• UberPeople.NET - Independent community of rideshare drivers. It's FREE to be a person and enjoy all the benefits of membership. JOIN US! CLICK HERE

ARTICLE...HOW UBER MAKES ITS DRIVERS PAY

chiguy5839

Member
How Uber Makes Its Drivers Pay
The firm’s reported costs don’t include the cars’ lost value: almost $11 billion.
SHARE

By Ken Wiles and Kep Sweeney
Aug. 13, 2019 6:57 pm ET
Uber headquarters in San Francisco, Aug. 6.
Uber headquarters in San Francisco, Aug. 6.PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

Uber lost $5.24 billion in the second quarter this year and seems to have no clear path to profitability. But even that loss is understated, because a substantial part of the expense is not included in Uber’s income statement and is instead pushed onto drivers: the wear and tear the job puts on their cars.

Most Uber drivers seem unaware of how their job costs them when it comes to the value of their cars. We spoke with more than 50 Uber drivers in Los Angeles, Portland, Austin, Dallas, Houston and Charleston, S.C., in recent weeks and asked them to tell us their revenues and costs. The revenue—the payments Uber made to them—are recorded in detail, but the costs aren’t as clear. The drivers all included gasoline. Some noted the price of water or candy for riders, and a few included maintenance—but only one detailed the loss in value of the car he was driving, and even then only after we inquired about it specifically.

That driver has an accounting background and wanted to make a little extra money over the holidays. He drove a few-years-old Mercedes M Class SUV, which was worth about $20,000 when he began driving for Uber. He kept meticulous records of his total costs, which he netted out against income. He drove for Uber for a couple of months.

When he stopped driving, he had made about $5,000, but the value of his SUV had dropped from $20,000 to about $15,000. Reviewing his records, the driver found that at least 80% of the miles he drove during that period were for Uber, making about $4,000 of the decline in value attributable to his work for the firm. He was going to have to pay for two service visits, higher insurance rates, and new tires sooner than if he hadn’t been an Uber driver—which all added up to somewhere north of $3,000 in additional costs. In short, he was worse off financially than when he started.

For drivers who depend on Uber to make a living, their cars’ loss in value is serious. If a driver carries passengers for 40,000 miles a year and incurs depreciation of 29 cents a mile—the average reported by the American Automobile Association in 2018—the annual expense is $11,600, or $967 a month, $223 a week, $5.58 an hour based on 40 hours a week.

ADVERTISEMENT

For Uber, this cost transfer to drivers is worth billions of dollars. Uber reported about 1.7 billion trips on its platform during the second quarter of 2019. If, as has been reported, the average length of a trip is 6.5 miles, Uber drivers would have provided more than 11 billion miles of rides. Using the depreciation rate of 29 cents a mile—which Uber used in the registration statement it filed with the Securities and Exchange when it went public—drivers incurred nearly $3.2 billion that quarter in costs, many without realizing it.

It gets worse. Drivers are allowed to expense the miles that they drive, which offsets some of the loss, but Uber reports only the mileage incurred when riders are in a car, which may be far less than the total miles driven. The drivers we spoke with only reported the miles reported by Uber and are thus underreporting their miles driven on the job.

Not all of Uber’s reported trips were in cars. Some were on scooters, but let’s assume that 90% were car miles, as that’s roughly how much ride-sharing and UberEats account for in Uber’s business. Not accounting for growth, drivers would absorb more than $11 billion in annual costs.

Once drivers understand that they are liquidating the value of their vehicles, in effect receiving payday loans with their cars as collateral, the effects may be significant. Companies like Uber, Lyft, Grubhub and DoorDash may find it more difficult to recruit and retain drivers unless they raise prices and pay drivers more.

ADVERTISEMENT

Restaurants that rely on delivery will find their revenues under pressure. Even Tesla, which recently announced that it plans to have a million robo-taxis on the road next year, may find it more difficult, since the company doesn’t plan to own the taxis and instead wants owners to make their cars available for rides.

If these services were profitable, these companies would want to own the vehicles. They don’t, and we know why.

Mr. Wiles is a clinical associate professor of finance at The University of Texas at Austin. Mr. Sweeney is managing director of Acceleron Group.

