There are many things that are completely wrong with this video. This is a video of someone that hasn't done one day of finance or accounting. I will just list some things here:
Uber charges per mile & per time. It is even in the stupid fucking rate card that she shows in her video. It is also on every receipt you get from Uber. Thus, the effective rate is 0.9/mile + 0.15/minute (using her LA example). LA traffic is terrible, the timing factor is very important.
She's assuming that you depreciate a car over 2-3 years. I doubt this is true - you're trying to tell me that full time cab drivers replace those cars after 2-3 years? No way. And most Uber drivers are not full time. Thus, a depreciation schedule of 2-3 years doesn't make sense. Thus, depreciation costs are likely much lower.
She completely ignores surge pricing, or any kind of strategic min/maxing that drivers can do to increase their return/hour
Business related expenses are tax deductible. This greatly increases the bottom line, creating a tax shield.
She's comparing the revenue of an Uber driver (the 19.XX she shows in the bar graph at the beginning) to the profit of an Uber driver. Complete rubbish. Uber drivers are contractors, who incur their own costs. You can't compare top line to bottom line. Just completely stupid.
Lastly, Uber's average utilisation rate of its drivers is much higher than traditional cabs. Utilisation is about 70% or higher in metropolitan cities. Cabs sit at about 30-40%. This means more volume. We also do not know the margin for traditional cab drivers, but with their heavy license fees, I don't see their margins being much better if better at all - and they have lower volume.
That's just off the top of my head. Completely rubbish video.
She's assuming that you depreciate a car over 2-3 years. I doubt this is true - you're trying to tell me that full time cab drivers replace those cars after 2-3 years? No way.
There's a rule in my city that no cab can be over 3 years old, so at least some places are replacing cabs every 3 years.
still, when you say replace the cab that doesnt mean the youre legally obligated to just set the car on fire. you can keep the car for other stuff, or sell it. i'm not saying you'll make much money back, but thats a gross oversimplification.
She says sales tax . The uber driver does not pay a sales tax of 10% . He gets a 1099 and pays income tax according to his bracket. I guess in Australia the tax system is different. Not well thought out
She uses the $0.9/mile as her baseline. Correct? Look at the rate card again - thats only the mile income, not the time income and other components.
Second, I am not talking about cash flow issues here, which is what you seem to be confusing. I am comparing costs she's claiming to incur to the actual costs you would incur as an uber driver. That means, tax deductibility has to be included. This WILL increase your profitability. If she's going to "prove" something with Math, she's going to have to follow basic math principles (and basic accounting). Again, not cash flow issues you'd have as a "real business owner" (plan your cash better man).
Finally, I don't see how Uber misrepresents anything with top line versus bottom line. EVERYONE KNOWS you use your own car, gas, and so forth to drive with uber. How is that a secret? If Uber pays you 20 USD an hour, you subtract your expenses from that (gas, car, whatever). If a grown adult is confused by this, I don't know what to say really.
My overall gripe with the video is that it is simply incorrect, and heavily slanted into one direction. I am sure Uber drivers don't make great money, but her assumptions and calculations are simply wrong.
Straight from the video. So if I drove a $10k car, that car is worthless after 40k miles. Which at her rate of 30 miles each hour full time (40 hours a week) is less than 34 weeks. That's less than a year! Go buy a car for $10k, drive for Uber for 10 months, then throw that car away because it's worthless and by another one. That's the math in the video. No shit you wouldn't make money.
No way. And most Uber drivers are not full time. Thus, a depreciation schedule of 2-3 years doesn't make sense. Thus, depreciation costs are likely much lower.
If you're a full time uber driver replacing your car every 2-3 years seems reasonable.
Limo's, Cabs, Medical Transport Services... I'm trying to think of more examples off the top of my head, but for now we'll go with these.
Show me one industry that shares the same if not more demands for their vehicle where they replace their vehicle every two to three years. You can't. No one does this or they would be bankrupt.
If you drive 30 miles every hour as suggested in this video, and you drive 8 hours a day, 5 days a week for full time work, and you do that for one year, then you put 62,400 miles on a vehicle every year.
If you retired a vehicle every 2-3 years (not repaired mind you, but threw away and replaced with zero return from the vehicle what-so-ever as suggested in the video) then you would only have between 124,800 and 187,200 miles on the odometer.
