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Much less scientific but interesting nonetheless: Mr Money Moustache ran some numbers on driving Uber and they are Not Pretty either. It's not even hard to fin

by chx 9y ago

Much less scientific but interesting nonetheless: Mr Money Moustache ran some numbers on driving Uber and they are Not Pretty either. It's not even hard to find the relevant data on amortization and such: relevant government agencies will tell you what they think is reasonable. In Canada, that'll be this page. https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-allowances/automobile/automobile-motor-vehicle-allowances/automobile-allowance-rates.html https://www.canada.ca/en/revenue-agency/services/tax/busines... > The automobile allowance rates for 2018 are: > 55¢ per kilometre for the first 5,000 kilometres driven > 49¢ per kilometre driven after that The logic goes -- you can be pretty sure to spend at least this much on your car, the taxman won't allow you to deduct more... So using these numbers, you can check the average Uber trip distance length, the time it takes you to drive it and the number of trips a month to figure out how much you are making. UberX in Toronto pays you 81 cents per km and 18 cents a minute. The Toronto minimal wage is currently 14 CAD an hour. If you do quite well and spend 30 minutes driving at a 30km/h average speed then you made 4.8 dollars on the per km part (.81-.49) x 30/2 and 5.4 dollars on the time part .18 x 30. The minimum fare won't save you because they don't deduct the 49¢ per kilometre car cost obviously. Note https://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/ https://www.mrmoneymustache.com/2017/11/22/mr-money-mustache... used the rough equivalent of 40 canadian cents/km for the same cost above we used 49c for -- it's not too outlandish, everything in the US vehicle wise is cheaper and there's some guessing involved anyways.

