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Why do people care about depreciation so much?

Discussion in 'Advice' started by kay_, Dec 6, 2016.

  1. ABC123DEF

    ABC123DEF Well-Known Member

    Location:
    Southeastern USA
    Driving:
    UberX
    You're welcome. Yes...water truly is wet and the sky is blue. The world is also round and grass is green, too.
     
  2. renbutler

    renbutler Well-Known Member

    Location:
    Indy North Suburbs
    Driving:
    UberXL
    Not old vechicles, which is why I drive, well, old vehicles.

    My most recent purchase, this past summer, was a 2006 with 70k miles. According to edmunds.com, it depreciates a minuscule 1.64 cents per mile.

    Oh, and I haven't paid a single penny in maintenance yet in the first 5,200+ miles (although it will be due for oil soon -- just like any new vehicle -- and a brake check).
     
    circle1 likes this.
  3. jfinks

    jfinks Active Member

    Location:
    KS
    It's not the math, it is the general accounting principles that are severely lacking in this thread.

     
    circle1 likes this.
  4. Tedgey

    Tedgey Well-Known Member

    Location:
    Los Angeles
    Driving:
    UberX
    You've addressed the depreciation issue without really thinking about it. You bought a cheap azz clunker hunker of crap which is a decision I commend you for, and so depreciation won't affect you as much as someone with a newer car.

    But don't kid yourself, depreciation is not simply theoretical. It's real and you should still be depreciating your cheap car every month if you want to keep accurate records. I believe you can depreciate down to 20% of the purchase price. I didn't read the rest of the thread but hopefully somebody will know the specifics.
     
  5. Tedgey

    Tedgey Well-Known Member

    Location:
    Los Angeles
    Driving:
    UberX
    Amortization is not the same as depreciation
     
    Dammit Mazzacane likes this.

  6. Tedgey

    Tedgey Well-Known Member

    Location:
    Los Angeles
    Driving:
    UberX
    You know it's funny that you're so smart and I'm so dumb yet you're paying rent and I'm paying mort... oh wait, I paid my house off.
     
    circle1 likes this.
  7. Blackout 702

    Blackout 702 Well-Known Member

    Location:
    Las Vegas
    Why so glum, chum? I really don't get the personal attacks over differences of opinion. When someone is losing an argument they go from the simple math of it to muddying the waters with unrelated issues to silly personal attacks to whatever that last post from you is.

    Reasonable people can disagree. I'm sorry that you are so insecure and easily upset. Try getting some fresh air.
     
    eXperiment and werty like this.
  8. Tedgey

    Tedgey Well-Known Member

    Location:
    Los Angeles
    Driving:
    UberX
    Yeah I guess I've been excessively confrontational. My apologies
     
    eXperiment, Shangsta and Blackout 702 like this.
  9. Tedgey

    Tedgey Well-Known Member

    Location:
    Los Angeles
    Driving:
    UberX
    I'll do that. In my backyard.
     
    Disgusted Driver likes this.
  10. Blackout 702

    Blackout 702 Well-Known Member

    Location:
    Las Vegas
    Now that wasn't so hard, was it? I'm glad that at least you can tell the difference between facetiousness and ad hominem.
     
  11. Disgusted Driver

    Disgusted Driver Well-Known Member

    Location:
    Raleigh
    Driving:
    UberSELECT
    Drop the mike!
     
    Fuzzyelvis likes this.
  12. Atom guy

    Atom guy Active Member

    Location:
    CT
    Most Uber drivers are part time, using their personal vehicle. So they are deathly afraid of depreciation. Full time drivers have a car just for Uber, so it is just a piece of machinery to be used for business, nothing more.
     
    SuperStar3000, werty and circle1 like this.
  13. Shangsta

    Shangsta Well-Known Member

    Location:
    Seattle

    You cant deduct mileage AND depreciation unforunately
     
  14. I guess the chimp is right when you really think about it. Drivers make so little after deducting all of the other expenses that piling depreciation on top of it is just throwing matches on a bonfire.
     
    eXperiment likes this.
  15. Blackout 702

    Blackout 702 Well-Known Member

    Location:
    Las Vegas
    Yes! I mean No! Wait, what?
     
    Stephen likes this.
  16. Shangsta

    Shangsta Well-Known Member

    Location:
    Seattle
    If you drive for Uber fulltime your car wont last very long. Most FT drivers project 30 to 40 miles a year.
     
  17. Trebor

    Trebor Well-Known Member

    Location:
    Bellaire
    Driving:
    UberSUV
    You hit the nail on the head.

    I myself hate when people talk about deprecation. If it was not for the car, you would not make any money. The drivers who are worried about deprecation are the ones who are likely upside down on their loans and can only see their car as a liability and not asset. The truth is, your car is an asset. If you have a car that you can put on 200,000 miles, you should be able to generate at least $100,000 in revenue if your city's market is at least 50 cents a mile. How fast it takes you to rack up those miles/how many dead miles you have is up to you.