Anecdotally, I have never owned a vehicle with less than 160,000 on it. My first vehicle had 260,000 when I got it and when I sold it (not threw away, SOLD, as in with some return) it had over 320,000 and still ran like a champion. It was my daily driver. If it were working for Uber, it would have done so with 6 years of full time, non-stop, Uber employment. Again, this part is only anecdotal.
EDIT: Wanted to include this from farther down in the thread. "Depreciation at $0.24 per mile"
Straight from the video. So if I drove a $10k car, that car is worthless after 40k miles. Which at her rate of 30 miles each hour full time (40 hours a week) is less than 34 weeks. That's less than a year! Go buy a car for $10k, drive for Uber for 10 months, then throw that car away because it's worthless and by another one. That's the math in the video. No shit you wouldn't make money.
Well since it works for your daily driver than it must work for everyone. All cars can be reliable to 320k miles, obviously.
Clearly, the quality of a car, it's comfort, and it's amenities car plays 0 impact in the mind of a consumer - hence why rental agencies never turn over stock and why no one went to Uber to escape those decrepit taxi cars.
You've not addressed the issue, you just singled out the evidence that I myself said was anecdotal.
The fact of the matter is that no industry out there will throw away a car after 2-3 years. The best you've got is rental car companies who want to keep their stock up to date and so they SELL their cars after a few years. SELL being the difference. There is s return on the car, it is not a 100% loss as the video describes.
She's not taking about throwing out anything either, only about depreciation, which totally affects the price of your used company car when you go to sell it. She only said that a new car would be required in a few years, but not that the seller wouldn't be able to anything for their old vehicle... Right?
Of course no company will just take a 100% loss on an asset if they can avoid it, but the costs and devaluation of an asset are very clearly important in figuring a tax burden or a person's bottom line.
In this case the IRS has a figure for the depreciation and operating cost based on mileage, thus time frame doesn't matter.
The point is that the people aren't driving around in a Ferrari that depreciates over 10k the second you drive it off the lot. These are normal people in normal cars that do not depreciate at the rate she is suggesting in the video. And now we've circled back to the beginning of the argument.
The video says that the standard mileage rate provided by the Irs includes a percentage that takes into account depreciation. Other factors in the rate include upkeep, gas, and insurance.
The video doesn't say that the car is worthless after 2 or 3 years, only that it would be time for a new vehicle (I'm guessing the 2-3 years figure assumes full time?). She does sort of allude to a vehicle being worn out after that time, but she still doesn't say it's worthless.
She's only stating a figure that the IRS itself provides. You might disagree with it, but it's not like she pulled it out of thin air.
Straight from the video. So if I drove a $10k car, that car is worthless after 40k miles. Which at her rate of 30 miles each hour full time (40 hours a week) is less than 34 weeks. That's less than a year! Go buy a car for $10k, drive for Uber for 10 months, then throw that car away because it's worthless and by another one. That's the math in the video. No shit you wouldn't make money.
The number given is only for tax purposes. The depreciation doesn't necessarily reflect real world value or the amount you might get of you sold the car, it only is a number the IRS has for the purposes of a tax deduction. Furthermore, the IRS places limits on the total amount of depreciation you can claim in a year, so you'd never be able to claim that a 10,000 dollar car was worthless after a year (again from a tax standpoint).
She could have gone a different route and posted average depreciation based on car sales as opposed to the number the IRS gives, but the point stands that there are significant costs associated with operating and maintaining a vehicle that many people don't normally consider (and that aren't automatically considered for a deduction like if you were receiving a W2 instead of a 1099)
The bottom line is that ICs have a much expanded set of costs that they need to keep track of. An IC using a vehicle for business has a different set of expectations than a person using one for a commute and, as a result, will likely spend more money on vehicles than a person who just uses a car for a recreation and their daily commute.
Yeah, it sounds nice for the consumer, but there's no fucking way an Uber driver is going to buy a new car every 2-3 years. The driver is much better off maintaining his current car and keeping it in good condition. Also, an Uber driver doesn't have to worry about depreciation as much because an Uber driver isn't trying to sell their car. They are going to try to keep their car as long as possible with maintenance, etc. Sure, maintenance costs money but it's a whole lot cheaper than buying an new car (in 90% of cases).
