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

dctcmn

Well-Known Member
Okay, you can say I'm being picky. But...

You need to account for that to have an accurate measure of how much PROFIT you are netting. We already know what the _revenue_ is. Revenue is what Uber sends you. Subtract your costs from that to get your net profit.
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.
 

NOXDriver

Well-Known Member
You cannot fix a vehicle forever.
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.

Good news, there is this calculator for partially identifying true net profit... https://uberpeople.net/pages/EarningsCalculator/

(mark "none" for Uber Commission if you are going off of after-commission take-home pay for the calculation)

View attachment 288043 i.e.

... and these are about right, I used two-fifths (under one-half) of a tank and that would cost me about 15 bucks at the pump to refill. The numbers would be lower if I didn't include some tips in the "fares" calculation.

Now this needs to be paired with a car costs estimator.
Your market has an average ride of over 16 miles???? 145miles/9rides???

I call BS on your numbers.
 

MadTownUberD

The Trendy Transporter
Moderator
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.
Do you have a body shop? I'm assuming it snows in Harrisburg PA.
 

oldfart

Well-Known Member
Yes, but the more miles you put on it, the quicker you will need to replace it. 1.2% of vehicles last until 200k and .2% of vehicles last until 300k, so every mile you put on your vehicle brings it closer to death and the need for replacement. You need to account for that to have an accurate measure of how revenue much you are truly netting by doing this.
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
 

oldfart

Well-Known Member
Okay, you can say I'm being picky. But...

You need to account for that to have an accurate measure of how much PROFIT you are netting. We already know what the _revenue_ is. Revenue is what Uber sends you. Subtract your costs from that to get your net profit.

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

Depreciation matters for accrual basis. Most drivers and individuals use cash basis, so a non-cash item, like depreciation, isn’t relevant.
Thank you

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

I call BS on your numbers.
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
 

Fozzie

Well-Known Member
Your market has an average ride of over 16 miles???? 145miles/9rides???

I call BS on your numbers.
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.
 

DrivingForYou

Well-Known Member
I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.
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.
 

reg barclay

Well-Known Member
Moderator
I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.
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.
 

Dammit Mazzacane

Well-Known Member
Your market has an average ride of over 16 miles???? 145miles/9rides???

I call BS on your numbers.
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.
 

jenijazz

Well-Known Member
I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.
What you "plan" and what life gives you are often quite different things...
 

Mordred

Active Member
  • Thread Starter Thread Starter
  • #32
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.
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.
 

MadTownUberD

The Trendy Transporter
Moderator
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.
Outstanding. You must be a fellow MBA.
 

Fuzzyelvis

Well-Known Member
I plan on fixing my car and keeping it for a very long time.. Seems kinda like considering the value of my half eaten cheeseburger. It doesn't matter I have no plans on selling it.
I never planned on selling my last car. But then a drunk intervened and it was totaled.

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.
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.
 

Crosbyandstarsky

Active Member
For tax purposes, depreciation is a real thing. But once you have fully depreciated your vehicle and your resale value is less than $3000 (IMO) then I dont consider it a real cost anymore.

I have people play devils advocate to my thinking all of the time and they are entitled to their opinion. In my situation, I bought a $5000 minivan, put in a $800 radio and $1850 in repairs so far. Since I purchased said van for doing Uber, I have made almost $30000. The Beast owes me nothing to this point and everyday I keep it running is all white meat....

I consider $5/hr for my gas, repairs, insurance as my depreciation.
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
 

Mordred

Active Member
  • Thread Starter Thread Starter
  • #36
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
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
 
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Fuzzyelvis

Well-Known Member
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. Never total the car out... What does it matter what the value of the car is? Depreciation means nothing
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.
 

Mordred

Active Member
  • Thread Starter Thread Starter
  • #38
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.
Yes. Chalk that up as routine maintenance. I say roughly 6k a year covers everything.
 

MadTownUberD

The Trendy Transporter
Moderator
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.
 
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