Should You Drive For Uber? These Real Numbers Help You Decide

Should You Drive For Uber? These Real Numbers Help You Decide

If you are interested in earning extra cash, you might consider driving for Uber. A lot of people are doing just that. In fact, according to a recent study by Princeton, 40,000 new drivers are signing on every month. They are attracted by the flexible hours, the opportunity to be their own boss and the potential to make big money. What’s not to love?

driving for Uber

I have to admit, on the face of it, it sounds appealing. And because so many people turn to me and ask for good ways to earn a few pesos on the side, I took a deep dive into the Uber opportunity to see if it’s really all it’s cracked up to be.

Super Important Note: Being an Uber driving partner (that’s what they call it) is a very unique experience. I scoured the net for everything I could find on this opportunity and a few very important points became very clear very quickly:

a. As you’ll see, whether or not this job is suitable for you depends on YOUR unique circumstances.

b. The profitability of this work is also highly dependent on your unique situation, the market you drive in and how you work the market. (More on this later).

For that reason, I did a ton of research – so you can make an informed decision. Reading or listening to one individual driver’s experience might be interesting, but it won’t give you any idea about what you need to consider in deciding whether or not to drive for Uber. That’s what this post is going to solve for you.

Specifically, here is what you’ll learn by the time you finish reading:

A. How much you can make as a driver.
B. How the Uber business model works and why that’s important for you.
C. 3 ways to earn more as a driver.
D. How to calculate your real costs to drive for Uber.
E. How to apply for the job.
F. How to run your Uber business
G. Who this job is good for.

Before we go too deep, I want to point out that Uber offers two services. Their first and trademark service is ridesharing. That’s what the following discussion is about. But they also offer UberEATS – which is a food delivery service. It’s not hard to get a job with Uber and it’s even easier to drive for UberEATS.

You only need to be 19 years old and have one year of driving experience to deliver for UberEATS. Also, just about any car is acceptable so it’s much easier to land that job. You can even work if you only have a motorcycle, scooter or bicycle. The pay structure is different but the cost structure is the same. That’s why even if you are interested in signing up for UberEATS you should still read this post in its entirety. Here is moreinformation about UberEATS.

How Much Can You Make as An Uber Driver?

To make a good decision about working for Uber, you have to calculate your net profit for each hour you work. It doesn’t matter how much you make. It matters what you keep. And in order to understand how much you make, you first have to take a look at Uber’s business model.

The Uber Model

Customers use the Uber app to request a ride for which they are charged a fare. This fare is based on a base rate, the distance traveled and how much time it takes to complete the ride. On top of that, customers pay $1 to $2 to book the ride. Other than the booking fee, all the revenue is split 80% to the driver and 20% to Uber.

Let’s look at an example.

Let’s say you are an Uber driver working in LA and you take a customer on a 9 mile trip that takes 35 minutes. (It’s important to specify the city you are driving in because the tariffs differ by local. This will be very important later on as you’ll see.) In this case, the customer would pay about $15 of which you’d be paid 80% or $12. Simple.

Can You Earn More?

Yes – and this is key. Uber charges riders “surge” pricing when there are fewer drivers and greater demand. This happens often during bad weather, special events, or rush hour. It can happen anytime during the day (or night) whenever lots of people need Uber and there just aren’t enough drivers. Surge pricing can be 1.3x to 2.1x times the normal rate. In the example above, if that LA ride was made during a surge period, you’d be taking down 80% of (maybe) $30 rather than $15. Sweet.

As I said, surges can happen anytime and there is no guarantee that if you work a particular time, you’ll enjoy the higher fares. But as a driver, you can make yourself available during times (and in areas) which are most likely to have surges as described above and increase your odds of earning more money.

Earning Even More Money With Uber

The basic service is called UberX. People who order up this program get a normal car to take them where they want to go. But many riders want to be carted around in luxury vehicles and Uber is only too happy to oblige. And if you own a swanky ride, you can earn more. The higher-end options include:

    • UberXL

 

    • UberBlack

 

    • UberSelect

 

    • UberPlus

 

    • UberSUV

 

    UberLUX

Each level up demands that you provide a cooler sled but also commands heftier fees. Again. that means you’ll earn more for every hour you drive. I doubt it’s worth trading in your Pinto for a Lamborghini just for those higher fees. But if you happen to own a nice car, this option could really pay off for you.

Bottom Line On Gross Income

Near the conclusion, I’ll provide a few of the hacks the successful Uber drivers use to make this gig pay. But as I said at the outset, your gross earnings will vary by when, how and where you work. But you need some figure to work from. That being the case, it’s probably best to use $20 an hour. That’s the national earning average as calculated by Uber.

Expenses

The pay sounds pretty cool but don’t forget about your costs. When you drive for Uber, you use your own car and pay all the associated expenses. Many Uber drivers fail to understand the true costs of this arrangement and as a result overestimate their earnings. Let’s take a walk through the cost side of the Uber equation. I want to make sure you really get this.

Insurance:

If you are thinking about driving for Uber, you probably already own a car and that means you probably already have car insurance. The thing is, your existing policy may not be adequate. That’s because once you start earning money with your car, you become a commercial driver and that usually calls for different car insurance.

Call up your insurance company and tell them that you will be driving for Uber. Ask them if the policy you have is enough. There is a slim chance that your existing policy will be sufficient but probably not. Here’s why.

When you become a paid driver you are a higher risk. That’s because you are on the road more hours and that means you are more likely to be involved in an accident.

Your insurance company might be able to sell you a hybrid policy that covers both personal and commercial use and if so, your premiums will go up. If your company doesn’t offer a policy, Uber can sell you this added coverage but the Uber policy isn’t enough. You’ll still need your own personal policy. So make sure to find out what your additional insurance costs are going to be.