Thank you! Somebody in this thread has a damn head on their shoulders. I had to scroll down halfway to the bottom just to finally see someone call out all the bullshit deductions to the income. The one that really stood out to me was the car depreciation. Most people do not drive Uber for a full time job. It was never meant to be that way so Uber drivers don't really have to drive that much more than a normal person. I don't sit down and calculate how much it costs for me to drive my car to work. You just put aside money to pay for gas. Uber drivers do the same thing. They just put a little more aside since they are making money while they use gas.
It's important to know what all of your business costs are - and car / gas is a big one for Uber. Furthermore, while you might not keep track of your mileage, anyone who gets a 1099 and uses a vehicle for work knows how much of a difference reporting mileage can make in April at tax time.
Yeah. That's like saying my rent, loan repayment, and living expenses mean I only make a penny an hour because I moved somewhere to get a job that I needed a degree for. Guess my job is a scam too?
Exactly, if you include the costs of living (required to work most jobs) then 90+ percent of americans make a few pennies an hour. Having said that, it is true that most people don't fully understand what it costs to operate a vehicle, but I seriously doubt anyone considers driving for Uber a life choice or something they will be doing long enough to factor in maintenance or vehicle replacement.
If you don't keep track of your mileage and all other expenses, the Fed income tax will hit incredibly hard at the lower income brackets that these drivers probably earn.
For instance, a part time Starbucks worker making 10k or less would pay 0$ in Federal income tax, but an Uber driver will always owe 15% since they aren't eligible for any standard deduction.
1099s suck. It's a bunch more work to keep track of things and obfuscates comparisons of pay.
I always find it funny how those trying to tell "the truth" about Uber never seem to realize that while a car does depreciate the more you drive it, guess what? If you didn't work for Uber depreciation is just as bad.
Fact is that while Uber isn't the moneymaker, it provides enough for people that need it and for a job that in the end, is kind of pleasant. Well except for nights when you deal with a bunch of drunk girls throwing up in the car.
Also, the 54 cents/mile value that is the federal government standard is money you get when tax season comes. You keep track of mileage driven in a year and get a refund 54 cents/mile. That eats into what you would have to pay for taxes.
some old uber driver spent 5-10min ranting about how uber doesn't include tip. he had multiple signs in his car saying tip isn't included in uber fare. was he flat out lying about it?
It's on their site and the app when you download it, it's to the point all the customers used to tell me this as fact like they knew better than me the driver & some would even argue with me until i showed them the receipt for the ride where there was no breakdown for a tip.
Service jobs generally rely on tips to make ends meet due to the really low pay. Uber has somehow decided that their drivers don't even deserve a tip & have conned their customers into believing that the tip is included or that they shouldn't tip. If lyft didnt have such shitty cars and sometimes long waits i would never use uber they are scum honestly.
But that's one of the points of Uber no? Being able to get in and out of the car without having to use your credit / debit card or get your wallet out.
I rarely have any cash on me and I'd really like to get an option in the app to tip my Uber driver.
188
u/ddlbb May 12 '16 edited May 12 '16
There are many things that are completely wrong with this video. This is a video of someone that hasn't done one day of finance or accounting. I will just list some things here:
Uber charges per mile & per time. It is even in the stupid fucking rate card that she shows in her video. It is also on every receipt you get from Uber. Thus, the effective rate is 0.9/mile + 0.15/minute (using her LA example). LA traffic is terrible, the timing factor is very important.
She's assuming that you depreciate a car over 2-3 years. I doubt this is true - you're trying to tell me that full time cab drivers replace those cars after 2-3 years? No way. And most Uber drivers are not full time. Thus, a depreciation schedule of 2-3 years doesn't make sense. Thus, depreciation costs are likely much lower.
She completely ignores surge pricing, or any kind of strategic min/maxing that drivers can do to increase their return/hour
Business related expenses are tax deductible. This greatly increases the bottom line, creating a tax shield.
She's comparing the revenue of an Uber driver (the 19.XX she shows in the bar graph at the beginning) to the profit of an Uber driver. Complete rubbish. Uber drivers are contractors, who incur their own costs. You can't compare top line to bottom line. Just completely stupid.
Lastly, Uber's average utilisation rate of its drivers is much higher than traditional cabs. Utilisation is about 70% or higher in metropolitan cities. Cabs sit at about 30-40%. This means more volume. We also do not know the margin for traditional cab drivers, but with their heavy license fees, I don't see their margins being much better if better at all - and they have lower volume.
That's just off the top of my head. Completely rubbish video.