Why NO ONE should drive for Uber in Tahoe

Lake Tahoe Uber Drive Says No More

Let me start by saying, I have loved using Uber for convenient rides everywhere from Sydney, Australia to Boston to San Francisco and back again. I am a huge proponent of using Uber in most situations…

…that said, I ran a little experiment over the Holidays when Uber was launching in my hometown in North Lake Tahoe and found that as an Uber Driver in Tahoe I was losing money or barely breaking even at best. Not good! My best trip was netting $1.66 on a $6.00 fare. My worst – being down $12.62 on a 2.5 hour foray (last time I drive to South Lake to pick someone up). Now given, you can say I am only out money if I include wear-and-tear and use the standard mileage rate ($0.575/mi) for my expenses, but even just taking into account direct fuel and maintenance expenses I am making well less than minimum wage while decreasing the value of my car at the same time.  Bottom line is, something needs to change with Uber in Tahoe before every driver out there learns the sad truth – it is currently a money losing proposition.

Here is my threefold take on Tahoe’s Uber-problem:

  1. Tahoe is split by two states and you can only pick up in one making most trips uni-directional;
  2. There are very few in-town trips; and
  3. Uber is subject to what I will call the populational gravity effect.

The result is unsustainable earnings at best unless you assume no incremental wear, maintenance or cleaning:

 Earnings before Taxes after Taxes
– after Uber Fee, Federal Mileage & Phone Data $ 1.53/hr $ 1.14/hr
– after Uber Fee, Fuel & Maint (prorated) & Phone Data $ 6.71/hr $ 5.03/hr
– after Uber Fee, Fuel & Phone Data (no maint/wear) $ 12.57/hr $ 9.43/hr

(more about these numbers below)

Two States

Every Uber forum will tell you not to drive anywhere between trips – it is a useless expense. Since Tahoe is split by two states, many of your trips as a Driver become one-directional because if you pick in Nevada and drop off in California, you have to scurry back to Nevada before you can go back online and begin accepting trip requests again – and those new riders often want to go back across the state line. This means that your costs are roughly double for every trip because you cannot just pick up another trip where the last one left off. If you are a California Driver in Truckee, Tahoe City or South Lake this may not be as much of a problem for you, but I would love to hear your input.


Populational Gravity Effect

By the nature of taking people where they want to go, Uber naturally has a gravitational pull toward populated areas which means if you are working in a less populated area (i.e. Incline Village, Nevada – pop 8,800) near more populous areas (Reno [250,000pop], Carson City [54,000], South Lake Tahoe [24,000], Truckee [16,000] etc), you are highly likely to have a trip outside of town to one of these other more populous areas every day. Once you drop someone off in a bigger town/city you are more and more likely to continue receiving trip requests within that area. If you don’t live in the biggest city/town in your area and you drive for Uber, good luck – every driver eventually receives a trip to that city and at some point you have to return home, only to end up getting sucked into that city again the next day by its inescapable gravity field.

A typical day driving in Tahoe:

  • Daytime trips to/from Ski Resorts primarily:
    • Mid morning (8-11am)
    • Mid afternoon (3-4:30pm)
  • Evening Trips to/from
    • Casinos
    • Bars
    • Restaurants
    • Hotels
    • Rental Homes

Here is a sample of some trips from Incline:


By the numbers

I invite you to look at my numbers too and tell me what you think: danherrdotcom.files.wordpress.com/2015/12/uber-tahoe-costs-29-dec-2015.xlsx


I can see how Uber would claim a driver “makes” more than $20/hour – but that is before Uber fees, costs to operate etc. From my experience, you can show that during my actual trips (not including before or after mileage) my fares were $282.05 for the 5hr, 14 min and 21 sec I spent “driving” on trips – that is $53.83/hr, but remember I can’t just turn around and pick someone up where I drop off most of the time – I have to drive back to Nevada, and at some point return home. If I include the hours driving to pick up and return from dropping off that quickly turns to $21/hr. But that is not an accurate number – you have to pay Uber, you have to pay for Fuel, and somewhere in there needs to be maintenance and phone costs:

Total Fares/Sales $282.05
  Uber Fee $62.85
  Safe Rider Fees (reimbursed by Uber for Tahoe) $0.00
  Mileage to start (@ $0.575/mi) $34.99
  Mileage on Trip (@ $0.575/mi) $79.44
  Mileage returning (@ $0.575/mi) $83.46
  Cell Phone Data $1.59
Total Expenses $262.34
 Net Income $19.71
 Taxes (25%) $4.93
Net Profit $14.78


Breaking this down by the total amount of time I was on the road:

Trip Time 05:14:21 5 hrs 14 min 21 sec
En Route Time 07:40:39 7 hrs 40 min 39 sec
Total Time 12:55:00 12 hrs 55 min 0 sec

Dividing my $19.71 of pre-tax earnings and $14.78 post-tax by 12 hrs and 55 minutes gives you the $1.53/hr and $1.14/hr respectively that I gave above.

