Am I missing something?
https://www.irs.gov/newsroom/2017-standard-mileage-rates-for...
Students are usually under 25 thus largely are unallowed to rent cars.
I doubt using a rental car for this type of business is allowed under the terms of a rental contract or under Uber's rules.
Insurance isn't free.
Looks like GM is definitely in on this with Lyft: https://blog.lyft.com/posts/expressdrive
Also, apparently Hertz: https://thehub.lyft.com/express-drive-hertz-update/
Program: https://www.lyft.com/expressdrive
This is all I could find on cost for Lyft: https://help.lyft.com/hc/en-us/articles/218196557-Express-Dr...
For Uber, they also partner with Hertz: https://www.hertz.com/rentacar/misc/index.jsp?targetPage=Ube...
But it does make sense to prorate the portion of those fixed costs associated with the Uber use. Failure to do so is a major business mistake, since you will have to replace the vehicle, etc., sooner than you would otherwise.
Which means something like a conservative 53¢ per mile.
53¢ is the US government's ("We're here to help you!") estimate of the total cost of an average vehicle divided by the lifetime of the vehicle as measured in miles.
If your vehicle's lifetime is 200,000 miles, and 10% of that is assignable to Uber, that is 20,000 miles or $10,600, which is 10% of the estimated lifetime cost of $106,000.
If you try to break that up into different "buckets" ("I need a car anyway, so I shouldn't apply the fixed costs to my Uber income"), you end up with a car that effectively only lasts 180,000 miles and therefore your fixed costs for the car for personal use are artificially higher. It is the same thing as if you had decided "I would just burn that gas anyway" and didn't count fuel costs against your Uber income.
As if Uber is a poster child for following rules and regulations.
Like every other safe harbor in the tax code, the primary purpose is "reduce the cost and uncertainty of tax administration." The IRS has to review 1~2% of all firms in the economy every year; if they pick a number too small, many of those firms will have hundreds of extra line-item entries in their books to satisfy the Actual Cost method. The IRS truly does not want to overly burden taxpayers. They also don't want to burden their examiners over what, for the overwhelming majority of small businesses, is a trivial amount of money -- the net difference in taxes between Maximally Accurate Car Costs and the 53.5 cents/mi approximation is likely on the order of a few hundred dollars, and that is below the care floor for business returns.
You are talking about $/mile. Moving that figure up or down a penny quickly approaches a billion on the macro scale and their overarching incentive is keeping it down.
I mean, I will take this figure any day over someone higher up the thread essentially arguing it's much less because all Uber drivers have cars anyway that they finance through (?) so accounting it towards the Uber income doesn't make sense (??).
There are a lot of changes that are within the IRS' authority to make which would be net-positive from a tax collection perspective and which it would not do and, if it did, would be undone from above. One is "radically increase the number of audits administered."
So as soon as that first fare is picked up (if not sooner), then the renter is in breach of contract. Any insurance from the rental agency is now void, and without special personal insurance waivers, the driver is now driving uninsured.
That is both illegal, and all liability will now be 100% on the driver.
So if someone is going to do that, then they need to calculate in the risk of an accident/arrest and all of the full liability that goes with that.
To make the numbers easy to do in your head, a thirty K car sounds average-ish and lasts 150 K miles, thats a fifth of a buck per mile depreciation for that miracle car that never needs oil changes or any other form of maintenance.
When I was younger I had a sportier car that used ultra high performance tires that cost me a kilobuck per set and only lasted something like 20K miles, which is a nickel per mile just for tires. Of course most cars tires last longer but prices only increase with inflation such that some SUV and truck drivers are likely paying more than five cents per mile just for tires.
dollars per gallon divided by miles per gallon gives you dollars per mile, so 2.5 or so divided by 25 or so (to make the math easy to do in head) implies at least 10 cents per mile just in gas costs. Of course many people spend a lot of the life of their car paying more than $2.50/gal for gas and 25 MPG is a daydream for most cars and most drivers on most roads.
