Testimonial: UberX

[BillyBBrew]

You are correct DTGuy. I had the wrong rates. I did some research last night and confirmed it today. I will not be driving for UberX. By the time I figure my tax liability, their 20%, and mileage driven that's Uber related [[fare miles and deadhead miles) there's no money to be made. Tack carwashes and whatnot onto that and it's definitely not worth it. I figured I could put a little bit of money into my pocket [[and not just into my car's) with the Uber fares, but driving a Buick Lacrosse for UberX is just not worth it. BTW, back in the 90's when I was around cabs a lot, you could lease a cab for 12 hours for $48. After you paid the lease and your gas used, the rest of the money was yours, including tips. [[I could be wrong, but this is how I recall it being) I don't think that using ones own vehicle, if you want it to stay nice and not a piece of shit like most cabs in Detroit, leaves much room for profit with UberX, especially when tips are strongly discouraged. I think, in my case, the tip would have been the deal breaker. If Uber did not discourage tips and just left it at "Tips are at the rider's discretion and are not required" I might have considered it.

[Mackinaw]

Big ups to Uber. Use it in NY/NJ and was excited to hear of its Detroit expansion. Will give its Detroit crew some work ASAP.

[corktownyuppie]

You are correct DTGuy. I had the wrong rates. I did some research last night and confirmed it today. I will not be driving for UberX. By the time I figure my tax liability, their 20%, and mileage driven that's Uber related [[fare miles and deadhead miles) there's no money to be made. Tack carwashes and whatnot onto that and it's definitely not worth it. I figured I could put a little bit of money into my pocket [[and not just into my car's) with the Uber fares, but driving a Buick Lacrosse for UberX is just not worth it. BTW, back in the 90's when I was around cabs a lot, you could lease a cab for 12 hours for $48. After you paid the lease and your gas used, the rest of the money was yours, including tips. [[I could be wrong, but this is how I recall it being) I don't think that using ones own vehicle, if you want it to stay nice and not a piece of shit like most cabs in Detroit, leaves much room for profit with UberX, especially when tips are strongly discouraged. I think, in my case, the tip would have been the deal breaker. If Uber did not discourage tips and just left it at "Tips are at the rider's discretion and are not required" I might have considered it.

A Buick Lacrosse is a pretty decent vehicle. Wouldn't it qualify for Uber? The fares [[and therefore, your pay) are almost twice as much.

[BillyBBrew]

Apparently it doesn't. I did ask about regular Uber. I'm sure that it not being black would be the first issue. But it's every bit as nice as a Cadillac or Chrysler 300 in my opinion.

[downtownguy]

BBB, I've been in a couple of Toyotas and the last one was some kind of pickup with a front and back seat cab. I would think your Buick Lacrosse would match those.

As for tipping, I was under the mistaken impression that a tip was factored into the final fare. I may have read something elsewhere about the service that gave me that impression and when you sign up and enter your preferences they do ask you to set your default tip rate. But after I looked closer, apparently that only applies to the Uber Taxi service which I guess is a fully regulated taxi service, and I don't think it's available in Detroit. But I don't know that I have seen anything from Uber that discourages giving the driver a cash tip. I wonder what the other folks on this thread that have used the service have done? Do you give an extra cash tip?

And finally, from what some cab drivers have told me, they pay about $30 more for their lease than you recall from the 90s, or about $75-$80. I would think that's a pretty big nut to crack before you break even for the day. I've also heard that some drivers get "preferential" treatment from the dispatchers, so if you're not willing to play the game, you may have to do a lot of cruising or waiting in line at taxi stands. Factor in the huge security issues of not knowing who's hopping into your cab, wouldn't that balance the scales for you a bit?

[Spartan]

I generally don't tip since it is included in the fare. I'll throw a bit extra their way if they have to deal with something extra [[making a few stops, cleaning up after me or my friends, dealing with someone who is being a dick, etc) though.

My one uberX ride, the driver said he took a wasted guy from like Detroit to Novi and the guy gave him a huge tip, even though he reassured him multiple times that tipping was considered part of the payment.

[BillyBBrew]

I just figured I'd try to pick up some extra money. I enjoy driving, live close to downtown and have a decent vehicle [[that I'd like to keep that way). They say an average fare from downtown to midtown is $6-$7. Figuring it at $6, this is how I broke it down. $6 less 20% [[for Uber) = $4.80. $4.80 less 30% [[Tax liability, being conservative) = $3.36. $3.36 less $3.92 [[7 miles, 2 miles plus deadheading miles) for wear/tear on vehicle at $.56/mile IRS rate leaves me in the hole. I have made nothing for my time, there's no guaranteed person going somewhere from Midtown, and so far as I know, wear and tear doesn't include car washes, the suggested cold water Uber wants you to provide, etc etc. Add in that I priced snow tires for my car and they came out to be $1,250. Maybe if I had a vehicle with a cheaper replacement cost. Most cabs are worn out pieces of junk and are maintained just enough to keep them road worthy in my experience. I do not plan to maintain my car to that standard and therefore, my maintenance and upkeep costs would be significantly higher. I appreciate the thoughts and opinions. I thought long and hard about this. If the rates were Uber rates and not UberX, I think I could make it work, but not on UberX rates.