Popular on WSJ.com
ECONOMY

Mortgage Debt Hits Record, Eclipsing 2008 Peak

Read More
TECH

‘My Baby Monitor Is Haunted’: Tales of Parental Fright

Read More
ASIA

Hong Kong Protesters, Police Clash at Airport

Read More
POLITICS

U.S. Retreats on Chinese Tariff Threats, Stocks Soar

Read More
SPORTS

NFL Taps Jay-Z for Social-Justice Issues—and Entertainment Offerings

Read More
WSJ Membership BenefitsCustomer Center
Legal PoliciesDownload WSJ Apps
The Wall Street Journal
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved
 
Last edited:

WindyCityAnt

Well-Known Member
The problem with drivers is they don’t set themselves goals, or completly unaccomplishable ones. I set myself a goal of paying off my car, purchasing another one with cash at 100k miles. My current car can ride easy 200k more at that point. If I can do that. Then I’m good. It’s a hustle. Either you can do it or you can’t.
 

Ankido

Active Member
The theory of my vehicle being depreciated. You are renting your vehicle to drive for Uber. Once your car is paid off, drive it to the ground working until it's time to RENT another vehicle aka purchase a new car. Nobody said drive a Mercedes Benz. I've seen people with Maserati's in the TNP lot with an uber sticker on the windshield. STUPIDITY! If Taxi Cabs can do it with crappy cars, why can't you with a nice oh lets say "Nissan Altima" like the one I have? Cut your losses by using a vehicle people will be comfortable in yet affordable in your pocket. My car monthly is $320. If I average $1200 a week give or take that's nearly 4,000 to 5,000 monthly. Technically, you are not losing here but gaining in my case. Pay your car off as quickly as possible without paying so much for interest. WIN WIN!!!

Paying drivers under $1 a mile should be a crime. I don't know about you with 10,000 rides and have been with Uber for more than 5 years, you probably get over $1 a mile. As for the rest of us I get 0.64 a mile and 0.22 a minute. Close to 0.86 a mile depending on the length of the drive. Miles vs Time is the real debate here. We deal with dead miles all the time. In one week I drove to Indiana twice and Madison Wisconsin once. Imagine the dead miles coming back. The idea is to make more money than the miles spent driving. You will win the day.

Solution: Raise the pay per mile and take the 50% cut. I don't mind. As long as Uber makes money, we make money and have a job. I've surveyed my customers and they don't mind paying DOUBLE because the service is convenient. My Nissan Altima vs those Cabbies I'd win on a ride 9 out of 10 times.

The world is hooked. Now REEL them in.

This is me and my goals.

Bills
--------------
-Internet/TV $210
-Electric $50
-Rent $550 (shared 50/50)
-Car $400 (I pay extra lower interest)
-Insurance $120
-Credit Card $35

Expenses
--------------
-Car Gas $700
-House Food $400 (give or take)

Bills $1,365
Expenses $1100
Savings $1,000 (I end up with more at the end)

Total $3465
Week $866
Day $144
Hour $14

Every month I have over $1,000 in my bank account from savings. Did I lose here? I pay taxes and whatever is left over is my savings for the year.

Your goal should be $150 a day. Well, my goal. If you push for more you can make $200. It's about working hard and being disciplined. If Uber app says you've driven 8 hours, you are done for the day. Want Overtime? Make that uber app hit 10 hours. Theoretically, you are working more than 8 to 10 hours. Sacrifice your time 5 days a week and rest Saturday and Sunday. Love those weekends and make more money? Take a day off that's normally slow Tuesday or Wed. Replace that with Saturday. Hell, if you fall short of 40 or 50 hours of your goal a week; use Saturday to complete those hours. GOALS GOALS GOALS PEOPLE!!!!

Stop blaming Uber for everything. Be thankful there is a job for you to work instead of dealing with a mean boss telling you what to do. Get out there and DRIVE. Stop complaining and just drive. In the end, Uber will bounce and start making money if they hear our voices. Right now, RideShare has a bad business model.

Want to make more money and see Uber thrive? Cut drivers! Too many drivers in Chicago. I hear "We don't have enough" yet the TNP lot reaches 250 a day with a 45min to 120min wait times. No more surges and wait times between rides has increased. That tells you we have too many drivers. Cut those low rated drivers and fire them. Lock anyone from being hired and see how it goes from there. Hell, might want to even go hourly who knows.

In the end, you are making money and putting a roof over your head no matter how you do it. The real question is, how much money do you want to make? A doctors money, lawyer or successful business owner? You are a driver brah, what do you expect to live in a mansion and take vacations every other month? Wake up!

Note: I worked for a handling company dealing with New Zealand. I made $13.50 an hour. My paycheck was $850 every two weeks. I make that and more in a week. Appreciate what you have before it's over.
 
Last edited:
Top