Tis has been a hot topic for the past few years. The idea of working with the Uber where you can set your own hours, drive on your own time, and enjoy the freedom of being your own boss.
That all sounds like an awesome idea and quite frankly, It can be. However, there are a few things you need to think about before you start down the path of driving for Uber so that you can actually manage expectations and know what you’re really getting yourself into.
An Introduction to Uber Fees
At its core, the Uber model is fairly simple: Passengers pay a booking fee, a per mile fee and a per minute fee during the time of their ride. The driver then earns the majority of the total fees and Uber takes its portion as a “Service Fee.”
That said, Uber hasn’t been all that transparent about the fees that it has been charging its drivers. In the research our team has found, it is our opinion that Uber is actually receiving a much higher portion of the total fees in excess of the 25 percent commission that they advertise.
So What is The Problem? Simply, Lower Prices and Booking Fees
Uber, Lyft, and most of the other rideshare companies charge a “booking fee” and “rides fee” on each ride. The fees vary city to city but are typically between $1–$3 dollars in the United States which are added to the passenger’s fare.
That said, Uber drivers don’t actually receive this booking fee. It is kept by Uber and isn’t included in the actual fare.
In addition, Uber has been lowering its prices substantially in certain markets over the past few years, having an impact on Uber driver earnigns in the process. As an example, in 2013, Uber drivers could simply drive 2.36 miles and likely make $10 before fees. Today, the average Uber driver has to drive nearly double that 4.71 miles to make the same money.
Those earning are before Uber takes its additional fees.
We were able to find an informative infographic that gives a good analysis of Uber rides in San Francisco. You will see, after Uber’s booking fee and 25 percent commission are all tallied up, the fee can become significantly more than 25 percent fee on the ride.
Take a read of the full infographic below:
So That Said… How Much Does Uber Actually Take From Drivers?
Although they claim to only take 25 percent commission on rides, Uber and other rideshare companies are actually taking closer to 42.75 percent of their drivers. Those numbers are just looking at the minimum-price fare ride in San Francisco area.
Basically, the shorter rides are becoming less profitable for drivers. The numbers are showing that for a lot of drivers in the rideshare space, drivers in the Bay Area (and elsewhere), nearly 50 percent of a driver’s earnings are lost to Uber.
Uber vs. Lyft Fees
Uber and Lyft both claim they don’t take more than 25 percent as a commission from their drivers. However, as the infographic shows you, that does not seem to actually be the case.
Uber claims that their drivers take home $25 per hour and Lyft claims that drivers can earn as much as $35 per hour. However, Lyft takes 20 percent of each fare — plus the entire booking fee — while Uber takes 25 percent from each fare.
A 2015 study regarding how much Uber drivers make, the research shows that after the expenses were factored in, the drivers in the Detroit area study, only earned around $8.77 per hour, just above Detroit’s minimum wage.
The Fees Take a Toll on Your Commission
In the San Francisco-based study, the median fee commission that drivers did not receive during the course of 37 rides was close to 39.01 percent — significantly higher than the 25 percent claim that Uber states.
In addition, the majority of the Uber drivers that participated in the study were earning less than $10 on the vast majority of their rides. Factoring in automobile and the other expenses you have as an independent contractor, quickly you see your effective hourly wage decrease — most certainly on the shorter rides.
Furthermore, you must keep in mind the additional driving-related expenses when driving for Uber. As an example, Lyft and Uber both pay for some of your general auto liability and collision insurance to protect you from on the job claims, however, you still must pay for your own vehicle insurance when you’re not driving for Uber.
Some of the additional expenses to think about include:
- Time waiting for rides
- Fluctuations in gas prices
- Typical car maintenance
- Tolls and Fees
- Self-employment taxes
- Detailing your car and keeping it clean
So What’s the Bottom Line? How Much Does Uber Pay?
With all the information you have seen in this article, the Uber booking fee results in a higher Uber commissions forcing drivers to work longer and harder to make the same earning that they have been used to in the past.
Thinking about that, you realize that it is difficult to earn a full-time wage just by driving for Uber. With a typical five-mile ride earning less than $7 in many cities, drivers are finding themselves making far less than $15 an hour, not the $25 plus they were expecting.
That said, we are not saying that it’s not worth driving for Uber. As a Part-time driver you can still use the platform to make additional money as a side job, and for people who can and want to commit to longer hours, they may find more ride demand with the decrease in Uber fares.