[corktownyuppie]

I just figured I'd try to pick up some extra money. I enjoy driving, live close to downtown and have a decent vehicle [[that I'd like to keep that way). They say an average fare from downtown to midtown is $6-$7. Figuring it at $6, this is how I broke it down. $6 less 20% [[for Uber) = $4.80. $4.80 less 30% [[Tax liability, being conservative) = $3.36. $3.36 less $3.92 [[7 miles, 2 miles plus deadheading miles) for wear/tear on vehicle at $.56/mile IRS rate leaves me in the hole. I have made nothing for my time, there's no guaranteed person going somewhere from Midtown, and so far as I know, wear and tear doesn't include car washes, the suggested cold water Uber wants you to provide, etc etc. Add in that I priced snow tires for my car and they came out to be $1,250. Maybe if I had a vehicle with a cheaper replacement cost. Most cabs are worn out pieces of junk and are maintained just enough to keep them road worthy in my experience. I do not plan to maintain my car to that standard and therefore, my maintenance and upkeep costs would be significantly higher. I appreciate the thoughts and opinions. I thought long and hard about this. If the rates were Uber rates and not UberX, I think I could make it work, but not on UberX rates.

Well I think you're on the right track, but I'm unconvinced about the math.

You generate $4.80 for the average fare after paying Uber their cut. We agree on that part.

Where I question your methodology is that you subtract out the 30% rate you pay the IRS [[which I think is a reasonable rate)...leaving you $3.36...but then you subtract out $3.92 in reasonable wear and tear on your car afterward.

I think the arithmetic is right but the sequence of operations is wrong.

I'll let some accounting professionals chime in here, but if you're generating $4.80 after paying Uber, you should subtract out the $3.92 in wear and tear BEFORE calculating the taxes, not after. Why? Because the IRS wear and tear calculation is deductible expense that's fundamental to running your business. The IRS wants to tax your net income, not your gross revenue.

So you generate $4.80, but you subtract out $3.92 before you report taxable income, meaning you're only getting taxed on $0.88.

At 30% -- 25% fed plus 4.3% state -- [[which would only be that high if you're generating $72,000 in joint income prior to working for Uber), you're paying less than 27 cents in taxes.

So now you're getting $4.80 per fare minus 27 cents in taxes = $4.53 per fare. 5 of those in an hour isn't bad money.

Is it worth it for you? Maybe not. Maybe yes.

The snow tires is a capitalized expense, not an operating expense, so you technically need to spread that cost out over the entire life of the tire. And, arguably, if you were already buying snow tires anyway, is it really an upfront expense?

Look, I have no stake in Uber, or in you driving for them. Is it good money? Like anything else, it depends on your alternatives. Am I going to quit my job as a financial planner to drive Uber cabs all night? No.

But if I had a reasonably nice car that wasn't too expensive to maintain plus really good gas mileage, it's not a total ripoff, either.

[BillyBBrew]

Very valid points. I did do some basic googling about what expenses cab drivers who use their own vehicles can write off, seems to be that you can't do the standard mileage deduction, but things like insurance are eligible.

I can probably make it throught the winter with the tires that are on the car, but if I was driving other people around, I would prefer not to. Unfortunately it came with slicker low profile freeway tires [[touring package)

I can relate to the scenario you've laid out, but unless I'm missing something, the actual operating expenses still have to be paid out of the remaining $4.53/fare. Not sure how much that would actually leave for my time, which is the whole point. I would much prefer to drive for UberX, but if I made more money working part time for McDonald's and didn't wear out my car in the process, it would make more fiscal sense.

The other issue is: Is there the volume to support 4 fares in an hour. I'm still thinking about giving it a try, but I will talk to my accountant and see about what's deductible and what isn't. I appreciate the input.

Well I think you're on the right track, but I'm unconvinced about the math.

You generate $4.80 for the average fare after paying Uber their cut. We agree on that part.

Where I question your methodology is that you subtract out the 30% rate you pay the IRS [[which I think is a reasonable rate)...leaving you $3.36...but then you subtract out $3.92 in reasonable wear and tear on your car afterward.

I think the arithmetic is right but the sequence of operations is wrong.

I'll let some accounting professionals chime in here, but if you're generating $4.80 after paying Uber, you should subtract out the $3.92 in wear and tear BEFORE calculating the taxes, not after. Why? Because the IRS wear and tear calculation is deductible expense that's fundamental to running your business. The IRS wants to tax your net income, not your gross revenue.

