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Is vehicle depreciation a real cost to be considered if you never planned on selling your car?

Discussion in 'Advice' started by Mordred, Jan 5, 2019.

  1. It's just terminology. I prefer Gross Revenue and Net Revenue for daily/weekly/monthly operational metrics. I don't think that actual profit can be accurately measured until all taxes are paid for the year, but it's important to have solid interim numbers-- that's where gross rev and net rev come into play for me.
     
    weykool likes this.
  2. Sure you can. My 1942 Ford, 1943 GMC and Chevvy are proof of that. My 2005 is needing some parts, but parts for a 2005 are 1/10th of a 2019 and the Internet is full of how to's and whats wrongs with a 2005, a 2019 is an unknown variable.

    In the past 30 days:
    front struts $60
    rear springs $20
    rear sway bar links $9
    2 new tires and alignment $210

    That's still less than a THIRD of a new car payment.. and that new car is depreciating faster than I am buying parts for my old car.

    Of course this assumes you can do your own wrenching. If you have to pay a mechanic than none of this works out in your favor.

    Your market has an average ride of over 16 miles???? 145miles/9rides???

    I call BS on your numbers.
     
    doyousensehumor likes this.
  3. MadTownUberD

    MadTownUberD Moderator

    Location:
    Madison, WI
    Driving:
    UberX
    Do you have a body shop? I'm assuming it snows in Harrisburg PA.
     
  4. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL
    no,you dont need to account for depreciation to have an accurate measure of how much you are truly netting... You will know that when the car finally craps out or when you sell it

    what you need to keep track of is your reserve account so you have enough money set aside to unanticipated repairs and for the ultimate replacement of the car... Unless you dont intend to replace the car...I mean at my age I am likely to die before the car does
     
    dmoney155 likes this.
  5. T&W

    T&W

    Location:
    WB
    Depreciation matters for accrual basis. Most drivers and individuals use cash basis, so a non-cash item, like depreciation, isn’t relevant.
     
    dmoney155 and Christinebitg like this.
  6. oldfart

    oldfart

    Location:
    Fort Myers
    Driving:
    UberXL

    Same thing., you dont need to to know net profit, in fact you cant know net profit until you sell the car
    Factoring in a number for depreciation is only an estimate, because you dont know what you sold the car for until you sell it



    Net profit is not an important number for me, except at tax time. and since i use the standard deduction net profit is only important to the IRS

    whats important to me is cashflow and my reserve account... I add to savings on a regular basis so that Ill have enough for unanticipated repairs and another car when the time comes

    Thank you

    sounds about right to me... last week I did 48 uber rides for $921 and 29 lyft rides for $370

    totals $1291 / 77 = $16.76

    my new years resolution is to do more airport rides, so with a little luck these numbers should improve
     
  7. Fozzie

    Fozzie

    Location:
    32779
    Driving:
    UberX
    As a morning airport runner, my average is often comparable to that. (Same market too) My runs this morning were 17.93mi, 22.78mi and 19.38mi. At $1.11 /mile + $0.1875 /min my best money is made with a passenger in the back seat doing 70-75mph down the highway.
     
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  8. DrivingForYou

    DrivingForYou

    Location:
    Los Angeles
    Driving:
    Lyft
    Not correct business thinking. If you drive Uber, you are an independent business.

    When you are a business, you don't plan around "depreciation" you plan around the AMORTIZATION of assets.

    I'm going to use a different business example to make it easy and clear. A plastic injection molded part might use only a couple pennies worth of plastic, say $0.02, and yet still have a "cost" of $5.00

    The reason is the TOOL cost. The steel mold can cost $20,000 to over $100,000. So lets say we need 5000 parts.This is how those costs might work out:

    Cost of plastic: $100.00
    Cost of machine time: $3000
    Cost of tool (mold): $20,000

    TOTAL: $23,100
    Per-part cost for 5000 parts: $4.62

    Even though the actual material for the part is only 2 cents, we have $4.60 is tooling and operating expenses that are amortized over the production run. You can't ignore the tool cost for a plastic part any more than you can ignore the vehicle cost when driving Uber or Lyft.