    I also love when people calculate their expenses with the IRS mileage rate and not actual expenses. The IRS rate although (I would think heavily researched) is a huge number that has some padding behind it since it has to cover every car/truck/suv. On top of this, every car (even if same year/make/model/trim is different. One car might have its engine blown out before 50,000 miles, and the next car on the production line may last for 200,000 miles without the smallest engine problem. If you think it actually costs 54 cents a mile to run your car, your wrong and quite frankly dumb.

    The 2016 rates are as follows:

    54 cents per mile for business miles driven
    19 cents per mile driven for medical or moving purposes
    14 cents per mile driven in service of charitable organization

    Why would it cost 54 cents per mile for a business and 14 cents per mile for charity? Does your car magically get better gas mileage? Do your parts magically last longer when you drive for charity rather than business? No. If anything its backwards. Driving for business is likely less strain on a car than loading your car up full of furniture or driving yourself to the hospital and vomiting/bleeding on your seats. In service of a charitable organization is a wide range, but you will likely find your self transporting furniture or patients to the hospital.

    You can not ignore the fact that your car is the biggest expense you have while driving for Uber. But if your thinking about deprecation, your worried about the wrong thing.

    You see.. OP has the right mindset. Buy a car and do not expect it to be worth more than scrap when you trade up for a new(er) car. If your able to get something for it cool. That's a bonus but the key is to find the best deal imaginable. I wish our city would allow salvage titles to be used for Uber. It would make shopping for a car a whole lot easier.
     
    Blackout 702 likes this.
  18. elelegido

    elelegido Well-Known Member

    Location:
    Varies
    25% correct.

    water truly is wet - can't argue with that
    the sky is blue - not at sunset/sunrise
    the world is also round - almost
    grass is green, too - not where I buy mine
     
    Stephen and circle1 like this.
  19. Disgusted Driver

    Disgusted Driver Well-Known Member

    Location:
    Raleigh
    Driving:
    UberSELECT
    I can't bear it anymore! Depreciation is real, depreciation matters and many of you have no idea what it really is so here's the deal as best I can explain it:

    Definition: Depreciation: a reduction in the value of an asset with the passage of time, due in particular to wear and tear.

    What does this mean to us in Uber land. Forget about taxes, forget about IRS mileage rates, forget all of that crap. It's really simple and at the same time a guess because you can't know till after you are done.

    It's the value you lose in your car for the miles you drive for Uber as we are discussing it. If I but a car for 10K, drive it for 100K miles and sell it for 5K, it depreciated by 5K. 100K miles/5K dollars means that my depreciation in this example is .05 per mile. This is JUST an example. If you are great at buying used cars and great at selling them for a good price, your depreciation may be much lower. If you buy a new car and run it hard, your depreciation will be much higher. Bottom line: We all have depreciation expenses. We may not know exactly what they are until after the fact but you can estimate them fairly accurately by estimating your mileage and how long you think car will last them plugging those figures into kbb.com or something similar.

    Again, it has nothing to do with the IRS mileage rate in reality, that's a gift from the govt, a padded guess of all of your expensesthat is overestimated unless you are driving a hummer and only driving 8 miles a day. If you buy a car for $1,000 and put 100K miles on it and then sell it for $100 for scrap, good for you. Your depreciation is only .9 cents (less than a penny) per mile. That's the way to Uber! Not all of us can do that so for many of us our depreciation cost is higher, particularly if you drive select or something like that. In my case, I've driven an extra 50K miles ubering and that appears to reduce the price of my vehicle by roughly 4K so I'm at about 8 cents per mile for depreciation (which is well worth it when I get an .70 a mile). By the way, this does not include maintenance, depreciation is just about the value of your car or asset.
     
  20. elelegido

    elelegido Well-Known Member

    Location:
    Varies
    You're correct in that depreciation as a proportion of revenue can be small. But your example of buying a new car and putting 200,000 Uber miles on it is extreme, and would only apply to a very small percentage of drivers.

    The point about depreciation is that it can be either very small (as a percentage of revenue) or it can be very large, and for drivers to do the math. Example - I had an Xchange Prius C. It cost Uber $19,500 to buy. When I'd finished with it 12 months later it had 45,000 miles on it. If I owned the car and wanted to sell it to a private party, KBB said that it would be worth $12,500. That would have been a massive $7,000 hit in depreciation in 12 months. $583 per month, to be exact.

    But my example is also an extreme, in the opposite direction to yours. Right now I drive a $4,000 car with 225,000 miles on it, on which I can put 50,000 more miles and resell it for $4,000.

    So when people mention depreciation, it's not that people are saying all depreciation on every car will be a killer for every driver. The point is to be aware of what it is and how it affects one's own profit.
     
    eXperiment, circle1 and Trebor like this.

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