One of the most basic tenets of good business practice is knowing your expenditure. While you might know what you earn, and you do know the basic expenses of operating your ride-share business, most drivers are oblivious to the many expenses that add up over time.
Sure, Uber and Lyft will tell you how much they think the expenses are, but in reality, it’s different. Here is our list of expenses and how to evaluate your business expenditure to get a true picture of your profit and loss.
Car Value
Cars have some hidden costs, sure you all know the price of gas, maintenance, replacing tires and insurance fees. What about depreciation and car market value.
A brand new car will depreciate by 20% in the first year and then around 15% (or more) annually depending on the model. While the car depreciates, its maintenance goes up. The older the car, the more you need to fix and replace. The so-called “golden rule” “”Cost Value nexus point” is around three years. A 3-year car has depreciated by around 38-45%, and it has not yet reached that maintenance black hole stage.
Car costs are based on these factors:
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Car purchase price including fees -
Annual interest on loans (not in the car price) -
Annual Depreciation -
Annual Insurance costs -
Monthly gas expenditure -
Yearly maintenance -
Monthly cleaning -
One time purchases spread of the cars life cycle -
The time your car parked as averse to the time, it was working.
Let’s look at a few cars and consider each one’s value as an option; the car details were inserted into an online car calculator http://www.masilabs.com/jcarcost3.html which is an amazing calculator. However, remember the above list we posted, you will need to add those costs into the equation. (Even a professional calculator didn’t take into account cleaning and gadget costs!)
Make: Mercedes, Model: C300, Year: 2018
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Price: $41,245 MSRP -
Rideshare category: Uber Plus -
Miles Per Gallon: 21 -
Cost per mile (not including cleaning and gadgetry): $0.17
Make: GMC, Model: Yukon XL, Year: 2015
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Price: $61,925 MSRP -
Rideshare category: UberXL, Black, SUV, Lyft Plus -
Miles Per Gallon: 12 -
Cost per mile (not including cleaning and gadgetry): $0.27
Make: Prius C, Model: Toyota, Year: 2017
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Price: $24,685 MSRP -
Miles Per Gallon: 12 -
Cost per mile (not including cleaning and gadgetry): $0.09
Toyota Prius is perhaps one of the most common cars being used by ride-share drivers; this is due to their unique economic gas consumption saving abilities.
It is obvious from the above prices that the price is directly related to the cost per mile; any mathematical genius knows that. However, by adding on all the other expenses, you get a true value per mile, which should shade the decision you make for your next rideshare car you buy.
Breakdown of costs per mile using the Toyota Prius C 2017 model over 36 months driving 50,000 miles a year.
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Car purchase price including fees: $24,686 -
Annual interest on loans (not in the car price) 3.79% -
Annual Depreciation 15% -
Annual Insurance costs $1,350 -
Gallon of Gas $2.35 -
Miles per gallon 50 -
Yearly maintenance $800 -
Monthly cleaning $25 -
One time purchases spread of the cars life cycle $250 -
The hours your car is actually operational (not parked) 4
Total cost per mile, based on these additional costs: $0.29
This is for 4 hours of driving a day!
Note, this calculation of 4 hours is for average driving, if you are a professional driver, you will reach maybe 6 hours maximum, and that is with 100% continuous driving. We added parking time; NO ONE has ever added parking time! Realising parking time is important, it means that 83% of the time your car is not working, but the costs are constant. So the income you generate in 17% of the time your car is operational covers the remaining 83% it is stationary. Now isn’t that inefficient?
The time wasted in parking leads us to consider sub-leasing to another driver, maximising time on the road to maximise value per mile.
Leasing Issues
With Uber’s latest Xchange lease program, leasing has reduced prices drastically. The above figures reflect this since we used the Xchange lease figures for the calculations. Uber has solved the downpayment, and monthly installment issues have cleared up the early return and have connected drivers to many lease options that were not available before.
Uber Costs
So far we have only discussed direct costs, now let us look at the indirect costs, or the Uber administrative costs: 25% for UberX, Select and Black and 28% for SUV and Lux.
Why is this important? After all, this article is about the expenses of running a car. Well, Uber is an expense. You might charge your customer and receive a nice income, you will deduct your expenses, but remember, your income comes at an administrative cost. So, calculate the Uber 25% in numbers and add it to your annual expenditure then break it down into an hourly charge.
Let us say that you earned $80,000 in NYC last year, based on 30 hours per week. That means Uber takes $20,000. The Uber fee is $0.4 per mile, so your actual cost per mile is: $0.69
From now on, when you calculate your gross earnings, calculate and deduct $0.69 per mile, and you will have your actual profit – before tax!
Yes! TAX…IRS, don’t forget to add that at the end of the year. For anyone earning $80,000 per annum, even after taking off all the expenses, you are still in the 25% tax bracket.
OK, got the picture? After all this, you must remember that even after you reduce all your income through expenses, you will still have a 25% tax to add to the rest, now add that to your $0.69, and you will finally reach the exact cost per mile!
Good Luck.