Comment by rm999 | Hacker News Reader

Comment by rm999 | Hacker News Reader

This article rests on the premise that operating a car costs a fixed 50 cents a mile. But several uber drivers have told me the economics work out pretty well for them because they already need their cars, so IMO using 50 cents a mile is an unfair assumption.

Looking at the operating cost of a car is complicated with many variables, but the standard 50 cent estimate is NOT a marginal cost, i.e. you don't actually spend an extra 50 cents to drive a mile. The annual AAA driving costs brochure puts the per mile cost (gas + maintenance) at 14 cents a mile for a small sedan, and 17 cents for a big sedan, plus ~3 cents a mile for depreciation (see "decreased depreciation"). Moving from 50 cents to 20 cents a mile brings his estimate pay from 7 dollars an hour to 12.40.

Brochure link: http://exchange.aaa.com/wp-content/uploads/2017/08/17-0013_Y...

edit: to be clear this math is if you already own a car and are driving on off-times for additional income, which (in my experience) is what a large % of uber/lyft drivers do. It's also what Mr. Mustache was doing in his test.

Quick and dirty math. Let's say a new Kia Soul has 200K miles of useful (as an uber car) and costs $20K USD. The driver drives 2500 miles per month, getting 25 miles per gallon $4/gallon. Insurance is $100/month. And every 5000 miles there's $100 of maintenance to do.

20,000 USD / 200,000 miles - 10 cents per mile.

200,000 miles / 25 mpg = 8000 gallons

8000 gallons * $4/gallon = $32,000

$32,000 USD / 200,000 = 16 cents per mile

200,000 miles / 2500 miles/month = 80 months

80 months * 100 insurance/month = $8000

$8,000 / 200,000 miles = 4 cents per mile

(200,000 miles / 5000 miles) * $100 maintenance = $4000

$8000 maintenance / 200,000 miles = 2 cents per mile

10 + 16 + 4 + 2 = 32 cents per mile.

That's my best guess while typing on my phone in a Chipotle. 32 cents sounds like best case, so 50 cents seems like a conservative & realistic plan. Cars have ways of eating ones money in expected ways, and I didn't account for costs associated with driving for Uber/Lyft, such as needing a good cell phone plan, self employment taxes, etc. Did I make any math errors? Anyone wanna tweak those numbers to be more realistic?

Need to include interest on the $20,000 purchase. Most Uber drivers aren't buying new cars for cash. Even if they are, it's fair to include the opportunity cost.

A five year $15,000 loan @2.5% interest is $972.63 interest over the life of the loan. Round it up to an even $1,000.

You also should count sales tax, which looks like 7.5% in California,so an extra $1,500 total.

Those are fixed costs but your car won't last nearly as long if you drive for Uber vs if you don't. You also don't have the choice of driving your car into the ground if you want to continue to drive for Uber.

According to Bankrate, 2.5% interest isn't a reasonable assumption these days. Looks like it's more like 4.5%, and I presume that's assuming you have really good credit.

That said, even at 6%, you're only looking at $1,172 over the life of a 5 year loan, so I agree that it's a fairly negligible difference for the purposes of this calculation.

I was going with best case with perfect credit. My credit union offers 2% loans - https://www.navyfederal.org/products-services/loans/auto/aut... those are 36 month loans though.

You're right I probably should have done average case.

I just got a new 30k Kia for 2.2% with 5k bonus cash. They also offered 0% and 3k bonus cash but taking the extra cash was better for me.

Gas is not that expensive in most parts of the country. It's been a while since it hit $3/gallon where I live. That portion likely should be 10-12 cents/mile.

Maintenance/repairs is always hard to predict...

True. Gas prices can be spikey, and a few years ago I was paying over $5/gallon, so I went up a bit.

But it does tend to be more expensive in cities, which is where these cars operate more.

You should make a phone app to calculate income for Uber and Lyft drivers.

That would be a pretty interesting tool.

I imagine that the tricky part is getting it to plug in to all the relevant information for the calculation. Uber won't let anything actually pull data from the app, and the driver would have to make sure to mark their mileage at the beginning and end of a shift so they can plug in the "amount driven". (They can't just copy over Uber's figure, which would only tell them paid miles driven.)

You'd also want it to calculate the after-tax income, which would depend on their estimated income from other sources.

If you could get that to work, though, I imagine you'd see a quick exodus.

Uber does have a public API, not sure if it includes the stuff you need though.

I wouldn't say that's best case. A Prius basically doubles the gas mileage you've listed here.

And the cost of the vehicle too no?

I think you definitely underestimate the maintenance cost. For example, you’ll probably need to replace the tires at least 4-5 times in those 200k miles, which will set you back around $800-900 each time. You will also need to replace clutch plate, brake pads, likely battery etc, and you are likely to end up needing to repair something in these 200k miles. I’d add at least $5000 to maintenance cost, and likely more.

Discount tire/America's best tire will cert your tires in which case you won't be spending that much money at all. Over the course of 1.5 years driving for Lyft I had about 12 tire changes, each one going for about $30.

Real experience:. I made about 90k over 1.5 years of driving for Uber/Lyft. Much maintenance I did myself, and took my car (Honda insight, 30mpg city/45 highway) from 70k to about 260k. Obviously this paid for itself (~16k) and rent in the expensive bay area, and some.

I don't know if it's as lucrative as it used to be, and I was also very very good at it. Usually ~50-75% of my fares were not at base rate.

> because they already need their cars

If you take out the car, insurance and registration out of the revenue-cost system of being a uber driver, then those costs still need to be paid. How?

