People looking to make a quick buck are increasingly getting involved in the sharing economy — but it may not be as worthwhile as it sounds, a new analysis has found.
For example, working for Uber isn’t all it’s cut out to be, according to personal finance blogger Mr. Money Mustache. The anonymous man behind the website, who goes by Pete, retired at 30 and frequently gives advice about finances. He decided to become an Uber driver to see how much contractors for the company really make.
In the past, Uber has claimed drivers in New York City make a median annual income of $90,000, but an independent analysis by loan company Earnest put the number much lower. Uber drivers make an average of $4,368 a year and a median of $1,860 a year driving for the ride-sharing company, according to the analysis. The average Uber driver in New York City takes home $25 an hour after commission and sales tax, Uber said in 2014.
However, after car costs such as gas and insurance and time spent driving around between picking up rides, Mr. Money Mustache said he took home only $7 an hour. He criticized the company for advertising gross earnings to drivers instead of net earnings. (Uber didn’t respond to a request for comment.)
“You should never boast about business earnings without subtracting the money spent in the process of running the business,” he said. “So, Uber and Lyft should subtract a reasonable estimate of car costs per mile, for all advertised earnings.”
The cost of driving a personal car, according to the IRS, is about 54 cents per mile. At this rate, driving to pick up riders and waiting for them before a fare begins can be costly. Mr. Money Mustache’s first ride as an Uber driver, for example, included 5 minutes of waiting, 5 minutes of driving, and 1.2 miles driven without being paid, bringing his net fare to $3.37. Another ride, which included 15 minutes of waiting, 5 minutes of driving, and 1.9 miles of paid driving, made his net fare $3.37 as well — but a $5 tip brought his average up higher. “With the financial gain of ride-share driving being negligible, I am surprised that there are so many people who do it,” he wrote.
There are several ways to up take-home salary as a driver, he noted: getting a fuel-efficient car, taking advantage of the referral bonuses Uber offers, and driving during “surge pricing,” when fares shoot up due to higher demand.
And he learned some things about Uber’s customers.
“I found the worst…