Rapid advances in technology have made life in the modern world all about change and how we cope with it. In my 4 decades of life, I've seen the evolution of life changing technologies including home computers, mobile phones, the internet, and most recently (in January 2007), modern smartphones. One thing I've learned is that a new Disruptive Technologies can dramatically change our daily lives.
Some inventions make life at home easier, others make work easier or more profitable. Some technologies are so disruptive that they reshape industries. While many jobs are lost due to new technologies... many more are created
One of the most disruptive innovations in recent times has undoubtedly been Uber! Since the app first launched in November 2010, it's grown at a phenomenal rate. Today, it's hard to find someone who hasn't heard of Uber. As passengers, it's easy to see why Uber and all ridesharing is so popular. All you have to do is press a button, and within minutes, a driver arrives at your precise location. There's no doubt that this is great for customers but most wonder how much do rideshare drivers earn?
Can You Make Money Driving With Uber
The Finance guy has been researching this in great detail since January 2016, by driving with Uber. As a full time student and part time blogger, it was difficult to find a normal job which would allow me to study, blog and spend time with the family. Blogging is cash flow positive, but is a long way from paying all the bills. The ability to set my own hours made Uber a very attractive option
After a year of driving with Uber, in Perth, Western Australia, I can say that you can definitely make money driving with Uber. Over the year, using my own car to provide ridesharing has paid me $24.25 per hour! That's about 20% above minimum wages a part time employer would have offered. But as an Uber driver you are self employed and have to pay your own expenses.
*After expenses my taxable income was slightly over $20/hr. These results are unique to my own experience in ridesharing. This is not a representation of average earnings by Australian Uber drivers. As an Uber driver, you are effectively running your own business. You decide when it's time to log on, and when it's time to log off. You don't have to commit to any particular hours, and there is no minimum. You work as much or as little as you want every week, and get paid for every ride you complete.
How Much Can You Make Per Hour Driving With Uber
When you sign up to drive with Uber or any other ridesharing service, you are not an employee, you are a partner. This means that you share in any revenue you help generate, but there is no guaranteed pay. In Australia, Uber pays drivers 80% of the fee charged to passengers. They take 20%, and don't charge you any ongoing fees to stay active. This means that you only get paid if you get passengers. If you need the security of a guaranteed hourly rate, then Uber is not for you
Over the past year, I was online as a driver for almost 900 hours, and over that time, generated an average revenue of $24.25 per hour. In my worst stretch, I was online for 6 hours and earned nothing. The best return came after a music festival, where due to Uber surge pricing, and one 40 minute ride, I made over $220 in just one hour. You can make money driving with Uber, but you have to ride the pay rate roller coaster.
Due to the profit sharing partnership used by most ridesharing companies, the amount you earn from Uber will vary from week to week depending on how many rides you accept, as well as the total distance you transport your passengers.
I calculated my average hourly rate based on weekly pay statements, and over the past year it has varied from week to week as shown in the chart below:
As you can see from the blue line in the graph above, the hourly revenue I am able to generate with Uber fluctuates from week to week, this is just part of being an Uber driver, you have to 'ride' the roller coaster. Even though my weekly income may vary, my long term average rate per hour, shown by the grey line, has risen significantly. After a year of driving I have managed to increase my average hourly rate by 25%
The orange line shows my four week rolling average hourly rate. While this line is still a bumpy ride, it's moving in an upward direction! Since August, I have been averaging more than $27 per hour driving with Uber. Why has my hourly rate gone up so sharply? A large reason is because Uber is still growing at a very fast rate, you'd be amazed how many passengers tell me this is their first Uber ride.
Undoubtedly luck has played a part in my improved returns driving with Uber. It could be that I am just in the right place more often than I was before. It could also be that as an Uber Driver, I've learned how to be in the right place at the right time... with 11 months worth of experience, I have discovered ways to optimize my Uber earnings
How Do I Earn More With Uber
In my first week with Uber, I only generated a revenue of $9.48 per hour. I was only online for 5 hours that week ( my account activated late in the week and I was offline for a 2 day family event). It was a disheartening start to my Uber career., making less than half of minimum wage before expenses, was not looking good. Despite this less than stellar start, I decided to keep going. After all, I'd spent $ on getting all the documentation ready and wasn't willing to quit until I'd recovered it. All I had to do was figure out how to play the game of Ubernomics.
I came to the early realization that Uber is what economists would call a 'Free Market'! Ubernomics is all about supply and demand. On the supply side, if you meet the simple qualification criteria, you can drive with Uber. Uber want as many drivers as possible to register with them! The reason is because of the profit sharing agreement. Uber spends money growing and promoting the product. In exchange for all the marketing activity and for creating the ridesharing market, Uber takes 20% of every ride.
