Are you thinking about starting a career with Uber?
Maybe you love the idea of becoming your own boss; choosing your own hours and driving your own routes.
However, before you start dreaming of a future where you’re making incredible money with nothing but your car, it’s worth noting exactly…
- how much you can earn with Uber.
- the Uber commission they’re going to take out of your earnings.
In this post we’ll take a deep dive into both topics, so you have the best idea of what you’ll walk away with when driving.
Uber Fees: An Introduction
When Uber first began, it was a new and exciting way for people to earn money using nothing but their car and their knowledge of the roads in their local area.
In order to stay in business, rideshare companies charge hefty fees to passengers for their service. These well-known fees come in the form of the standard ride fares that are calculated by taking a combination of distance traveled and time spent in the vehicle.
However, as more companies around the world began adopting the “rideshare” model, Uber has been forced to drive down fees for passengers and rides. While that may be understandable to some, the news that’s harder to get your head around, is the fact that Uber is taking more out of their driver’s paychecks too.
For a long time, drivers have believed that Uber and Lyft only take a 25% commission of these fares. They’ve accepted the commission rate, and have just been happy that these companies are allowing them the chance to earn by providing a steady stream of paying passengers.
The Truth About Uber fees
Over the past few years, Uber drivers have noticed an alarming trend that is playing out over and over again: Uber keeps lowering prices, and as a direct result, drivers make much less each time.
At first glance, the decrease in earnings appears to simply be caused by prices dropping, but after doing a little research, we noticed that Uber is actually taking a much higher portion of driver earnings than the advertised 25% commission.
What most drivers don’t realize is that there are additional fees that the rideshare companies take, and the Uber booking fee is actually much higher than that 25%.
The booking fees that Uber and Lyft charge don’t get passed along to the driver, but instead go straight to the rideshare companies directly. This means that passengers are charged a fare and a booking fee, which drivers see absolutely none of.
The direct result for drivers:
The lower the ride fare is, the higher Uber’s commission becomes. And the higher Uber’s commission becomes, the less rideshare drivers make.
Beacuse of this, drivers are forced to work twice as hard to maintain earnings, driving twice as far and working twice the time. It’s a hard correlation go grasp, and drivers are beginning to get a bit frustrated.
To better understand this, let’s visually analyze the situation in the infographic below.
This summarizes a recent study of multiple trips in the San Francisco area show that the actual driver pay, after Uber’s commission and Uber booking fees, is actually much higher than the standard 25% that drivers are assuming Uber is taking.
How Much Does Uber Take From Drivers?
The first thing you need to know about your Uber earnings, is that while rideshare companies like Lyft and Uber suggest that they only take $25 commission from their drivers the real cut is usually much higher.
For instance, as outlined above, Transportation Network Companies like Uber can take up to 42.75% from their drivers. That’s just for a minimum-price fare ride in San Francisco.
In other words, thanks to extra, unmentioned expenses like booking fees which drivers never actually get to see, you’re losing almost half of your earnings to Uber every month.
Combine that with the fact that the brand needs to keep cutting down the amount you can get from your passengers by reducing their fares, and your ability to earn starts to suffer.
The problem stems from the fact that the booking fees that are charged to passengers when they arrange a ride through their Uber app, aren’t passed along to the drivers like they should be. Instead, that money instantly goes to the rideshare company, and you miss out on a significant portion of your potential earnings.
It appears that drivers working with ridesharing companies today have to work twice as hard, just to maintain earnings that are high enough to pay the bills. It’s no surprise that today’s freelance workers are becoming increasingly more frustrated.
Lyft Fees Vs Uber Fees
While both Lyft and Uber claim that they never take more than 25% commission from their drivers, if you get down into the actual numbers behind your driving expenses when working with one of these companies, you’ll find that you’re losing more money than you earn.
Uber claims that their drivers take home $25 per hour, while Lyft claims that drivers can earn as much as $35 per hour. However, Lyft takes 20% from each fare, as well as the complete booking costs, while Uber takes 25% from each fare, alongside the booking costs. Additionally, there’s also a “black car fund” in some areas that take a fee of an additional 2.5%.
In one study into how much Uber drivers can make, research conducted through 2015 found that after expenses were factored in, drivers in Detroit only earned around $8.77 per hour.
For Lyft drivers, some end up making around $12 an hour instead of their promised $25 minimum, while others make no more than $4.54 an hour.
For more detailed information, check out the video below. Sam Choi, an experienced rideshare driver, breaks down the earnings and commission structure for each company.
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% – much higher than the 25% claim that Uber makes.
If that wasn’t enough, most of the drivers learned less than $10 on at least 31 of 37 of the trips involved, which meant that after you factor in additional expenses, you may not be able to earn the huge wages you expected when you signed up for an Uber career.
There is also a collection of other hidden costs associated with becoming a driver for a ride sharing company that some freelancers forget to think about. For instance, while Uber and Lyft will pay for some of your driving insurance to protect you from professional claims, you’ll still need to pay for your basic insurance, on top of:
- Gas prices
- Car maintenance
- Self-employment taxes
- Regular maintenance
- Carwashes 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.
Can You Really Earn with Uber?
Over the years, the wages earned by an Uber driver have changed significantly. Back in 2013, you only had to drive around 2.36 miles to make $10. Now, the distance you’ll need to travel to make $10 is 4.71 miles, and TNCs like Uber collect $3.26 of that total. In other words, you’re driving almost five miles for a little over $6.
While companies like Uber might benefit from offering their customers lower fares, it’s the drivers that ultimately suffer. After all, Uber can process a higher number of journeys, and capture a higher portion of each fare by charging less to the public.
On the other hand, drivers are limited in the number of journeys they can reasonably commit to. Unless you can figure out how to continue driving all hours of the day and night, then you could find that it’s impossible to earn a living wage with Uber.
Result for Drivers
As we outlined above, this Uber booking fee directly results in a higher Uber commission, meaning drivers will have to work much harder to stay the the level of earnings they’ve grown accustomed to.
Either drivers are going to have to figure out how to make a ton of extra tips, or they’re going to give up and deactivate their acounts alltogether. Either way, time will tell.
Did you know that the actual commission Uber is taking is much higher than 25%? How do you make up for this cut? Let us now in the comments below!