Please Don't Drive a New Car for UberX

Published by BlogTeam in the blog BlogTeam's blog.

A lot of people see Uber as an opportunity. It's not hard to get the job; you fill out the application on your phone, take a few pics of your car, enter your bank info, and in a few days you're out on the road driving. Better yet, if you don't have a car Uber will help you get one! But driving for Uber isn't like other jobs. This position requires you to be responsible for your own business. Unfortunately many drivers aren't prepared for what operating their own business entails. As a result a lot of drivers oversee the costs of driving. (For a detailed explanation on all costs see this post: http://uberpeople.net/xfa-blogs/uberhammer.5765/) By driving a new car for UberX, a driver takes on the biggest cost of owning a car - depreciation. It is a general consensus on this forum that driving a new car for UberX is a bad idea. It's bad business.

"On average a new car loses 11% of its value the moment you leave the lot" - Edmunds

So you get that new base model Prius. You were smart enough to not get any bells and whistles, and you declined all the add-on upsells. You think you are doing it right by getting a fuel efficient vehicle. When you drive for a living the most obvious cost is gas. So your new Prius... Let's say you get it for a purchase price of $22,000 - that's doing well at the dealership. According to Edmunds by the time you get home your car is only worth $19,580. You lost $2,420 in value on your 10 mile ride home. Ouch. $2,420 is a GOOD month of income driving UberX after Uber commissions and gas cost, even on your Prius. Imagine you opted for a more expensive car! A $25,000 purchase price and you are losing $2,750 by the time you pull into your driveway.

"Depreciation is the largest cost factor by far" - Consumer Reports

So let's say you do get the standard 5 year loan for your new Prius and that you are going to drive full-time for UberX. We will even assume that you drive for the 5 years as your full-time gig. It's safe to say that after 5 years of driving UberX full-time you are going to have 200k or more miles on it. That's TWO HUNDRED THOUSAND miles. Hmmm, in 2020 what's a Prius going to be worth with 200k miles on it? Prius sticker prices have remained constant over prior years - the MSRP of a 2010 Prius was almost identical to a 2015. Right now a 2010 Prius with 200k miles is valued on Kelly Blue Book at $6,440. Hopefully you didn't get any signifcant body damage and maintained it well, or it's going to be less. The $22,000 Prius purchase with taxes and registration cost you $24,500 out the door and has lost $18,060 in value in 5 years or $3,512 a year. That's $293 per month solely in depreciation. Let us not forget other costs of driving - gas, maintenance, repairs, insurance, and registration.

How many people are going to drive 40 hours a week, 52 weeks a year, for 5 years, on the UberX platform. Not many! So let's try a different scenario. With your decent credit you get the Prius at 8% APR and you put your last $2,000 of savings down on the car. You drive UberX on average 25 hours a week, and with your personal driving included you are only putting 22k miles a year on the car. So after 2 years you are done with Uber, you have learned everything about your city, and more about people and partying then you cared to know. It's 2017, and you find yourself with a lifestyle that no longer needs a car, or better yet you no longer need to have a car payment, and you want to sell your Prius. It has 44k miles on it. Kelly Blue Book says your Prius is worth $14,754. Those two years of driving cost you just short of $10,000 in depreciation alone. With $22,500 financed at 8% APR for 5 years your payment is $456.22. That's $10,950 you have paid off on the car. Hate to break it to you, but you are going to be LUCKY to be able to get out of the car without owing anything. That was only 22k miles a year. Imagine you were driving full-time for those two years and put on twice the mileage. Then you are stuck with the car, oweing more than it's value.

We are using the Prius as an example because it's regarded as one of the best bets for a new car purchase to drive UberX. There are a lot worse purchase choices you could make that have more significant depreciation, higher purchase prices, and worse gas mileage. But with gas prices down considerably from recent years it is worth considering regular sedans for UberX as well. Other sedans might get 60-70% of the gas mileage as the Prius but also come with a similar purchase price ratio.

Edmunds provides another statistic that is helpful in understanding the cost of buying a new car to drive UberX. They publish a 5 year cost to own estimate for all new vehicles. In the estimate all the costs of owning a vehicle are included. Cost per mile; A figure showing how much it will cost per mile for the car, with an average of 15,000 miles driven a year for 5 years. The Prius comes in at .46 cents a mile. A baseline Honda Cr-V is .54 cents per mile. A Ford Fusion .57 cents a mile. The Prius ranks at the top of the list for cost per mile. These figures you will notice are similar to the IRS deduction of .575 cents per mile for busines. It's safe to say with a new car your costs of driving are going to be $1/mile for every paid mile. This is assumed by doubling the cost per mile, because for every paid mile you will have one that is not. In most cities you are LUCKY as a driver to take home over $1 per mile after Uber takes it's 20% commission. LA for instance is .90 cents per mile which is .72 cents to driver after Uber's cut. Most newer cars will cost an LA driver more than they make per mile. In LA there is no base fare, and the per minute rate is .18 cents. .18 cents a minute doesn't add up to much, even at 30 minutes of the hour with a passenger in the car it's only $5.40. Hopefully you didn't drive far with your new car with them or you lost some of that too. With a car cost so high and fares so low you are literally driving around in circles, borrowing equity from you car.

http://www.edmunds.com/car-comparisons/

These examples show that as you pay the car payment, the maintenance, the repairs and drive your new car for UberX that when you decide to stop you will have no value in the car. Moreover depending on your car make and model and your mileage - you may have negative equity in the vehicle.

This graph from ConsumerReports.org shows that on averave the overall cost to own a car lessens with age.

car_owner_costs_2012.png

Your cost can be reduced significantly by reducing the depreciation potential of the car you drive. UberX vehicle year requirement in most markets is 2005 or newer. In a lot of cities it has recently changed to 2001 or newer. It's important to take advantage of these older car options for this job. If your city allows 2001 and newer cars then a 2003 or 2004 is a perfect choice. These older cars can be had for $2,000-$3,000 or even less. Remember that's the same amount that you lose in value on the ride home from the dealership in your new Prius. Our veteran forum member UberComicUberComic has been touting his success driving UberX with a $800 Ford Taurus. This is how you can minimize your cost by minimizing your depreciation potential for your vehicle. Uber and Lyft promote their companies to drivers, often showing new cars and saying "make up to $35 per hour driving for us." What they don't advertise is that it's possible for you to drive for them and lose money too. If you want to drive for these companies and make money it is imperative that you minimize your car costs.


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