For Uber, more drivers on the road means less waiting time and better service for passengers. They don't care how many drivers register because Uber only pays drivers for rides completed. There is no ongoing costs to them once a driver is activated. Uber will not prevent more drivers from registering if there is already a high supply. To make more money with Uber, you have to game the system.
Drive with Uber at Unusual Hours
In my second week on the job, I had limited access to the car, and could only go online after 8pm. This was due to circumstances which some would call 'luck' and others would call 'heavenly intervention'. I instantly discovered that driving at unusual hours can be profitable. Perth is not what hipsters would call a 'bustling city', if Frank Sinatra wrote a song, he'd call it the 'city that sleeps well every night'. Having said that, I found driving between 10pm and 1am turned out to be surprisingly profitable.
Driving in the late hours means that the roads are quiet and there are less Uber drivers online. This means you get a better share of any rides that do come up and there's no traffic jams. If you go online late at night, you will have to drive further to collect your passengers. This means you might drive 15 minutes for a $6 ride, but it could just as easily be a $60 ride... The only way to get the big payouts, is to accept every ride!
This is what economists would call a contrarian approach to the market. Going online when most drivers are sleeping means you get a larger share of a smaller market. That is there are less passengers demanding rides, but if you are there so supply them you can make money at unexpected hours
Play the Uber Market - Drive When Demand is High
Demand for Uber rides varies depending on the time of the day, and the day of the week. For example it is hard to make money between 10:00 am and 4:00pm on week days because there are a lot of drivers online, and demand for ridesharing is relatively low. There can be spikes during the lunch hours, but apart from that, it's an uneventful time.
On weekdays, I like to wake up early an be online before 7:00am. That way I always capture the morning high demand for Uber as passengers head to work for the day. Usually by 10:00 it has quietened down, and I've earned around $70, so I head home for some time out of the car seat. This is when I try to get other things done, such as house chores and working on blog posts etc.
Depending on how the week is going (and what other commitments I have), I often go online again at around 4:00pm and work through to 7:00pm. This is the evening Uber rush as people leave work, and head out for dinner. By breaking my day into two separate shifts, I am always driving during times of high demand.
Weekends (from Friday evening until Sunday night), are particularly busy in Perth. I try to work as many hours as possible over the weekend because weekends have the potential for a much higher hourly rate. More than half my income is earned over the weekend. In recent weeks, I've averaged an Uber revenue of $39 per hour over the weekend.
Don't Focus Too Much on Hot Spots
Uber allocates rides to drivers based on proximity, when a passenger requests a ride, it will go to the closest car, who should get there quickest. This means passengers spend less time waiting for their ride. The result, is better service for the riders, but for drivers it can be frustrating.
In my early days, I often scouted the airport for rides. I thought if I circled or parked near by I'd surely get a ride. This strategy was less successful than you'd think. Sometimes it worked well and I got rides immediately, at other times, I hung around the area for almost 2 hours and got nothing. Flights were landing and passengers were ordering Ubers, but I wasn't allocated any rides because I was never the closest available driver. It didn't matter that I had been waiting the longest for a passenger
By allocating rides to the closest driver, Uber has created a competitive market. The airport is a busy location, with lots of demand for Uber, but all the drivers know this, so at any time, there are lots of them creating more than enough supply to meet that demand. A quick look at the passenger app, will show you how many Uber drivers are in a particular area at any given time. The screenshots below show the supply of Uber drivers at the airport at three separate times:
It's tempting for Uber drivers to head out to high demand areas such as the airport or the CBD. It is true that demand for ridesharing is higher in these areas, but high demand locations are not a guaranteed source of rides. The problem with going to these hot spots, is that locations with high demand also have a high supply of rideshare drivers.
To make money with Uber, you have to play the market. Sometimes you can make more money avoiding the high demand areas. The picture below shows the supply of Uber drivers in the CBD and the suburbs at the same time on the same day.
The left and middle segments from the image above, show the supply of Uber drivers in the CBD in the middle of the day. The segment on the right shows the supply in the suburb where I was located at the time of collecting this data. As you can see, there are several Uber cars available in the city, but only one car is visible around my suburb.
You can make better money if you investigate market supply and demand for Uber. Before you drive out to try and match demand, you should make sure there's not already an over supply in that area. You might make more money going online and waiting for a ride from home
Don't Chase Surge Prices
Uber surge pricing occurs when there is a high demand for rides in a particular area. As a driver Uber pays you a cut of every rideshare you complete. This means that during surge times, drivers have the potential to earn more per trip. Uber drivers know when an area is surging because it starts glowing red on the map of the Uber driver app (as shown below):
The middle and left segments from the image above, were captured early on a Saturday evening. It is a time of very high demand as people use Uber to head out for a night of fun. As you can see, there is a large amount of shading on the map in the left segment. The darker the shading (or the more red it gets), the higher the surge rate. The middle segment shows a zoomed in view showing different pay rates and the slight differences in shades of red.
