With Uber, you can set your own hours and drive on your own time — sounds great, right?
It can be, but there are a couple of things you need to keep in mind before you start driving for Uber so that you can set your expectations and know exactly what you’re getting into. These are:
- How much you can earn with Uber
- How much commission Uber actually takes from each ride
We’ll give you a look at both of these points in this article to help you decide if being an Uber driver is a good fit for you.
Note: To provide context to this post, we highly suggest you check out our posts on…
Additionally, this post goes into detail about how much rideshare companies take from each ride. If you’re looking for hard data on how much drivers earn, then check out our 2020 Earnings and Satisfaction Survey. We found that drivers in 2020 are making 31% more than they were in our 2018 survey.
That aside, let’s jump right in.
Uber Fees: An Introduction
The Uber model is simple: Passengers a pay a booking fee and per minute and mile during their ride. Then, the driver is paid the majority of the fare and Uber takes a cut called a “Service Fee.””
As it turns out, Uber hasn’t been so transparent about fees it’s charging its drivers. In our research, we found that Uber is actually taking a much higher portion of driver earnings than the advertised 25 percent commission.
There are actually a number of additional fees that rideshare companies take. As a result, the Uber booking fee is actually much higher than that 25 percent.
How does this happen? We put together a quick video to easily explain:
[su_youtube url=”https://youtu.be/wxL-lpXt2R8″ width=”560″ height=”320″]
The Problem: Lower Prices and Booking Fees
Uber and Lyft both charge a “booking fee” and “safe rides fee” on each ride. These vary by city but are generally somewhere between $1–$3 dollars in the United States and are added directly to the passenger’s fare.
Unfortunately, Uber drivers don’t actually see any of this booking fee in their bank accounts. It goes directly to Uber and isn’t included in the driver’s fare. Even if you’re driving a Tesla or another high end car, they still take a healthy cut. On lower priced rides, this means that Uber is taking a much higher cut than 25 percent.
Further, Uber has lowered its prices significantly over the past few years, hurting Uber driver salaries in the process. For example, in 2013, Uber drivers only had to drive roughly 2.36 miles to make $10 before fees. Nowadays, the average Uber driver has to travel a whopping 4.71 miles to make the same amount of money.
Oh, and that’s before the $3.26 Uber takes.
In other words:
The lower the ride fare is, the higher Uber’s commission becomes. And the higher Uber’s commission becomes, the less rideshare drivers make.
Here’s an infographic that analyzes a recent study of Uber rides in San Francisco. As you can see, after Uber’s booking fee and 25 percent commission are added up, the fee can sometimes be significantly more than one-fourth of the ride that Uber promises.
See the full infographic below:
How Much Does Uber Take From Drivers?
Despite claiming to take just 25 percent commission on rides, rideshare companies like Uber actually take up to 42.75 percent of their drivers. That’s just for a minimum-price fare ride in San Francisco.
In other words: Short rides are becoming less and less profitable for drivers. For many rideshare drivers in San Francisco (and elsewhere), almost half of a driver’s earnings are lost to Uber.
So before you rush out and sign up to become an Uber driver, we suggest getting a firm understanding of what’ll get taken from your paycheck first.
Lyft Fees vs. Uber Fees
Both Lyft and Uber claim that they never take more than 25 percent commission from their drivers. But as you can see above, this is almost never true.
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.
In a 2015 study into how much Uber drivers make, researchers found that after expenses were factored in, drivers in Detroit only earned around $8.77 per hour, barely above the city’s minimum wage.
The Drain on Your Commission
According to the San Francisco-based study, the median commission that drivers lost out on over the course of 37 rides was around 39.01 percent — much higher than the 25 percent claim that Uber makes.
Further, a majority of the Uber drivers that participated in the study earned less than $10 on a majority of their rides. After you factor in additional automobile and other independent contractor expenses, you’ll quickly see your effective hourly wage decrease — especially on shorter rides.
There are a number of driving-related expenses to keep in mind when driving for Uber too. For example, Uber and Lyft will pay for some of your liability and collision insurance to protect you from professional claims, but you still need to pay for your basic vehicle insurance for the times when you’re not driving for Uber.
Other expenses to keep in mind include:
- Gas prices
- Car maintenance
- Self-employment taxes
- Regular maintenance
- Car washes and interior detailing
- Getting to the pick-up point
In some areas, it’s also very difficult for drivers to collect passengers safely without infringing on rules surrounding road traffic. Arranging a meeting spot with a customer can sometimes lead to fines for entering bus lanes, or waiting in prohibited areas.
Pro tip: If you get one such fine, reach out to Uber customer service and they’ll help you figure out next steps.
How Much Uber Pays: the Bottom Line
As we outlined above, this Uber booking fee directly results in a higher Uber commission, so drivers will have to work much harder to keep the level of earnings they’ve grown accustomed to in years past.
With this in mind, it’s hard to earn a full-time wage by driving for Uber. Since a five-mile ride earns less than $7 in many cities, drivers will often find themselves making far less than $15 an hour.
However, that’s not to say that it isn’t worth driving for Uber at all. Part-time drivers can still use the platform to supplement the income from their full-time jobs, and those that can commit to longer hours may experience more ride demand now since Uber has decreased fares.
Either drivers are going to have to figure out how to make a ton of extra tips, a change will need to happen within Uber, or drivers will need to find new jobs. Only time will tell.
Did you know that the actual commission Uber is taking is much higher than 25 percent? How do you make up for this cut? Let us know in the comments below!