There are many articles and promotional pages about Uber incomes, some claiming you can make tens of thousands of dollars a year. We decided to look into the actual income and expenditures that an Uber driver can make a year. This article will be split into two parts, the Uber income model, and the Uber driver expenses model.We will then deduct the latter from the former and receive the exact income to expect from driving with Uber.
Uber income model
Uber fares are made up of three components, the booking fee, the cost per minute and the cost per mile. Passengers get an upfront quote, and your income is based on the pickup point to their destination calculation. Prices vary per city and per country so we will choose LA, USA, for our point of reference.
An 8.5 mile trip:
- Booking fee: $1.65
- 26 minutes for travel at 15 cents a minute = $3.90
- 5 miles at 90 cents per mile = $7.65
- Total paid by the passanger = $13.20
It is gross income to Uber, not to you. Now we calculate how much you will receive from Uber for your time.
Remember that you are not paid for Period 1 and 2 time (The time you have no fare to the time you receive a call to a fare). You only get paid from the moment the fare enters your car as a passenger (Period 3).
Deduct Ubers booking fee = $1.65
Deduct Ubers 25% commission = 25% x $11.55 = $2.89
Your gross income for a 26-minute ride is $8.66
The gross income per mile (8.5 miles driven) = $1.018
With an average of 3 minutes per mile.
Why is it gross income, because you still have to deduct expenses (direct and indirect) as well as taxes. We will discuss this in the next part of this article.
There are some extra income factors that you must add, surge prices and prime time as well as guarantee bonuses. We won’t delve too much on these, just concentrate on the Surge prices, since they occur more often.
Surge income is a multiplication factor, for instance, it can be 2X surge multiplier, this means that for the same 26-minute trip you will get $17.32 which is exactly double.Surge double pricing is common during surge times, that is why many Uber drivers try to learn surge patterns to beat the queue.
So now we have the calculation, which is quite simple. Let's look at the average income on a monthly basis. This, of course, depends entirely on the driver. How many hours they decide to invest in ride-sharing will ultimately decide how much money they make a month.
Remember that drivers have to combat such issues as lull times (period 1), driving to the passenger (period 2) and waiting for late passengers (also period 2). The only time an Uber driver makes money is during period 3 when the passenger enters the car and they start to drive to the destination.
The average income will be around $15 to $20 per hours; this takes into account surges and lulls. So, if you work 4 hours a day for 26 days a week, which is 104 hours, your gross monthly income will be between $1,560 to $2,080. This adds up to $18,720 to $24,960 per annum. Remember, this is gross income, before deduction of expenses and taxes.
This calculation is for rideshare drivers that do not work a full day. As mentioned above, if you work a full day and work 6-7 days a week you will earn more. The question is how to balance your life and your work load.
Uber driver tips
What we didn't include in these calculations are tips, since this is an unknown variable that is different for every driver.
Uber driver Expenses
There are direct and indirect expenses. Direct expenses are those purchases made to assure the cars worthiness and your safety. These include gas, car maintenance, car washes depreciation, lease or loan repayments and rideshare insurance. The indirect costs are those items that make the ride more comfortable and include the additions you made such as dashcam, entertainment system, upholstery, vomit bags, cleaning items, food and drink taken during work hours.
Breakdown of costs per mile for Toyota Prius C 2017 model
- 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 $2,250
- The hours your car is operational (not parked) 4
Total cost per mile, based on these additional costs: $0.31
This is for 4 hours of driving a day
Net income per mile/month
We now have the gross income per month, or per mile, it was $1.018
We deduct the expenses, and we now get $0.708 that's 71 cents a mile income!
So, if you drive an average of 104 hours a month, at a rate of 3 minutes per mile, you are in fact driving a total of 2,080 miles which means you earn before tax a total of $1,476.80
Now comes the end of the year, you have taxes to pay, how do you pay your taxes? Are you a sole proprietorship, an LLC or an S-Corporation? Depending on which entity you choose will decide what your taxes will be, and that's before your friendly CPA helps you out.
Bottom line: If you work 104 hours a month, 4 hours a day, you will take home $17,721 at the end of the year (before paying taxes).