Comment by Bartweiss | Hacker News Reader

Comment by Bartweiss | Hacker News Reader

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Some numbers: Uber charges riders $0.18 per minute and $1 per mile. They take a 20% cut (plus the whole of the $1 base-fare). Drivers estimate that they spend 20% of what remains on tax and vehicle costs.

That's not an enormous margin, but it's large. Uber is still expanding rapidly in driver count, in geographic range, and in product range. That takes quite a bit of money, especially the geographic range - Uber runs pretty vigorous ad and lobbying campaigns to influence regulators and oppose taxi agencies.

Fasten is a startup whose entire business model is "Uber but better for drivers". They advertise to consumers that they take a smaller cut, and hope to attract more drivers with their better rates. My guess is that Uber will crush or acquire them after dropping prices (or raising driver share) in the relevant markets.

So I think the answer is: Uber could do this, but it would slow their growth. Once they're an entrenched player in most markets, I would expect to see driver share (and possibly rates) rise a bit to maintain supply, but right now they're funneling everything they can into expansion.

(And, I'm sure, panting at the thought of using self-driving cars to turn that 80% into profit.)

20% of what remains on tax and vehicle costs?

FICA alone for a self employed person is 15% (although it's a bit lower in effect b/c of deductions). Add in state and federal income tax, fuel, maintenance, and vehicle depreciation, and you're talking way more than 20%.

Yeah... I was honestly confused by those numbers, but I'm citing self-report by Uber drivers (there are a lot of forums online discussing these issues).

They reported 10% on tax and 10% on fuel/maintenance. If you live somewhere with cheap gas, and don't count depreciation, then that 10% is plausible (obviously depreciation matters, but I think they didn't count it).

The 10% on tax is odd. Possibly it's about the self-employment premium (i.e. "How much of my earnings do I lose for driving Uber instead of working McDonalds?") Or possibly it's after EITC and other balancing factors - if Uber driving is your only career you aren't likely to be in a high tax bracket.

Or perhaps they aren't paying their taxes correctly....

It's possible they really are paying 10% of their total paycheck in taxes after the EITC, but only if they are making very little money and have children.

The other possibility that I didn't think of is that it's 10% of their total paycheck because they spend half of their paycheck on deductible expenses, but that doesn't mesh with the 10% expenses section.

I think the most likely explanation is that the drivers you're talking about are underestimating taxes due. They have to pay themselves since there's no withholding, and it usually takes years before underpaying taxes catches up with you.

And yeah vehicle depreciation is a big expense. It's probably more than 1/3 of total pay if a driver is actually making a small enough income to have a 10% tax rate.

I've heard many Uber drivers who say they are making almost nothing after expenses including vehicle depreciation.

This seems like a good summary.

It's worth remembering that a lot of Uber drivers are making relatively little money. Some are students, some are part-timers, but no matter what Uber ROI drops off more aggressively than most jobs (you work surge times, then constant-demand times, then your rates collapse).

I definitely have the sense that Uber's current model isn't sustainable - the money looks good because they constantly bring on new drivers who underestimate tax and depreciation, and count their salary in weekly-paycheck terms. I suspect that either they'll become more generous once they're spending less on regulation/campaigning, or something else will fall apart.

It may be sound for part-time drivers. If they are people that need the cars for other activities, depreciation is a sunk cost, and should not be taken into account.

But that does not make the basis for a sound self-driving fleet.

Depreciation is also a function of mileage.

Last I checked, most places reimburse you about 50 cents/mile for vehicle depreciation and gas. Let's assume drivers pay 15% in taxes, just to make the math easy.

$1 - 20 cents for Uber - 15 cents for taxes - 50 cents for fuel/depreciation = 14 cents.

18 cents - 4 cents for Uber - 3 cents for taxes = 11 cents.

So drivers net 14 cents/mile plus 11 cents/minute.

You don't pay taxes on your expenses, so it would b 15 % of 0.70=$0.11 for taxes, meaning they would get ~$0.18 per mile after tax based on your assumptions. But fuel is cheaper is some areas, and if you do basic maintenance on your vehicle yourself (change the oil, etc) you can save some that way.

> They take a 20% cut (plus the whole of the $1 base-fare).

So does that mean that the drivers gross 80%? The photographers in the article would also be responsible for their equipment, materials, and taxes, so is this the right comparison?

The drivers get 80% of (gross revenue - $1/ride). The $1 is Uber's wholly-captured surcharge for each trip.

So yes, Uber drivers are similarly on the hook for tax, expenses, and capital depreciation.

Maybe I'm misreading the other comments in this discussion, but it sounds like people are saying that the story in the article is a special case, with elite professional photographers, but this would never work with the hoi polloi 'gig economy' companies like Uber, which will only ever pillage from their workers. (I'm exaggerating a bit here, but this is the sense I get from the tone of some comments. Apologies if I have misread them)

Passing 80% of the gross receipts (less the $1/ride safe-whatever charge, which I believe is for some sort of insurance policy?) does not seem like they are screwing the drivers to me. It seems like a pretty common split between marketplace/infrastructure providers and suppliers.

What marketplace providers are you compared it to? It sounds quite high to me compared to other marketplaces of non-digital products.

Whoa. Drivers only make $0.18/min? Did I read that correctly?

No, riders pay time and distance, you missed the distance part.

I'm asking about what drivers make, not what Uber charges riders. I didn't miss the distance part at all—the parent said Uber takes the whole $1/mi base rate. Unless I misunderstand or it was poorly phrased, that sounds like drivers are only paid $0.18/min.

Edit: Reviewed parent, and they say Uber takes 20% of the $0.18/min and the $1/mi base rate. That's even worse. So drivers only make $0.14/min, or $8.64/hr if driving every minute. Yikes.

Drivers get 80% of the $1/mile, but not the initial $1 for starting the ride.

Got it. Thanks!

They only make 8.64 if they aren't going anywhere with their passenger. If they take their passenger 60 miles in that hour (admittedly a long distance, but legally possible), then they'd make 8.64 for the time, and $48 for the distance, making it a total of 56.64/hour. This is probably an upper limit on the hourly rate an uber driver might make.

Thanks for explaining. I'd misunderstood the $1 fee as the per-mile fee being taken 100%.

I can't reply to your post further down the thread for whatever reason, but uber takes the whole $1 per ride "rider fee", not the $1 per mile distance fee. The driver gets 80% of the time + distance fees.

Ahhh. Thanks! This makes more sense. I misunderstood the original phrasing.

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