Taxes

Of course if you make money driving for Uber you’ll pay tax on that income. Keep in mind that you are an independent contractor and while Uber will send you a 1099, you’re still responsible to file.
Also, remember you’ll be an independent contractor and as such your tax preparation may be more complex and therefore may cost you more money to have prepared.

But there is also some good news when it comes to taxes. Because you will be in business for yourself, you might be able to write-off more of your work related expenses and that could end up saving up a nice chunk of change. Rejoice.

Phone

In order to make this business work, you must have a smart phone and a data plan. You can install the Uber app on the iPhone 4s,5,5C,5S,6 and 6 Plus running iOS 7 or later. You can also use an Android 4.0 or later. If you already have both a smart phone and a good data plan, this isn’t really an added cost.

Gas, Maintenance, Wear and Tear

Each driver has different car costs associated with working with Uber. Your costs will depend on your gas mileage, how well you keep your automobile, the kind of driving you’ll be doing and your car’s current condition.

I did a lot of sniffing around and found that the typical Uber driver figures it costs them about $.30 per mile to drive for Uber all in. If I was thinking about driving for Uber however, I’d assume it cost me $.40 per mile just to be on the safe side. The cool thing is, the IRS allows you to deduct $.53.5 (2017) per mile or actual costs – whichever is greater. So you might be able to write off more than it actually costs you and save some tax dollars. Cool.

Adding It All Up

There is a lot of controversy about Uber driver-partner expenses. And it is a murky subject. Your expenses will vary depending on how you work. I read everything I could on this topic (including scouring the Uber driver forums). Bottom line? Expect to set aside about 30% of your gross to pay your expenses.

Who Is Allowed To Drive for Uber?

In order to get on the Uber gravy-train, you have to meet certain requirements:

  1. Be 21 years old or older.
  2. Minimum 3 years driving experience.
  3. Have an automobile insurance policy in your own name and in the same state you want to drive in.
  4. Have a Social Security number.
  5. Submit to a background check.
  6. Have a clean driving record.

This may seem onerous but don’t worry. Nobody expects you to be perfect. As long as your driving history is good and you don’t have a criminal record, you’ll probably be accepted.

Also, a basic license will probably be enough in order to drive at UberX level. If you want to drive at a higher level you may need a higher license classification. The company will let you know.

You need a model year 2000 or newer sedan that seats a total of 4 people minimum (including you). Your car must have license plates issued in the state where you’ll be driving and the car can’t be salvaged.  If you don’t have the appropriate car, reconsider signing up for UberEATS.

How Do You Start The Process Of Becoming An Uber Driver?

If you meet the requirements described above, you shouldn’t have any difficulty getting started.
All you have to do is fill out this application and have your car inspected. Then, you’ll turn in the paperwork to get your background check done. This won’t take long and once you’ve cleared these low hurdles, you will get started by setting your schedule and earning money. In most cases, you should be able to start driving within a week or two (max) of completing your online application.

How to Start Earning Money with Uber

The actual work process is very straight forward. You just open the Uber driver app. Once that’s done, you’ll be connected with the next rider you are closest to.

If you accept the trip, the navigation in the app will direct you to the passenger pick-up location. Then, the app will navigate you to the destination and your work is complete. You don’t need to collect any money as the rider is charged automatically and you’ll get paid via direct deposit every week.

One very cool benefit of this job is that you don’t have to submit a schedule. If you are ready to work, you turn the app on. If you don’t want to work, you shut it off. Simple.

Is Driving For Uber A Good Job?

Driving for Uber can be a great part-time, seasonal or temporary job for some people. This is especially so if you need a flexible work schedule. It’s also a cool way to supplement your income by putting in some extra hours behind the wheel after work or in between class instead of vegetating in front of the TV or computer.

More than 80% of Uber drivers work less than 35 hours a week in their 20 biggest markets and more than half drive between one and 15 hours a week. (Just keep in mind that in order to stay active you have to accept at least 1 trip every 30 days. If not, you’ll have to go through the application all over again.)

If we figure you can make $20 gross on average and it will cost you 30% of that in expenses, your hourly rate should come in around $14 an hour. Having said that, we don’t know yet what your gross will be and we don’t know what your expenses are going to cost you. That said, I’d say, give Uber a try if you are willing to earn $10 to $12 an hour. If not, find something better.

Who Uber Is Great For

If any of the following describes you, Uber is a gig worth trying:

  • You need a flexible schedule.
  • You want to try being self-employed.
  • You want to earn more money.
  • You are retired and while you dig having a few extra shekels in your pocket, you are really interested in meeting new people and staying useful.
  • You are looking for ways to pay off credit cards or other high cost debt.
  • You want to earn money to fund a very specific financial goal.

Of course, as I’ve pointed out, the money issue is tricky. After reading everything I could find on this topic I’ve come to the conclusion that the only way to really know what you’ll earn driving is to give it a try. Having said that, you’ll increase the odds of being successful if you:

  1. Make yourself available during surge periods.
  2. Work in a less-competitive market.
  3. Keep meticulous income and expense records.

Beyond these three tactics, the most profitable Uber hack is to use your time wisely. If you can utilize your downtime for things like studying or doing other work, this will be killer. That’s because you erase downtime from the equation and as a result, your hourly rate goes through the roof.

I started this post by explaining that 40,000 new drivers sign up to become an Uber driver-partner every month. There is a lot of turnover in this business but more than 50% of the drivers who sign on, are still driving a year later.

That tells me that a lot of people think this gig is profitable. Just don’t expect to hit cruising speed right off the bat. If you decide to give this a try, give yourself a few months to learn the ropes.

Once you do, you can make a good income, name your schedule, meet cool people, and have your own business. The thing is, you’ll never have any of this unless you give it a try.

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