Have you ever thought about driving for Uber but not sure if it is a good fit for you? My husband, John, recently decided to give it a try while I was out of town visiting friends for the weekend. Below is a summary of the good, the bad, and the ugly about driving for Uber, starting from the very beginning of the process.
Applying for Uber was a surprisingly easy process. I should note that other than a speeding ticket from approximately four years ago, John has a clean driving record. You can find a link to the application here. Qualified candidates will need to meet the following requirements:
- 21 years of age or older with 3 or more years of US driving experience
- Or, 23 years of age or older with 1 or more years of US driving experience
- A valid driver’s license
- Valid vehicle registration
- A clean driving record and criminal history
After you make it through this initial application, there will be a background check for looking seven years back for the following information:
- No DUI or drug-related offenses
- No fatal accidents
- No history of reckless driving
- No criminal record
After the initial application, John was told that he would need to provide three references. Over the next few days, he spoke to some potential references. When he went back to include this information he was informed that he had already been approved in light of his clean background check. That was it! Then he just had to wait for his sticker to come in the mail, which takes approximately seven days. In the interim he had the option to download a pdf version to print, but he decided to wait for the sticker.
Next, he downloaded the Uber Driver app. This is a special app that is separate from the normal Uber app. He was able to input the final information with his photograph and his banking information. The amount he earns automatically transfers from the Uber Driver app to his checking account every so often. At that point, he was ready to drive.
Once everything is ready to go, the Uber Driver app remains in the “offline” setting. You can open up the app and see whether you are ready to drive. Once you decide that you want to start driving, you simply click the button at the top of the app to transition your status from “offline” to “online”.
John’s first day of driving was on Saturday August 12, 2017. We live in North Carolina in a medium-sized city. Our cities’ population would be considered average compared to other areas across the United States. Those who liver in larger urban areas can typically make more money due to the higher population density along with other factors. In the alternative, those in more rural location where there is a smaller population may not be able to make as much money.
He started driving at 3:35 pm in the afternoon and drove until 6:30 pm. Then he took at break for dinner, subsequently returning to driving from 8 pm until 1:15 am on Sunday. During this almost eight hours of driving, he covered 226 miles. This includes his mileage waiting for riders or when he headed home after his “shifts”. During his first shift there were lag times between rides since it was earlier in the day. Although you are paid for this wait time, the pay is minimal. However, as the night went on, there was an increase in a demand. There was a country music concert at a local outdoor stadium on the evening John drove which resulted in a surge in pricing.
For those who are not familiar with Uber, surge pricing occurs when there is a gap between the number of individuals looking for rides compared to the number of available vehicles. Due to the lack of supply, the price of the drive will “surge” by a certain percentage. What you may not realize is that on the other side of the app, the Uber Drivers are able to see where the surge locations are occurring. Since this increases the driver pay for the same amount of work, it encourages those who are “offline” to go “online” and other drivers to head towards the area with the surge. This should allow the market to equalize overtime.
Below is a quick summary of his afternoon drives:
||10 min 45 sec
||$5 app/$2 cash
||10 min 7 secs
||26 min 31 secs
As you can see, the tips dramatically impacted what he was able to earn. Without tips, then he would have only made $17.64 over an almost three hour period. That would equate to an hourly rate of $5.88, below the minimum wage. With the tips, his hourly wage increased to $9.88. John noted that the afternoon felt like a waste because he spent so much time sitting and waiting for someone to request a ride.
Moving to the evening shift, below is a summary of his earnings:
||18 min 12 sec
||23 min 37 sec
||11 min 9 sec
||15 min 45 sec
||10 min 53 sec
||11 min 48 sec
||21 min 52 sec
At the end of the night, riders were readily available. There was actually an option to have another ride prepared before you even drop off the prior rider. His total earnings were $74.10 over this period, or $14.11 per hour. However, the last two riders in the chart above were surge riders. Thus, he earned 57% of his income in the course of two rides which totaled a little over half an hour. Without these last two rides, he would have only earned $31.94 over three and a half hours or $9.15 per hour. As you can see in the image to the right, the surge pricing increased his revenues by 200%.
As far as the passengers, as the night goes on they tend to get more interesting. Well, maybe more inebriated to put it frankly. There is the increased risk that someone could get sick while in your vehicle. Luckily that didn’t happen to John, but after having a couple of passengers who were clearly intoxicated he decided to call it a night.
It is important to be cognizant of the costs involved when driving for Uber. There is obviously the costs associated with owning a car and cellphone. These include car insurance, parking costs, any vehicle financing payments, and our cell phone contract. However, these costs are ones that we would incur whether or not John drove for Uber. So we didn’t really factor these into our analysis. However, for anyone who may not currently have a vehicle, these are costs that you would certainly want to consider.
The most obvious expense as a driver is the cost of fuel. In regards to mileage, my husband drove 226 miles while driving for Uber. This is not all reflected in the chart above, because it includes the time he drove around waiting for rides as well as the miles he drove to get back home after each shift. His vehicle gets approximately 25 miles per gallon in the city. Gas costs approximately $2.20 per gallon in our area. This means that he spent approximately $19.80 in gas. This is almost 20% of his total earnings.
Another cost, which may not be as readily apparent is the increased vehicle maintenance costs. If you are driving an extra 200 miles per week while driving for Uber, that would mean an extra 10,400 miles per year. Assuming you have your oil changed every 3,000 miles, you would be getting almost four extra oil changes a year as a result of driving. Additionally, the car is going to experience wear and tear over this period as far at the transmission, battery, brakes, etc. Although this is a long term expense which may not seem as concerning, it can certainly add up overtime.
The economics major in me can’t leave out the opportunity cost of my husband’s time. Every hour spent driving is an hour that could be spent doing something else. Whether that is spending time with the family or working around the house, there is value to the time that you spend driving. With me being out of town, John would likely have spent most of the weekend on the couch so the opportunity costs were relatively low. However, that is another factor to consider since time is a valuable resource.
As an Uber driver you are an independent contractor and paid on a 1099. This means that the income you received is not taxed. You definitely want to plan ahead and set a portion of your earnings aside so that you are prepared for this future expense.
On the other side of things, there are some tax advantages to driving for Uber. There are a number of possible tax deductions that you can take advantage of come tax season. To do so, you will want to make sure that you actively document your mileage, phone bills, and maintenance costs.
Check out this link to learn more about the tax implications of driving for Uber and to make sure that you are tracking the relevant information that you will for your tax return.
Over this almost 8 hour period, John earned $108.64 which includes his $7 in cash tips. However, as previously indicated, his gas costs for that period were approximately $19.80. This means that his revenues were about $88.84. Divide that over an eight hour period, he earned approximately $11.10 per hour before taxes.
Ultimately we decided that it is definitely something that we will continue to utilize, but we need to do so in a way that works for us. That means that he likely won’t drive in the afternoon unless there is an increased surge for some sort of local event. That being said, our goal is to put an extra $200 a month towards his loans to decrease the payment timeline by two years. So he will probably consider doing it a couple of times per month to help contribute towards that expense.
I think it is definitely worth giving it a try, but just make sure that you are aware of the hidden costs outlined above. If you want to learn more about the topic, then I would check out this article. Although it can be a profitable endeavor, the cost can outweigh the benefit if you aren’t careful.
Let me know if you have any questions!