Mathematics of Uber and Lyft

I love this picture, the irony, the truthfulness.

According to Uber, you too can make $90k per year just driving strangers around. A truly amazing fact, that isn’t a fact. If you wish upon an Uber star you too might be driving away at the end of the night in a Lamborghini.

Matt McFarland with the Washington Post stated “According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. In San Francisco, the median wage for an UberX driver working at least 40 hours a week is $74,191… [Relative to the typical cab driver’s salary of around $30k].”

Wow. That seems like an amazing deal – ill be able to afford that Lamborghini within a few years. Lets be honest, your an Uber driver, you couldn’t afford the gas or buying new tires for that thing. As my mother use to say, if it sounds to good to be true, it probably it. Welcome to the Uber/Lyft dream that has suckered thousands of people into freely becoming tiny Tim’s.

If you please, sir, I would appreciate a little more coal…for the fire. If you please, sir.

Taxi’s are a tried and true business model that has withstood the test of time. Yes, their rate is regulated by the local government and they have convinced the local government that this is the rate that is needed for them to make a profit and cover all expenses. Taxi companies are responsible for buying medallions (needed in most cities), buying new taxi’s, maintenance, insurance, w-2/1099 of drivers, and all supporting corporate personal.

Uber is not responsible to pay for your car, its maintenance, or insurance; that’s all you, the driver. They are responsible for the running their corporation.

According to this Business Insider article, an Uber is equal in price as a taxi at 1.4x surge pricing in San Francisco Bay Area; that was before Uber’s fare cut of 25%, 1.4x surge is now required. Lets take a look at how we got that number.

Taxi Rates in San Francisco
First one-fifth mile of flag rate                                     $3.50
Each additional one-fifth mile or fraction thereof   $0.55
Each minute of waiting or traffic time delay             $0.55
SF Airport Exit surcharge                                              $4.00

UberX’s Rates in San Francisco (1.0x surge)
Base Fare              $2.00
Per Minute           $0.22
Per Mile                $1.15
Booking Fee         $1.55
Minimum Fare    $6.55
Cancellation Fee $5.00

Right from the start it’s apparent that Taxi’s are significantly more expensive than Uber’s. Driving in a city that is 7×7 guarantee’s the vast majority of rides are short rides; hence equaling short fares. In addition, city driving is far more damaging to your vehicle than highway driving due to the constant acceleration / deceleration. More gas, more braking, engines suffer most of their wear and tear during acceration and deaccelaration; all imply higher operating costs. It’s a whammy. Typical trips for SF city Uber drivers.

2.3miles @ 9min 3.6miles @ 11min  37.6miles @ 52min
Uber 1.0x $3.75
Uber 1.5x
Uber 2.0x $52.46
Uber 2.5x
Uber 3.0x $6.11
Drive to rider*
 Booking Fee
 Min wage
  • Assuming conservative initial drive to rider of 1mile @ 5minutes.
    ** Standard IRS depreciation rate of $.569 per mile. Assuming that this covers all maintenance includes 30k maintenance, oil changes, tires. AAA cost guide
    *** Assuming your car gets a conservative 30mpg on both the highway and city.



Under the assumption above that a taxi is roughly a fair price for a ride implies that the economics for uber and lyft drivers are the same. A driver who is making siginifantly less is actually losing money, they acruelly paying money to work. Drivers need to be smart and skip taking jobs that cost them money. Remember drivers are independent contractors and h@be full control over their finances, I clucking which jobs they accept or reject.

While Uber takes a 25% cut from the base, miles, and minutes: their total cut can be as close as 50% on short rides when the booking fee is added in. Profits are going to be between zero and a few dollars. Arguing a typical driver averages 5 of these rides in an hour, they are looking at a max profit of $10 an hour; considering minimum wage is $15, that driver is down by $5. Uber, on the other hand made bank.

Uber pool rides rates are even less profitable to drivers due to reduced milage and minute rates. We recommend not taking these rides, they reduce the drivers profits significantly and make it more difficult to get 5 five star rating from riders. Only when surge is 2.0x or above do we recommend these. Again, don’t accept these rides, they are a financial kiss of death to drivers.

Drivers earn most of their money on the mileage they drive. The destination is non-negotiable,  how fast you get there is. Obviously, you should always drive safely. Speeding is illegal, driving slower to time lights so you don’t come to a complete stop is legal and saves both gas and wear and tear on your vehicle.

We recommend not accepting any ride that is not at least 1.4x surge; for those who are not good at math a 1.4x surge is 140% of the normal price. We recomend only driving when demand is high to maximize profits. Rush hour, Thursday, Friday, Saturday nights. Special events. Be a smart driver, not a stupid driver.








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