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Breaking Down The Rate Change For Drivers

If you’re currently a rideshare driver, there is no denying you’re likely going through a rough patch right now. Markets are flooded with what feels like more drivers than passengers, mileage rates are being cut across the board, self-driving cars are always looming and ready to steal your jobs, and worst of all it feels like you’re alone.

Problem:

I am an active member of a few rideshare groups and see a lot of the same arguments back and forth. Whenever a few people complain about an issue, you’ll have others who reply how driving for Uber is not supposed to be a full-time job. It was marketed as a side gig which is a weird argument to make considering how it was marketed should have no bearing on how the company treats its drivers.  I am a big fan of math, and when it comes down to it, there becomes a breaking point where it is no longer mathematically worth it to drive for either Uber or Lyft. Cars depreciate, gas prices fluctuate, routine maintenance is required, and repairs pop up. While every car may have a different value to how much it costs to drive, the reality is that every car has that value.

AAA has a large breakdown of that cost (which you can find here), so you can get a rough idea of what you’re looking at. Some cars are more dependable or have better gas mileage, so if you’re looking to get a specific cost per mile, I’m sure there are places online to check for your specific car, but here are the rough figures:

Type Cost per mile Notes
Small Sedan 0.46 Corolla, Civic, etc
Medium Sedan 0.59 Accord, Camry, Elantra, etc
Large Sedan 0.72 300, Avalon, Impala, etc
SUV 0.74
Minivan 0.65

Again, these figures will change by specific car, but this is a rough idea of what you’re spending.  Now, when Uber or Lyft cuts the mileage rate to around 60 cents per mile, that means your car is no longer making any profit and the only income you’re making is the per-minute figure.  Recently, in my market (Boston), Uber and Lyft both raised that figure to 27 cents a minute (or $16.2/hr) but that figure only begins ticking once the passenger is in the car and stops once they’re out. Drivers are not paid while waiting for a ride, while driving to pick someone up, nor are they even paid the first 2 minutes of waiting for the passenger to leave their house.

As a driver, I can tell you from experience that you’re lucky if 30-40 minutes of each hour is actively ticking which puts that figure at roughly the federal minimum wage and virtually zero profit from your car.

Data:

When the Boston market made their change down to 0.66c per mile, it was under the statement that there would be more consistent earnings. I decided to get a few people together to input some of their recent rides to calculate what they would have made versus what they’re making now.  Here are some numbers:

  • Number of rides recorded: 131
  • Total difference: -$139
  • Percentage change: -8.8%
  • Per trip difference: -$1.06
  • Percentage of trips that gained money under new system: 48%
  • Percentage of trips that lost money under new system: 52%
  • Average gain: $0.42
  • Average loss: -$2.43

What this means is, after 131 trips recorded, we’re at a total loss of $139 or just a hair over $1 per ride. While it is true that 48% of the rides did gain money, the problem is when a ride was more profitable, it averaged out to $0.42 while the losses averaged out to $2.43. This means if you had a ride that gained money versus the old system, you likely gained around 42 cents while if your new ride was a loss (a long highway ride), your average loss was over $2 per trip!

These are not more consistent earnings.

Solution:

I’m going to say right away that the per minute figure is good at 27 cents per minute. It means you’re earning roughly $16/hr if you have a 60-minute drive but will likely average around $8-9/hr. Increasing this rate was a good move on their part and should remain.

The problem is that lowering the mileage rate to 66 cents was just too much. Messing around with the figures and using the new time rate, here are some options:

75 cents a mile

This adds up to a $33 loss and a 0.25 loss per ride. 64% of the rides will profit at a rate of 56 cents compared to $1.71 loss.  It’s not ideal, but it certainly isn’t the big hit that 66 cents was.

78 cents a mile

This was virtually the break-even point. The grand total was a $2.31 increase at 2 cents a trip. The other figures go to 74% rides are increased at 60 cents a ride versus a $1.64 loss.

85 cents a mile

Here is where things start improving for drivers. We are almost double the expense if you own a small car and still 11 cents over an SUV (which riders prefer). Total income increased by $85 or 65 cents a trip and the number of rides that profit go to a staggering 89% with a 0.87 to $1.18  gain:loss ratio. This move would initially angered drivers but they would have been over the moon once they saw the data come out.

Unchanged ($1.0125 a mile)

This is where the market was before. Had they kept the mileage the same and merely increased the per minute rate, drivers would have seen an average of $2.11 increase per trip at a total of $276 over these 131 trips.

So, which option would be the best?  While the driver in me says keep the mileage unchanged, I do understand that Uber and Lyft are companies that are losing money and are about to go public. You can’t just give thousands of drivers an additional $2 per trip without a lot of fallout. I think the best solution would have been to decrease the per mileage rate to 85 cents while increasing the per minute rate to 27 cents a minute. That would have helped those who drive a lot in traffic, but it wouldn’t have been such a big hit to those who prefer nighttime driving.

About stevebeans

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