Ride-Sharing as A Driver

Colin had not thought about rideshare driving as a job possibility for someone in need of a part-time job until the conversation with Austin. After doing a bit of research, he found the following requirements to be an Uber driver: At least 21 years old, Four-door car, less than ten years old, Car title in the drivers name, Proof of insurance, Background check, iPhone or Android smartphone, Good driver rating Colin also found Ubers published fare schedule for Nashville. Each city can have different price schedules based on the overall demand for rides and the drivers in the area. Table 1 shows Nashvilles fare schedule for December 2015.

The more Colin investigated driving for Uber, the more it seemed like a good alternative for Austin and students wanting a part-time job. Also, Colin thought driving for Uber might be an excellent way to defray some of the expenses related to owning a car. Colin estimated that a student who wanted a part-time job could earn enough money to pay his or her car-related costs and make roughly $100 per week in extra spending money. The idea of letting a car earn its keep by directly contributing to earnings would probably be appealing to many college students.

Table 1: UberX Fare Schedule

Nashville, TN as of 12/1/15
Base Fare	$1.00
Per Minute Fee	$0.12
Per Mile Fee	$0.93
Cancellation Fee	$5.00
Service Fee	$1.45
Minimum Fare	$5.00

As Colin examined the Uber fare schedule for Nashville, he jotted down a few figures he knew would be relevant in determining whether driving for Uber would be profitable for a typical student. He assumed a typical student might have a car payment of $300 and car insurance of $250 each month. Collin looked up Austins car and found it had an estimated fuel efficiency of 23 miles per gallon in the city and 34 on the highway. He also found the average cost of regular unleaded gasoline to be $2.25 per gallon in December 2015. Finally, he assumed that the typical college student was in the 15% federal income tax bracket.

Though Colin had the Uber fare schedule, he was still unsure of how fares were computed. Colin thought Austin could provide clarification, and he wanted to know how full- time driving was working for him, so he called Austin to ask if they could meet again for coffee.

Here are the basics: passengers pay the total fare plus the Uber service fee of $1.45. Drivers receive 80% of the full fare and nothing from the service fee. Also, the minimum cost to the passenger is always $5.00.

Austin grabbed a napkin off the table and scribbled the flowing formulas down:

= $1.00 + ( $0.12) + ( $0.93) + $1.45 = ($1.00 + ( $0.12) + ( $0.93)) 80%

Let me walk you through an actual drive. The Uber driver app has all the data, and Im happy to show you. I picked up a passenger in the morning rush hour and drove 3.21 miles from pickup to drop-off. The ride took 11 minutes and 10 seconds. The passenger paid a total of $6.78, and I received $4.26. Here is the breakdown. [The information from Austin is summarized as Table 2].

Oh, that makes sense to me.

Austin: Absolutely. On the Uber driver app, it always shows the driver payout and not the passenger cost. I ignore the service fee, and my revenue is 80% of the total fare.

Table 2: UberX Payout Example

For an 11 minute 10 second ride for 3.21 miles)
	Passenger Cost (Total Fare + Service Fee)	Driver Revenue (Total Fare x 80%)	Uber Revenue (Total Fare x 20%) + Service Fee
Base Fare $1.00	$1.00
Per Minute (11.1667 x $0.12)	$1.34
Per Mile (3.21 x $0.93)	$2.99
Total Fare	$5.33	$4.26	$1.07
Service Fee $1.45	$1.45		$1.45
Total	$6.78	$4.26	$2.52

Since I started driving full-time, I average from 50-55 hours per week. I usually go about 6 hours daily during the first half of the week and about 10 hours per day on Thursday, Friday, and Saturday. I also average about 950 miles driven each week. But, I can take any day off that I want without asking a boss. I usually work in the morning and evening rush hours and sometimes the nights and late nights for sporting events, concerts, and the bar crowd.

I average about $650-$725 in net pay each week. It helps to be in a city that has lots of sporting events, concerts, and tourists. I pay attention to the schedule of games, shows, and conventions, and when they occur. Lots of people want rides before and after these events.

Thanks so much for the great info. I appreciate your time, and Im sure many will find this information useful.

Youre very welcome. Oh, one more thing, one of the significant advantages that I could see in driving for Uber, especially for a college student, is you get to meet some fascinating people. I conduct business people to work or the airport all the time. I had a CEO of a publicly-traded healthcare company in my car recently for a 25-minute ride to the airport. We had a great conversation. Not all rides are that memorable, but it does happen. I found that successful people respect hard work. For students, it could lead to a job interview or a career opportunity!

That is a great plus. I wish some of my more entrepreneurial students could see those opportunities and take advantage of them.

Colin was impressed by Austin and his decision. It did seem that Austin was making a comparable income and that he was happy. Many of Colins students, or any person looking for additional income, might benefit from learning about ride-sharing.

Table 3: Costs of Driving

Cost	Austins Notes
Gas and Maintenance	1. IRS Standard Mileage Rate (Recommended) Keep a mileage log (IRS, 2015)$0.54 deduction per mile for 2016
	2. Actual Costs (Instead of the standard mileage) Keep receipts for gas, oil changes, tires, maintenance, and depreciation
Car Insurance	Business vehicle expenseyou will need to update your insurance to include ride sharing on your policy; insurance companies are willing to do this
Cell Phone	Need a smartphone with lots of data
Car Washes	Keep your car clean inside and out
SiriusXM	Satellite radio $15 per month (optional)
MileIQ	Mileage app for the phone $5.99 monthly or $60 annually. Highly recommended!
Itemize	I use this app to keep up with my expenses. It costs $4.99 monthly. This is helping me, but maybe you dont need it.

1. What are the potential cash revenues and cash costs of driving for Uber? Assume you could work up to 20-25 hours per week, and conduct an average of 400 miles per week.
2. Construct and evaluate a SWOT analysis of driving for a rideshare company. What does your analysis show?
3. Based on the information in the case, how much would you need to drive to pay your car payment, insurance, the additional costs, and have an extra $400 per month in spending money? How does this compare with a retail job of $10.50 per hour? Assess your analysis. Assume no gasoline costs for the retail employment and 15% withholding for taxes and FICA. Hint: Use a breakeven analysis for each calculation.
4. What are the tax considerations of working part-time at a retail company versus being an independent contractor and driving for a rideshare company? Assume a federal income tax rate of 15%.