So you generate $4.80, but you subtract out $3.92 before you report taxable income, meaning you're only getting taxed on $0.88.

At 30% -- 25% fed plus 4.3% state -- [[which would only be that high if you're generating $72,000 in joint income prior to working for Uber), you're paying less than 27 cents in taxes.

So now you're getting $4.80 per fare minus 27 cents in taxes = $4.53 per fare. 5 of those in an hour isn't bad money.

Is it worth it for you? Maybe not. Maybe yes.

The snow tires is a capitalized expense, not an operating expense, so you technically need to spread that cost out over the entire life of the tire. And, arguably, if you were already buying snow tires anyway, is it really an upfront expense?

Look, I have no stake in Uber, or in you driving for them. Is it good money? Like anything else, it depends on your alternatives. Am I going to quit my job as a financial planner to drive Uber cabs all night? No.

But if I had a reasonably nice car that wasn't too expensive to maintain plus really good gas mileage, it's not a total ripoff, either.

[corktownyuppie]

I can relate to the scenario you've laid out, but unless I'm missing something, the actual operating expenses still have to be paid out of the remaining $4.53/fare. Not sure how much that would actually leave for my time, which is the whole point. I would much prefer to drive for UberX, but if I made more money working part time for McDonald's and didn't wear out my car in the process, it would make more fiscal sense.

I agree with that sentiment. It's a big question mark because we don't know how many fares you'll get, and we also don't know your tax bracket. Still thinking that it'll likely be more like 10-15% or less unless you're making beaucoup bucks.

...in which case you're making beaucoup bucks.

One interesting suggestion, if I may, download Uber and take the service yourself. Spend the 10-minute cab ride asking actual drivers whether or not they do enough volume to make it worth it.

[BillyBBrew]

As far as tax bracket goes. I work full time for the railroad, so, while I don't make nearly the $72,000 you mentioned, I am in the 25% tax bracket. That said, as a city resident, there's also city taxes to pay as well.

I hadn't thought of trying to get an UberX ride and see what they thought. I still would much rather drive part time and choose my own hours, than flip burgers. While it may seem like I'm making the big bucks, I take a larger hit with Railroad Retirement, as opposed to Social Security, and I'm paying cost sharing on my benefits. I figured out that I bring home roughly 50% of my gross income and it's not quite enough for a single person to live on comfortably. I appreciate the help and advice.

I agree with that sentiment. It's a big question mark because we don't know how many fares you'll get, and we also don't know your tax bracket. Still thinking that it'll likely be more like 10-15% or less unless you're making beaucoup bucks.

...in which case you're making beaucoup bucks.

One interesting suggestion, if I may, download Uber and take the service yourself. Spend the 10-minute cab ride asking actual drivers whether or not they do enough volume to make it worth it.

[downtownguy]

I hadn't thought of trying to get an UberX ride and see what they thought.

By all means, do this. Just for my own curiosity, I've been asking the drivers if they like working with Uber. They have all been very positive [[and optimistic). Most were quite new, which makes sense since they just rolled out UberX in November. They don't have any set or assigned hours either. When the mood strikes, they just turn on their app and wait for a ride to get assigned to them.

Other than doing what you must to meet Uber's standards [[extra insurance, for one), I don't know if there's much of a commitment. Say you don't like it in a couple of weeks, just opt out.

[downtownguy]

A potential downside to Uber was brought to my attention by a fellow DYesser I had the pleasure of meeting in person last weekend. Apparently, Uber has a practice of implementing "surge pricing" when the supply of Uber drivers cannot keep up with demand of waiting passengers, as happened during a recent New York City snowstorm. It's gotten a lot of flack from upset passengers and the media and has put the Uber CEO on the defensive:

In New York, Uber’s price surge isn’t a problem. Other cities might be different.

However, in another Washington Post blog two days later, this writer defends the practice:

Uber’s surge pricing is totally logical and fair. So why do people hate it so much?

When I first heard about surge pricing, I thought it sounded a bit like bait-and-switch. I wondered why Uber, which is so tech-savvy and transparent about their fares, would soak their customers without their knowledge. But, as the second blog points out, Uber does make it very clear BEFORE you agree to the ride, that surge pricing is in effect.

From what else I have read, they don't invoke surge pricing often. New Year's Eve, as you would expect, and the NYC snowstorm were the only specific times I read about.

Another article published a few days ago goes so far as to quote Uber's advisory that surge pricing would be in effect New Year's Eve, complete with a chart showing when Uber predicted rates would rise and fall.

As for the transparency issue, that article also has a screen shot of the warning Uber gives when surge rates are imposed, and the fare that would be in effect if you agreed to the ride. Seems pretty clear to me:

Previewing Tonight's Uber Surge Pricing Schedule

I can live with this. Since the driver keeps 80% of the fare, I don't read this as a money grab by Uber, but an incentive to get more drivers on the road when demand warrants it.