During Saturday night peak times, it is quite common to be allocated rides at surge price rates. As a driver, you might think that a red map means you will get rides allocated instantly. This is not always the case, not all the passengers accept the surge pricing for their rides.
Some passengers are happy to pay higher rates because they want to leave right away and they often explain 'it's still cheaper than a taxi'. There are also those who wait for surge rates to subside, some will order a ride when the surge is lower, others will wait until it's gone completely.
Sometimes Uber surge pricing will be isolated to a specific area, as shown in the segment on the right. As a driver, it is tempting to drive toward the red zone to capitalize on the higher pay being offered. In my experience, this is not a good idea. In most cases the surge will disappear before you get there.
When there is an isolated surge, all the Uber drivers in the area can see the red zone on their maps and a lot of them will drive toward the red section on their maps. The surge in demand is quickly matched by a surge in supply.
Being allocated surge priced rides is great when it happens, but don't chase the surge prices. I found it's better to remain where you are and wait for the next ride to be allocated to you. If there is a surge near you, then it is likely that a lot of Uber drivers will drive away from your area to try and capture the surge rate. The supply of Uber drivers in your area will decrease, if you remain where you are, then you become more likely to get the next ride allocated near your current location.
Make More With Uber by Driving Efficiently
As an Uber driver, you are running your own business. You have complete flexibility to choose the times and areas you want to work in. While most of this post has focused on ways to earn a higher income with Uber, you can also maximize your returns if you control your expenses as much as possible. I am fortunate that my car happens to be in good condition and gets very good mileage. I can usually generate around $500 in revenue from a $60 tank of fuel. Wear and tear has not been an issue so far, I have not had any unexpected large bills from the mechanic
To make more per tank, Uber drivers should to avoid driving without a passenger. When I've dropped a passenger off, I do my best to find a nice shady spot nearby, then I park and wait for the next ride. It is tempting to drive back to a busy area (such as the CBD), but I want to avoid driving too much between rides, it just means that I am burning fuel without generating revenue. You will have to drive to collect your next passenger, but that is better than driving in circles without knowing when the next miles of revenue will be allocated
I usually reset my trip odometer when I refuel, so I can see how many KM I drive per tank. I recently refilled so I thought I'd measure my return per kilometer. After refueling, I remained online for 5 hours. In this time I drove 100.3 KM, and earned $111.83. That's $1.15 per KM, this includes driving between rides and my drive home after the last ride was completed. By parking in the shade, I am able to earn more than $1 per kilometer driven. I know that fuel costs me just under $1 per 10 KM. Using this technique I am keeping my fuel expense from driving Uber to less than 10% of my revenue generated.
Sitting in the shade waiting for ride can be boring, so it's a good idea to have some form entertainment in the car. I often take reading with me, and make sure to have a good collection of podcasts downloaded. I often park the car where I can get out and walk around. I make sure not to go too far from the car, and take the phone with me. That way I can stretch my body and get a bit of exercise all while being ready to accept the next ride when it comes through.
You can also make more with Uber if you drive smoothly. By this, I mean accelerate and brake as gently as possible. Your car burns more fuel if you accelerate harder, and your brakes and tires wear out faster if you stop too suddenly. If you let the car build up speed gently, then you will find yourself refueling less often. Better fuel efficiency means more money for Uber drivers.
Should You Drive With Uber
If you are looking for an opportunity to work for yourself, set your own hours, and make more than a casual or part time wage, then Uber could be a good option for you. As an existing Uber driver, I will get an incentive for referring new drivers, (if they join and complete 10 rides). If you'd like to be referred by the Finance Guy (and perhaps share your experiences in the comments section or on a future post), please Click here to Drive with Uber.
What Do You Need to Drive With Uber
Signing up for Uber was as simple as following the steps in their application. I had to show that my car was less than 9 years old, and could carry four passengers (with space for baggage in the back). I had to show that my criminal and driving records were in order, and I had to get a special charter extension on my drivers license. The process took around 3 weeks, and I spent less than $400 getting it all done. Once I was able to start earning with Uber, I recovered all the start up fees by the end of my second week (I only worked a few hours in the first week). I probably took longer than average to get set up because I spent a lot of time researching each step before completing it.
