Chances are you have seen ads for Uber claiming that drivers can make up to $25/hour or something like that. These ads have obviously worked.
Over the last few years, a huge influx of people decided to become a rideshare driver for Uber. No joke, between 2010 and 2014, the number of drivers grew by about 69%.
But how much do Uber drivers really make?
In general, the answer to this question depends on the time of day, location, and weather. Factoring in all of this information, we have generated an average wage for the entire rideshare industry. As you may know first hand, drivers usually earn far less than expected.
From our research, we have found that the range varies from $11/hour to as high as $18/hour. But why is the range so high?
Today, we will dive into this confusion and reveal what is actually going on.
- How Much Do Uber Drivers Get Paid?
- How Much Does an Uber ride cost?
- How Much Are Uber Driver Expenses?
- So, How Much Do Uber Drivers Really Make?
- Thoughts on “How to make money with Uber”
- How to Improve Uber Driver Earnings
How Much Do Uber Drivers Get Paid?
There are two main components drivers often overlook when figuring out how much drivers earn. The first is how much an Uber cost for the passenger.
Higher end Uber rides cost quite a bit more than other Uber rides, such as UberPOOL. Due to these widely different prices, drivers may earn far more or less depending on which type of ride request they are accepting.
Another issue is business expenses.
Related: How Much do Lyft Drivers Make?
This umbrella category covers a lot of different aspects of an independent contractor’s costs. Business expenses include vehicle maintenance, gas, and insurance costs. Although these factors vary based on location, the general concept remains the same. Having to pay for each expense out of pocket eats away at a driver’s profit.
Let’s take a close look at each of these areas.
How Much Does an Uber ride cost?
As a basic rule of thumb, the rate your riders get charged is calculated by using a simple formula: Fare = Time + Distance. The cost varies widely depending on location. For instance, a ride in New York City or San Francisco probably costs a lot more than a ride in Denver or a smaller city.
We dove super deep into how much Uber costs here. But here is a quick and dirty breakdown.
Every minute a passenger is in an Uber, a designated rate is charged. In addition, another fee is added on for every mile covered. On top of this basic formula, the following charges are included.
- Base Fare
- Rider Fee aka Booking Fee
- Surge Pricing
Passengers are charged the fees above to cover other elements of the ride that are not spent while the Uber is in route. For example, the Base Fare is a fixed rate per trip that is added on initially for simply using the app. The Rider or Booking fee is also a fixed rate.
As for the Surge Pricing, this varies based on the time of day. More specifically, when passenger volume is running high and there are not enough drivers available to meet the demand.
When this occurs, Surge Pricing is invoked. Essentially, a multiplier is added to a passenger’s final fare price. By applying this multiplier, Uber is usually able to encourage drivers to pick up a few ride requests here and there.
The exact amount of the Surge Pricing multiplier varies based on a few factors, such as location and the passenger to driver ratio is. In general, the wider the gap, the higher the multiplier used. Taking all of these factors into consideration, the price of an Uber is really determined using a formula that looks more like this.
Once the Subtotal is generated, the Surge Pricing multiplier is applied as you can see in the formula below. Bear in mind, if there is no Surge Pricing active, the multiplier is one.
Here’s the part that confuses drivers the most. The fare calculated by the formula above is NOT how much drivers earn for completing the ride. Drivers earn the remainder of this fare after Uber takes their commission. Here is an example.
- For this scenario, let’s use the example of a rider in Chicago traveling via UberX from The Sears Tower to the Navy Pier. The ride is approximately 2.3 miles and it takes about 15 minutes. In Chicago, the base fare is $1.70, the cost per minute is $0.20 and the cost per mile is $0.90, in addition to a booking fee of $1.20.
- Passenger fare: 1.70 + (0.20 x 15) + (0.90 x 2.3) + 1.20 = about $8. If you would like to get a more accurate estimate for your area, check out Ridester’s Uber Fare Estimator
That’s pretty grim. So, let’s take an optimistic outlook and say the final passenger fare was $14. Not bad for 15 minutes of your time right? That’s almost a dollar a minute! Too bad it is not factual. Of that $14, drivers only get about 80% of it. That’s right. Uber takes a 20% cut of the final fare. To break this example down to brass tax, here’s how much an Uber driver will pocket.
- $14 – $1.20 (Booking Fee is Uber’s)
- $12.80 X 0.80 (Uber’s cut)
- Leaving drivers with $10.24
So in actuality, during the 15-minute ride drivers only earn $10.24. Keep in mind, that is not pure profit. The ten and change is payout before business expenses are factored in and that makes a big difference.
How Much Are Uber Driver Expenses?