If the default is that they are unemployed and need a car then they can't have one. You can't have a cost without a revenue source (support from the state don't count here since any benefits would be lost at the point of gaining a revenue above minimum standard). If they intend to use the revenue from being a driver, then the cost are added to that system and one have to account for the significant lower income in return for fulfilling the outer system "need" to have car.

If a person already have a job that require a car and they want to work a second job as a uber driver, then you can subtract the fixed car cost to either job. Similarly a person could have saved up money in advanced to pay for the fixed costs for the duration of the uber driving, similar to an investment, but that result in a limited cost saving for only as long as that initial capital will last.

The AAA analysis is a misleading sales document which fails to factor in risk, pretending that the insurance they're trying to sell you is sufficient. It doesn't take into account things like lost wages and other opportunity costs, catastrophic injuries, denied or underinsured claims, and so on.

The MMM article makes exactly this point -- it is hard to calculate the cost of driving. We're even failing so miserably in this thread...

When you have to replace your current car, do you plan on getting your next car free?

in that brochure, average total cost per mile is $0.5646 @15k miles per year. I think you're looking at the operating cost per mile, that doesn't include stuff like insurance, registration, and financing. page 9, look in the middle of the green section for the cost per mile - page 8 has the row name you're looking for.

My point is the fixed costs (the ones you list) don't significantly change if you already have a car and decide to become an Uber driver. Mr Mustache didn't pay 18 dollars to drive those 36 miles, he was already going to pay for his insurance and registration.

Most of the costs are not fixed, i.e. wear and tear, gas etc..

A car is literally one giant consumable, good for approx 200k miles. Of which perhaps 100-120k are pretty reliable, and after which reliability steadily degrades.

It's odd that insurance is a fixed cost. The probability of an accident seems like it would increase with more time spent on the road. I assume that either Uber is covering the difference in insurance, or there's a bit of moral hazard at play.

It depends on the policy. Mine is pretty much a fixed rate. But many policies do have mileage bands.

Both Uber and Lyft cover additional liability insurance as long as the app is open. They also cover comprehensive if a passenger is in the car.

https://www.nerdwallet.com/blog/insurance/best-ridesharing-i...

My insurance company asks me approx how many miles I drive per year and also how far away I live from work (because I list commuting as the purpose of my car). I assume those variables are included in my premium and my (very low) premium would be higher if I drove more or lived far away from from work - my commute is only 4 miles.

I also assume the Uber driver would have to tick off "business" as their car's purpose and your insurance may go up just because of that check mark, no matter if the mileage was higher or not.

Right, insurance does care how much you drive, but there are costs to being fine-grained about how you measure it, so they usually lump in everyone below ~30k miles/year and don't bother to count the differences there. I remember entering 10k vs 15k miles per year and the quote was the same for Geico.

Of course, you're absolutely right, and insurers have been slow to account for this parameter; the startup MetroMile exists solely because regular insurers overestimated what a difference the mileage makes. (MetroMile charges by how much you actually drive.)

To a point. If you are conscientious, then more time on the road makes you a better driver, by knowing your car better and being better able to predict what others will do.

Exactly. Insurance rates change with greater mileage and also with using a car for business instead of personal use.

If there is an accident, an Uber driver will need to pay out of pocket, unless they lie and tell the insurance company the ride wasn't for Uber.

I mean, it's your source. You're free to disagree with it. the cost per mile clearly goes down as milage goes up. as witnessed by the 10/15/20 brackets of driving. but 20 cents a mile isn't even close.

Insurance isn't a fixed cost, they want a yearly mileage estimate.

The argument is that those costs don't matter so much if you're going to be owning the car anyway. But cost accounting is complicated. The reality is that, for a car used a minority of the time for taxi service, the number is somewhere in between the IRS cost/mile and the bare minimum fuel + standard maintenance. For one thing, the car will get into higher maintenance costs and will need to be replaced sooner than if you just used it for yourself.

I would expect that an Uber driver would be doing far more than 15k miles per year. That's just normal usage.

You're also mixing up your accounting. The parent was discussing marginal costs, and you're discussing average costs. The marginal cost is what's used for making economic decisions, like deciding to drive for Uber or not.

My wife does 3-4 days a week for prime now. On track to hitting 12k miles this year. Just as a data point

The average driver between 20-50 drives around 15,000 a year.

https://www.fhwa.dot.gov/ohim/onh00/bar8.htm

The average driver implicitly isn't using ride sharing so there's really no relationship between that stat and this discussion other than it'll be closer to your number than to the average daily miles of a glactic starship captain.

A better number would be a taxi driver.

From op's data,

    10,000 - $0.7354 
    15,000 - $0.5646
    20,000 - $0.4944

I just don't see how you get that marginal cost down to $0.20, yes mile n+1 is a little bit cheaper than mile n. and sure, let's pretend that high milage cars used cars sell for the same as low milage cars. so financing is fixed. I just don't see how you can get regular maintenance and gas and insurance down to 20c/mile.

You're looking at average cost, which includes half-ton pickups and large SUVs. Look at page 6, which contains small and medium sedans.

Ah, i see. I misunderstood your argument. I thought you meant something like "an average person want to pick up some uber shifts. they already have the car, so the expense can't be that much." I'd assumed an average person would have an average car, and thus average cpm.

you mean (i think) someone needs a car for whatever reason. They specifically select a car they can use with uber, maximum mpg, least maintenance, and used. That might work. i'm still (very) skeptical of the $0.20/mi cost. But i could see you might be able to get that quoted $0.37 down to $0.32 or if you're really lucky, $0.30

A full time Uber driver is likely to do about 75,000 miles in a year.

Reply on news.ycombinator.com