Do you Like Driving a Car and Talking to Strangers
Essentially the only 'skills' you need as an Uber driver is the ability to drive, follow Google maps and talk to strangers. If you can do this, then you can make money driving with Uber. There is no secret formula all you have to do is arrive at the right place in a timely manner, drive them safely to their destination, and be nice to them along the way.
As an Uber driver, it's important to respond to what your passengers want. This could be in choice of radio station, how cold the air con is, and whether or not to chat. Most passengers will want to talk to you, but some just sit there silently. Surprisingly few take mints or water, but it is a good idea to have these for those that do want them.
What are the Negatives of Driving With Uber
Like all self employment opportunities, motivation can be either a positive or negative influence. Driving with Uber, you only make money when you are allocated rides. You will experience stretches of several hours or even a few days, when your rate of income falls because you aren't getting as many rides allocated. It is easy to become disheartened and log out at these times, but my advice is to keep at it.
During quiet times, such as the middle of the day, I often turn my Uber app online from home. I sit in the living room and work on my computer (or do other house activities), and if a ride is allocated, I quickly head out to the car and drive out to earn some $$. I might earn less than $20 an hour during these times, but logging in from home means I can also get chores done. I remember telling the Finance-wife how happy I was on a day when I earned over $70, and also managed to get two loads of washing done.
Your weekly income will fluctuate. As an Uber driver, you can not afford to rely on your weekly payment. You need to have a bit of a buffer in case there is a week or two of bad earnings. It is also important to once again keep your motivation up and put in more hours when times are tough.
It's a good idea to have clear earnings targets. I know that I need to generate around $660 per week to pay all my fixed expenses. This includes rent, fuel, tax, all my ongoing direct debits, and an allowance for personal spending on food etc. Most expenses are incurred monthly, but I am paid weekly, so I convert these to weekly amounts (by aiming for 25% of each). I know that once my weekly revenue hits $660, I am cashflow positive for the week.
Uber Drivers Need to Manage Their Finances Well
Some weeks you will struggle to reach your minimum target. The only way to fix this is to work harder and stay online more hours. Late nights and other times when most drivers are logged off are usually good. There is no guaranteed income with Uber, but every week, you have the ability to work harder to earn more. To hit your Uber income target, you just need the time and motivation
You need to have enough time to earn. If like me, you have other commitments in life, simply putting in more Uber hours isn't always an option. I've had weeks where I've had to work on University assignments, attend family events, and cope with stiff muscles from having already spent too much time sitting at a desk or in a car. Unfortunately these things happen, so the choice is to either have a week of poor income (which I've done more than once), or you have to force yourself to find more hours in the car until you hit your target
Being self employed means you will be paying all your own expenses. It is important that you are aware of your expenses and have a plan in place to make sure you can pay both your regular ongoing expenses (such as fuel) and your long term expenses (such as insurance, tax and car servicing) I use two seperate bank accounts for my expenses. One is for my expected tax expense and the other is for all other expenses.
Every week I transfer funds into my expense accounts. I try and put in more than the weekly minimum. That way I build a security buffer. At the moment I have enough sitting in there to pay a full months worth of expenses. This can cover any unexpected bills, or can keep me afloat if I decide to take a vacation. I am still working on building this buffer because it is not yet where I want it to be.
As for the tax account, I calculate how much tax I think I will need to pay based on my earnings each week. I generally transfer in 30% more than this to the account. This way when I pay my quarterly tax installments, there's always enough funds in the account. When I paid my most recent tax bill, there was 60% more funds than I needed. Building this buffer means I am never stressed about how I'm going to pay my next tax installment. If the buffer grows to a substantial size, then I can give myself a tax return.
It's important to plan where your funds are going, try to set long term financial goals for yourself. When my Uber revenue is over my weekly minimum, I don't lose motivation because I know where what I am working toward with my surplus. Once the bills are paid, I stay motivated because I know that each additional ride is a step toward my personal goals
My Final Say
You can make money driving with Uber, but how much you earn each week will depend on how many hours you are able to work, and how many rides you are allocated. Uber is well suited to people who don't mind spending lots of time on the road interacting with strangers. How much money you can make is up to you. I've shared some hints on how I think you can make a little more, but would love to hear feedback, specially if any of you do decide to
A Recent Update
Within a short time of publishing this article, Uber and Perth Airport changed the way Uber rides are allocated at all Perth Airports. There is now an airport queue. When I drop a passenger at the airport, I can look at the queue and see how many Uber drivers are ahead of me in the queue. The last time I was there, I saw that I was the third car in the queue, so I waited there and got a ride allocated in less than 10 minutes. The time before that there were 23 cars in the queue, so I decided to head away from the airport.