Once a ride is completed, drivers should record their expenses. Expenses take a huge cut out of an Uber driver’s bottom line. This should be done for two major reasons, taxes and figuring out earnings. These hidden costs can help a driver determine whether or not their rideshare operation is actually profitable. The expenses drivers should include in their calculations are as follows.
Although all of these factors will fluctuate based on a large number of factors, drivers are still required to keep track of them. A good rule of thumb to use to assure you are able to account for these types of business expenses is to set aside about 20% of your earnings. Sourcing our $14 ride earlier, here’s how much drivers actually earn after taking business expenses into account.
- $10.24 x 0.8 = $8.19
Applying this to general estimate to the average UberX ride, drivers may earn somewhere in the neighborhood of $15-20 an hour. Of course, that weighs heavily on whether or not they are to get 2 similar rides during each hour they drove. Taking all of this information into account, the business expenses cut deeply into earnings.
One other important factor to keep in mind is taxes. Uncle Sam is going to want his cut of your earnings (usually around 30%). That is one of the major reasons tracking expenses is important! Expenses are tax deductible as a rideshare driver (or any independent contractor).
Reporting your expenses on your taxes essentially reduces your taxable income. so instead of paying taxes on that full $10.24, you are only paying taxes on the $8.19. This makes a HUGE difference at the end of the year.
So, How Much Do Uber Drivers Really Make?
After reviewing the nitty-gritty details, it is time to dive into some cold hard data. Keep in mind, the numbers we are using in this article are used as a general representation of what the average Uber driver wage amount incoming reports are stating.
To get a bit closer to the mark, here are some reputable sources.
Uber Income Calculator
To find out how much drivers are making in your city, check out the Uber Income Calculator. This calculator from Ridester streamlines the researching process by narrowing down the steps you need to take to get the info you need. Simply enter your city, input your current expenses, and wait as the calculator shows you how much you can make.
SherpaShare’s Smart Driver tools assist rideshare drivers with the process of spotting lucrative routes in their city. Since they also offer bookkeeping tools, SherpaShare has info on how much drivers earn after taking expenses into consideration.
According to SherpaShare, many entry-level Uber and Lyft drivers are not even breaking minimum wage. Of course, this is only a portion of the rideshare industry. Having said that, it appears that in the vast majority of the country, Uber drivers make around $11 an hour. If you’re making only $11 an hour, it would be very difficult to drive for Uber as a full-time job. Keep in mind there are many ways to boost your earnings (we’ll get into that later)
Glassdoor is an excellent resource for getting insider information about companies, including Uber. Their reputable system makes it easy for users to report how much they are making as well as the pros and cons of working at said company.
In an attempt to offset the low rates, some drivers are taking advantage of signup bonuses and referral codes being offered. Capitalizing on Uber driver referral codes is pretty tempting too, considering some of them are worth hundreds of dollars. Many speculate that Uber is using this type of marketing plan in an effort to compete with Lyft. Currently, Lyft is giving away bonuses worth up to $1,000.
Thoughts on “How to make money with Uber”
If you have suspected that the rate Uber drivers earn is fairly low, you were right on the nose. After all, why earn less than minimum wage and have no benefits just to tear your $20,000+ vehicle up?
To put this into perspective on a larger scale, AirBnB only takes 3% commission when a person rents their house out to a complete stranger. Uber takes more than six times that while drivers run the risk of being in a dangerous situation with multiple people on board.
How to Improve Uber Driver Earnings
Uber drivers hoping to thrive in the rideshare industry need to be creative and think outside the box to earn extra money. The best way to increase your earnings is to earn more tips. We have identified a bunch of easy to apply ways to help Uber drivers boost their income over time. Check them out below.
- Hand Out Freebies: You may be surprised at how many passengers appreciate free water, candy, gum or mints. Happy passengers mean higher ratings and better tips. Do not worry. These items count as a business expense, which is tax deductible.
- Be Friendly But Professional: Being kind and professional goes a long way with anyone. Keep this in mind while you drive.
- Don’t Be a Jerk: Everyone has bad days. Do not take it out on passengers.
- The Uber Referral Program: drivers can earn $5 for each passenger they refer and a bountiful monetary reward for each new driver. We recently learned about the story of Joseph Ziyaee. They actually made $90,000 in 6 months by using the referral bonus system. Although results will vary, it is worth sharing.
To see which bonuses are currently available in your area, go here.
Working as a rideshare driver has a lot of ups and downs. Although being your own boss is a major perk, not earning a profit while working is tragic. Avoid falling into this unfortunate category.
Figure out how to maximize your paycheck each week. Then triple check that you are making a decent wage when all said and done.