? Debt, parents, unused car etc.?

~~~
nikanj
They don't live there, they just come there to drive.
[http://www.sfgate.com/business/article/When-Their-Shifts-
End...](http://www.sfgate.com/business/article/When-Their-Shifts-End-Uber-
Drivers-Set-Up-Camp-10876374.php)

------
jimmywanger
One more thing.

Uber is pouring huge amounts of money into this business. And it's not
profitable.

I shudder to think what will happen when all the subsidies are removed. If you
don't have any assets besides a clean driver's license and a recent car, you
got nothing coming.

~~~
ghaff
I'm not sure they can realistically cut what the drivers are earning by much.
What seems more likely is that fares rise to $2-3 per mile (or whatever
number), which puts them more in line with traditional cabs, and let ridership
fall where it may.

~~~
jimmywanger
Maybe that matters psychologically, but not in bottom lines.

Drivers might be fooled for a bit, but once the fares rise, I'll be willing to
bet the driver network collapses. They're not that stupid. If slinging burgers
is more lucrative than driving Uber, they'll be slinging burgers.

~~~
ghaff
That's fair. Less work for no more money on a per-ride basis. The driver
network will certainly decrease. Not clear what the overall dynamics look
like. I do think that prices need to get to breakeven in the fairly near
future and self-driving isn't going to make a difference in an interesting
time horizon.

------
paulpauper
the author makes the implicit assumption that someone can find a better way to
make money and that driving for uber comes with a large opportunity cost, but
that is not always the case. $5/hour driving pays more than an hour watching
TV ding nothing.

------
bluedino
A friend of mine is about to start delivering/shopping for Shipt, I'd like to
see a similar breakdown.

Heck, I'd like to see what pizza delivery drivers costs are as well.

------
alexasmyths
“Imagine developing a company specifically to take advantage of people’s
ignorance of how expensive it really is to drive their own car. What would
this company look like? “

This has always been my #1 complaint about Uber.

Their business model is like payday loans. It's not that 'it . can only work'
like this - but given human nature and competitiveness - 'it will effectively
work' like this.

Too many drivers will forgo the 'wear and tear' calculation and drive the
price down.

It has an effect much like migrant labour (nothing to do with the 'migrant'
aspect per sey - just that they are paid under minimum wage) - once a few
farms start doing it - the rest of the farms are forced to follow suit or go
out of business.

It's just bad for everyone.

I wish there were a way to make sure that drivers were comped a min gas + wear
and tear + servicing and THEN wages - and if that was not above min. wage then
Uber would have to up the comp.

~~~
ec109685
Driving full time for Uber costs $214 a week in maintenance and depreciation
costs (minus Hertz’ profit):
[https://www.hertz.com/rentacar/misc/index.jsp?targetPage=Ube...](https://www.hertz.com/rentacar/misc/index.jsp?targetPage=UberFAQs.jsp)

That is way less than the 50 cents a mile that the author cited.

Agree Uber could calculate that and provide that info to drivers, which would
be useful.

~~~
alexasmyths
Surely it's below 50 cents a mile ... but it's 'something' an whatever it is,
I suggest that drivers will delay the costs.

------
chx
Interesting. So they are not only hurting the entire society by weakening the
rule of law (google "greyball") but their drivers as well. Wonderful company.