scythe 9y ago
Mr. Money Moustache's cost estimates are wildly unrealistic. I ran a TCO on my own vehicle and it came out to about 35-40 cents per mile, much less kilometer. The MIT study uses 30 cents per mile, and this sounds right if you are being frugal and driving carefully, but apparently even this is being revisited. The idea that the government would not let you over-deduct is, in my opinion, a big mistake -- lawmakers know that people who work out of their cars are generally low-paid and therefore do not contribute much to the tax base in the first place, so it is a higher priority to avoid screwing over the poor than to nickel-and-dime them. Furthermore tax laws in America are influenced by some pro-car, anti-tax elements, who will of course act to make taxes lower for drivers.
- ghaff 9y ago
  If one assumes a fair and rational basis for the standard deductions, it's that people are driving their personal cars for business purposes. Those cars weren't purchased specifically to drive for business and they may not be optimized for economy. And, as you say, many people who put a lot of miles on their personal cars for business are probably average to the lower end of the income scale. The 30 cents a mile in this study seems reasonable for a modest Prius or Camry assuming that driving empty to pick up passengers isn't a big portion of the total driving. It's probably close to the low-end though for acceptable vehicles.
  - toomuchtodo 9y ago
    You’re able to deduct the miles driving while actively seeking a passenger. My Lyft driver was sharing this hack with me while driving me home from the airport yesterday; he turns the app on while driving home from work everyday. If he has a ride, good. If not, he’s gotten to deduct his commute home as a business expense.
  - user5994461 9y ago
    Your numbers are way too low as far as I am concerned. For comparison, you can have a look at France tax deductions. They account for the type of vehicle. https://www.service-public.fr/particuliers/actualites/A12350 https://www.service-public.fr/particuliers/actualites/A12350 The absolute minimum price is 0.286 euro * km. That is if you drive more than 20 000 km a year and have the most economic car of all.
    - scythe 9y ago
      Fuel is way more expensive in France, though, and it wouldn't surprise me if maintenance were as well, considering that CPI is significantly higher. Also see my explanation of why lawmakers would overestimate deductions. Also the minimum deduction in that table is 0.245 euro/km which is for 5000-20000 km although it assumes you drive 5000 km/year at a higher price, which most people will do for personal use anyway.
joncrane 9y ago
I think the government allowance in the USA is very generous. I generally drive reliable, economical cars (e.g. a Honda Civic) and I enjoy driving for work because I'm making a profit. Not much, but money is money. Maybe if I was driving a lifted F-350 through hilly terrain I'd start to be at the break even point, but using that number as an actual cost is waaay overestimating the actual cost, especially since Uber and Lyft require relatively new (read: efficient) vehicles.
- yodon 9y ago
  Are you certain your profit numbers include an accurate assessment of the long term maintenance costs and reduction in vehicle resale value you are incurring in connection with the miles driven? If not, as the original paper described, then you are unknowingly taking out a series of small loans on the value of your car.
  - ghaff 9y ago
    The original paper actually used a value of $0.30/mile for vehicle cost. This squares pretty well with renting a car from Hertz intended for this purpose (about $200/wk unlimited mileage/insurance) and adding about $0.10/mile for gas. (Obviously Hertz can buy and maintain cars for less than an individual. On the other hand, they need to make a profit on the rental.)
  - dwild 9y ago
    I did rent a car once for a working trip my SO had. We got out of it with a 40$ profit for a trip of about 600 km (yes gas included). For sure that renter include depreciation cost (I have never seen a car with them that had more than 150 000 km).
nopriorarrests 9y ago
Interesting. I wonder if 50c/km includes gas or it is just car depreciation alone. Because here in Moscow, Russia it's very close to what you usually pay when you use Uber, no surge premium. If that's real cost, it means that all Moscow drivers are engaged in money losing operation, and it's obviously not the case
- user5994461 9y ago
  From what I understand, the number is supposed to include, gas, car depreciation, maintenance and insurance.
sokoloff 9y ago
> The logic goes -- you can be pretty sure to spend at least this much on your car, the taxman won't allow you to deduct more... In the US, you are perfectly able to deduct more if you use the actual expenses method. Source: https://www.irs.gov/newsroom/standard-mileage-rates-for-2018-up-from-rates-for-2017 https://www.irs.gov/newsroom/standard-mileage-rates-for-2018... "Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates." Here's a Canadian tax advice site that suggests that actual expenses are permitted in Canada as well: https://www.thebalance.com/vehicle-expenses-you-can-claim-on-taxes-in-canada-2948626 https://www.thebalance.com/vehicle-expenses-you-can-claim-on... Edit: Direct CRA citation that actual expenses are allowed: https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t777/t777-fill-15e.pdf https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t777...
- chx 9y ago
  Yeah, it's a poor formulation although the intent can be figured out if you focus hard enough but let me make it easier. > We can use tax allowances instead of actual car expenses because you can be sure the taxman won't allow you to deduct more than what you are spending so the earnings we calculate here will not be more than the actual. As a formula: #1: (actual car expenses) <= (tax allowances) Adding (total uber fees) #2: (total uber fees) - (actual expenses) <= (total uber fees) - (tax allowances) and then we go on to prove #3: (total uber fees) - (tax allowances) < minimal wage And so: #4: (total uber fees) - (actual expenses) < minimal wage Changing <= to = (as you suggest) in #1 and #3 doesn't change the logic of our proof.
dwild 9y ago
> 55¢ per kilometre for the first 5,000 kilometres driven > 49¢ per kilometre driven after that These are amazing, I love them. My SO and I don't own a car, we rent one when we need. Once she had a working trip to Quebec for a convention, I came with her and we rented a car. We made 40$ of profit from renting that car because of that 50 cents per KM that were refunded (in case it's not clear, it does include the gas price). I have no idea if the renter we use (Communauto) loses money, I seriously doubt it because they keep adding more and more car into their network.

by chx 9y ago

scythe 9y ago

Mr. Money Moustache's cost estimates are wildly unrealistic. I ran a TCO on my own vehicle and it came out to about 35-40 cents per mile, much less kilometer. The MIT study uses 30 cents per mile, and this sounds right if you are being frugal and driving carefully, but apparently even this is being revisited. The idea that the government would not let you over-deduct is, in my opinion, a big mistake -- lawmakers know that people who work out of their cars are generally low-paid and therefore do not contribute much to the tax base in the first place, so it is a higher priority to avoid screwing over the poor than to nickel-and-dime them. Furthermore tax laws in America are influenced by some pro-car, anti-tax elements, who will of course act to make taxes lower for drivers.

