Uber Drivers, Beware

Those Uber ads are enticing — earn up to $90,000 a year driving your own car on your own schedule.

There’s a lot to like when it comes to freedom and not having a boss. If you are really good at it, you can probably do quite well as far as revenue.

Indeed, the prospect of earning extra money, or even of having full employment, is a great sales pitch. It’s easy to think of all those tasty greenbacks one might earn shuttling other people around. However, few drivers consider the costs associated with driving for Uber, or any rideshare operation, for that matter, when dreaming about working for oneself at hours nobody can dictate.

Those costs can be significant. They can knock as much as 68 percent off a driver’s gross income before he or she pays income tax, according to a research paper I published in June entitled “Towards a Cost Estimate for a NYC UberX Driver.”

The mistaken assumption is that driving for Uber-like services means incurring only costs for gasoline and a few extra car washes. But there are other not-so-obvious expenses. If a driver puts more miles on a car every year than he normally would, it means more repair and maintenance costs. Costs that might be spread out over several years are accelerated into as little as two or three years.

There are other expenses that are not so obvious.

The same goes for “depreciation.” If you put a lot of miles on your car driving for Uber, you likely will get less when you try to sell it.

And then drivers have to buy or lease a new car sooner than they otherwise would. That robs them of what’s called “opportunity cost” — the return they would have made investing that money in the years before they otherwise would have had to buy a new car.

And then there are sales taxes and other fees that some jurisdictions, like New York City, also add on to the tab.

So just how much do all these expenses total? The research pointed to about 38-cents a mile for those in the New York City area, not including Uber’s 20-percent commission, NYC’s 8.15 percent sales tax, a 2.44 percent Black Car Fund Fee, and the opportunity cost.

How does that 38-cents a mile translate to a driver’s per-hour salary? That requires drivers to calculate revenue per mile driven.

The research showed that drivers lose 68 percent of their pre-tax income if they make $1 per mile, 55 percent if they make $1.50 per mile, and 49 percent if they make $2 per mile. Thus, when using Uber’s own study, which imputed gross revenue of around $35 per hour, an UberX driver’s pay could be whittled down to $11 to $17.50 per hour — before taxes.

Think twice before joining the rideshare revolution.

After paying self-employment tax and income tax, assuming a single individual drives full-time, net pay comes out to between $9.50 and $14 per hour. That’s far less than a New York taxicab driver earns, and these costs won’t vary too much for other cities.

The bottom line: There’s plenty to like when it comes to working for yourself, using your own resources, with flexibility to work whenever and wherever you desire. However, think twice before jumping at the chance to join the rideshare revolution. If you do, keep track of all your data so you can calculate just how much you are earning. You may find you are far better off as a passenger.

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