    When you are driving UBER, the same concept of amortization is true.

    You have your Gas, your Oil, your other repairs and maintenance. And your biggest cost is that of the vehicle. And let's not forget licensing and insurance — costs that are substantially higher for a new vs an 8 year old used vehicle.

    If you buy a new vehicle, even if you plan on keeping it and running it into the ground, you still need to calculate the amortized cost of purchasing that vehicle into your per-mile and resultant per-hour profit. Thinking otherwise is magical fairy dust accounting.

    And still, depreciation is a factor for unforeseen events. If you have an accident that totals the car, or end up having to sell sooner than expected, the depreciation part of the calculation WILL hurt more than expected.
     
    dmoney155, jenijazz and MadTownUberD like this.
  9. reg barclay

    reg barclay Moderator

    Location:
    rockland/westchester NY, new jersey
    Driving:
    UberX
    Well, once it reaches the point where it's only worth scrap rate, then I guess it can't depreciate further. (Obviously the difference between what you paid and it's scrap worth will be your depreciation total, and will just get 'stretched out' over more miles). As it reaches the low depreciation mark (and further), your repair costs are likely to go up. Whether the extra costs of repairs will offset the depreciation benefits depends on a number of things, IMHO ability to do your own repairs will affect that a lot.
     
  10. Listed number of miles is cumulative, includes deadheading and positioning to action areas. Nine rides is correct, excluding cancellations. With cancellations it was about 13 rides from a quick run through the app.
     
  11. jenijazz

    jenijazz

    Location:
    Oakland, CA
    Driving:
    Lyft
    What you "plan" and what life gives you are often quite different things...
     
  12. Mordred

    Mordred

    Location:
    30605
    My point is that depreciation is a potential cost. Not an actual cost. If you never total your car and you never sell your car depreciation never actually costs anything.
     
  13. MadTownUberD

    MadTownUberD Moderator

    Location:
    Madison, WI
    Driving:
    UberX
    Outstanding. You must be a fellow MBA.
     
  14. Fuzzyelvis

    Fuzzyelvis

    Location:
    houston
    Driving:
    UberX
    I never planned on selling my last car. But then a drunk intervened and it was totaled.

    If you never have an accident you don't need insurance. Accidents are only a POTENTIAL cost. So why plan for them with insurance?

    You're still wrong, anyway. The car will be useless faster than it would otherwise be. So the cost will come in when you have to buy another car sooner than you would have.
     
  15. Crosbyandstarsky

    Crosbyandstarsky

    Location:
    Mn
    Are you kidding ? You still need matinee and it goes down in value. It’s alwas depreciating. Where is the money for the next car after that one don’t run anymore? From the depreciation. Some people have such a hard time understanding money they can’t see
     
    MadTownUberD likes this.
  16. Mordred

    Mordred

    Location:
    30605
    Can't the engine be replaced and just keep driving? Why do you have to buy a new car? Replace engine every 4-5 years.. Trans too. Both of which I categorize as maintenance. Never total the car out... What does it matter what the value of the car is? Depreciation means nothing
     
    Last edited: Jan 7, 2019
  17. Fuzzyelvis

    Fuzzyelvis

    Location:
    houston
    Driving:
    UberX
    But now you're replacing parts instead of the car...sigh.

    That's not how it works.

    That's not how any of this works.
     
  18. Mordred

    Mordred

    Location:
    30605
    Yes. Chalk that up as routine maintenance. I say roughly 6k a year covers everything.
     
  19. MadTownUberD

    MadTownUberD Moderator

    Location:
    Madison, WI
    Driving:
    UberX
    At some point it becomes less expensive to buy a newer car (assembly line, efficient production) than an older car (blood sweat n tears, inefficient repairs).

    Not that I know anything about economics.
     
  20. my last two toyota prius were worth beer money when i was done with them, so yeah it matters

    you are simply monetizing an asset until its worthless
     
    MadTownUberD likes this.

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