ghaff 9y ago
If one assumes a fair and rational basis for the standard deductions, it's that people are driving their personal cars for business purposes. Those cars weren't purchased specifically to drive for business and they may not be optimized for economy. And, as you say, many people who put a lot of miles on their personal cars for business are probably average to the lower end of the income scale. The 30 cents a mile in this study seems reasonable for a modest Prius or Camry assuming that driving empty to pick up passengers isn't a big portion of the total driving. It's probably close to the low-end though for acceptable vehicles.
- toomuchtodo 9y ago
  You’re able to deduct the miles driving while actively seeking a passenger. My Lyft driver was sharing this hack with me while driving me home from the airport yesterday; he turns the app on while driving home from work everyday. If he has a ride, good. If not, he’s gotten to deduct his commute home as a business expense.
- user5994461 9y ago
  Your numbers are way too low as far as I am concerned. For comparison, you can have a look at France tax deductions. They account for the type of vehicle. https://www.service-public.fr/particuliers/actualites/A12350 https://www.service-public.fr/particuliers/actualites/A12350 The absolute minimum price is 0.286 euro * km. That is if you drive more than 20 000 km a year and have the most economic car of all.
  - scythe 9y ago
    Fuel is way more expensive in France, though, and it wouldn't surprise me if maintenance were as well, considering that CPI is significantly higher. Also see my explanation of why lawmakers would overestimate deductions. Also the minimum deduction in that table is 0.245 euro/km which is for 5000-20000 km although it assumes you drive 5000 km/year at a higher price, which most people will do for personal use anyway.

joncrane 9y ago

I think the government allowance in the USA is very generous. I generally drive reliable, economical cars (e.g. a Honda Civic) and I enjoy driving for work because I'm making a profit. Not much, but money is money. Maybe if I was driving a lifted F-350 through hilly terrain I'd start to be at the break even point, but using that number as an actual cost is waaay overestimating the actual cost, especially since Uber and Lyft require relatively new (read: efficient) vehicles.

yodon 9y ago
Are you certain your profit numbers include an accurate assessment of the long term maintenance costs and reduction in vehicle resale value you are incurring in connection with the miles driven? If not, as the original paper described, then you are unknowingly taking out a series of small loans on the value of your car.
- ghaff 9y ago
  The original paper actually used a value of $0.30/mile for vehicle cost. This squares pretty well with renting a car from Hertz intended for this purpose (about $200/wk unlimited mileage/insurance) and adding about $0.10/mile for gas. (Obviously Hertz can buy and maintain cars for less than an individual. On the other hand, they need to make a profit on the rental.)
- dwild 9y ago
  I did rent a car once for a working trip my SO had. We got out of it with a 40$ profit for a trip of about 600 km (yes gas included). For sure that renter include depreciation cost (I have never seen a car with them that had more than 150 000 km).

nopriorarrests 9y ago

Interesting. I wonder if 50c/km includes gas or it is just car depreciation alone. Because here in Moscow, Russia it's very close to what you usually pay when you use Uber, no surge premium. If that's real cost, it means that all Moscow drivers are engaged in money losing operation, and it's obviously not the case

user5994461 9y ago
From what I understand, the number is supposed to include, gas, car depreciation, maintenance and insurance.

sokoloff 9y ago

> The logic goes -- you can be pretty sure to spend at least this much on your car, the taxman won't allow you to deduct more... In the US, you are perfectly able to deduct more if you use the actual expenses method. Source: https://www.irs.gov/newsroom/standard-mileage-rates-for-2018-up-from-rates-for-2017 https://www.irs.gov/newsroom/standard-mileage-rates-for-2018... "Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates." Here's a Canadian tax advice site that suggests that actual expenses are permitted in Canada as well: https://www.thebalance.com/vehicle-expenses-you-can-claim-on-taxes-in-canada-2948626 https://www.thebalance.com/vehicle-expenses-you-can-claim-on... Edit: Direct CRA citation that actual expenses are allowed: https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t777/t777-fill-15e.pdf https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/t777...

chx 9y ago
Yeah, it's a poor formulation although the intent can be figured out if you focus hard enough but let me make it easier. > We can use tax allowances instead of actual car expenses because you can be sure the taxman won't allow you to deduct more than what you are spending so the earnings we calculate here will not be more than the actual. As a formula: #1: (actual car expenses) <= (tax allowances) Adding (total uber fees) #2: (total uber fees) - (actual expenses) <= (total uber fees) - (tax allowances) and then we go on to prove #3: (total uber fees) - (tax allowances) < minimal wage And so: #4: (total uber fees) - (actual expenses) < minimal wage Changing <= to = (as you suggest) in #1 and #3 doesn't change the logic of our proof.

dwild 9y ago

> 55¢ per kilometre for the first 5,000 kilometres driven > 49¢ per kilometre driven after that These are amazing, I love them. My SO and I don't own a car, we rent one when we need. Once she had a working trip to Quebec for a convention, I came with her and we rented a car. We made 40$ of profit from renting that car because of that 50 cents per KM that were refunded (in case it's not clear, it does include the gas price). I have no idea if the renter we use (Communauto) loses money, I seriously doubt it because they keep adding more and more car into their network.