My car insurance is very interested in miles driven per year and if I drove my band limit (which I don't) I'd be paying about ten cents per mile for insurance.
I'm thinking 20 cents for car depreciation, 5 cents for tires, 10 cents for gas, 10 cents for insurance, another 5 cents for misc maintenance costs, the IRS 50 cent estimate isn't bad.
These numbers are very difficult to align with the prices advertised by the rental companies for Uber and Lyft drivers, which are usually claimed to be about $200 per week: https://www.nerdwallet.com/blog/loans/5-ways-car-uber-lyft/
For example, Hertz's site says they charge a base of $214 a week for Uber drivers, including unlimited mileage and insurance, but not including taxes, fees or fuel: https://www.hertz.com/rentacar/misc/index.jsp?targetPage=Ube...
While it's possible that the rental companies are losing money on these rentals or that the undisclosed fees are much more than the rental cost, I think the more likely explanation is that your estimate is inaccurate. Do you have another explanation for the discrepancy?
That $200/week turned out to be severely undercharging. According to this article [1], it allowed the driver to put a lot of miles on the car without paying its full depreciation:
>>"The Xchange Leasing division had been estimating modest losses of around $500 per auto on average, these people said. But managers recently informed Uber executives that the losses were actually about $9,000 per car — about half the sticker price of a typical leased vehicle."
>>The "unlimited miles" allowed drivers to work long days and return vehicles with way too many miles, which kills the resale value.
So, Uber is shutting it down.
Side note: a lot of people were getting this wrong and screaming bloody murder about how exploitative the leases were. The problem was, they were comparing it to the really-long-term lease you might get as a substitute for buying a car, in which you're still responsible for maintenance, not the kind of lease that covers high usage and major maintenance over unlimited miles.
[1] https://wolfstreet.com/2017/08/09/uber-gets-run-over-by-its-...
The point here though is that insurance doesn't go up if you drive for Uber, you would have bought it anyway and paid the same amount. That can be erased from the calculation.
The largest part of depreciation for late-model cars, age of the vehicle, is happening whether you drive for Uber or not, so delete (IMO) $0.15 of that $0.20 from depreciation. (If the car is not late-model, the difference between 150k miles and 250k miles is probably less than $1k.)
So the calculation is more like:
5 cents for car depreciation, 5 cents for tires, 10 cents for gas, 0 marginal cents for insurance, another 5 cents for misc maintenance costs = $0.25.
That’s simply not true for many insurance policies that a prospective driver would have.
Re: uber insurance
Uber only provides additional coverage, you still need to have personal insurance too, and only for liability are they primary during a trip.
https://www.policygenius.com/blog/insurance-secret-uber-does...
Via another source:
> Uber requires all of their drivers to have car insurance, and provides supplemental insurance coverage, but only while the app is on. Here’s how it works: When the Uber app is off, a driver is covered by their own personal car insurance. When the Uber app is turned on, a low level of liability insurance becomes active. When a trip is accepted, a higher level of coverage kicks in and remains active until the passenger exits the vehicle.
Limited liability coverage only when there isn’t a passenger in the car, hence comprehensive is your personal insurance. If your insurance finds out you are using for business and you didn’t disclose (and pay a higher rate), guess what, your claim is denied and your insurance is dropped most likely.
A simple google search provided that info.
Edit: here’s the link on Uber’s own site to back up the policy. It clearly states the above, comprehensive is supplemental and only while a trip is active (Aka with passenger).
I asserted that insurance costs with Uber wouldn’t exceed what you would likely already have without Uber, and you claimed that was wrong. I see nothing in your reply here that backs that up, only that Uber provides secondary insurance which is what I meant - although not quite what I said - in my above reply to you. Regardless, my original point, that you aren’t paying more for insurance, seems to stand.
Cars cost more to operate per mile than a lot of people think they do. I expect if there were a meter in personal cars, people would drive a lot less.