Of my driving it broke down like this:

Mileage (mi) (per)
To Start 61 18%
Trip 138 40%
Return 145 42%
Total 344 100%

I understand the argument that the Federal Mileage rate of $0.575/mile might be a bit high depending on your vehicle and the actual wear-and-tear, so I included a second and third calculation below. The second set of numbers ($6.71/hr & $5.03/hr) includes 87 octane Fuel prorated by mileage between fill-ups and Maintenance by mileage based upon my 12-month average maintenance expenses (oil changes, tires, tire rotations, checkups, cleaning supplies, etc), but does not include any incremental depreciation or wear-and-tear. The third only includes fuel. For me those numbers worked out to $0.17/mile for fuel and $0.22/mile in maintenance for a total of $0.39/mile.

 Earnings before Taxes after Taxes
– after Uber Fee, Federal Mileage & Phone Data $ 1.53/hr $ 1.14/hr
– after Uber Fee, Fuel & Maint (prorated) & Phone Data $ 6.71/hr $ 5.03/hr
– after Uber Fee, Fuel & Phone Data (no maint/wear) $ 12.57/hr $ 9.43/hr

Again these numbers do not include any payment for my time sitting around waiting for a request to come in – simply starting when I accept a trip and stopping when I get back in my workable area.


What I have surmised is that the Balance of Uber Earnings (green line) as a function of mileage for an Uber Drive in Tahoe is a losing proposition:

Uber Far & Expenses
Uber Fare, Uber Fee, other Expenses and Earnings Balance by trip distance (mi). View original interactive Google chart at jsfiddle.net/DanHerr/4cmuezmt/4/embedded/result/. Source file is available as well: danherrdotcom.files.wordpress.com/2015/12/dont-drive-for-uber-29-dec-2015.xlsx

I encourage anyone/everyone to have a look at my data and let me know if you draw any different conclusions – perhaps I am missing something. But my recommendation would be that until Uber figures out how to have us pick up across state lines or increases the fares in Tahoe, it is not worth your time to be an Uber Driver.


Notes & References

In all cases I went back online in Nevada as soon as I crossed back into Nevada again (Nevada drivers are automatically logged out at the end of a trip in California and cannot log in again while in California). There are some cases where I could have spent more time driving outside of my “area” (generally Incline Village and Crystal Bay), but at some point in the evening you need to return home. Generally if I waited for than 15 minutes without any request, I began moving toward home while staying online.

The above generally assumes:

  • $2.00 Base
  • $0.20 Per minute
  • $1.10 Per mile
  • $5.00 Minimum
  • $1.70 Safe Rides Fee when/if charged
  • 25% Uber Fee
  • 40 MPH average speed
  • 20 MPG fuel usage when needed
  • $0.575 Per mile standard federal mileage cost rate when used
  • 25% Tax Rate when there are any earnings

All of the above does not take into account that Uber’s earnings system has issues causing it to double charging me for Safe Rides ($1.70/ride) which they have confirmed via email they are working upon. Above I have taken the assumption that Uber will correct these issues and pay me the balance due of $1.70/ride.

Lehman Fee Calculator

Being in the Private Equity and investment banking world you run across the Lehman Formula in paying advisor/broker/banker fees quite often. Most all of us know the structure of 5%, 4%, 3%, 2%, and 1% for the first 5 million respectively, but sometimes it is just easier to have a calculator that does it for you. I couldn’t easily find any online and had some time to kill one evening, so I made one (includes option for Double Lehman):

Link to Lehman Fee Calculator by Dan Herr
Click image to access Calculator

Unfortunately, WordPress doesn’t let you embed Javascript (Myspace can tell you why :)), so either click the above image or go to:


The other ways to remember the calculation / keep it simple in your head are:

  • $150k for first $5m TEV + 1% of the balance; OR
  • $200k for the first $10m TEV + 1% of the balance


In the future I could add flat % (i.e.1% & 2%) as well as Reverse Lehman options to this calculator if enough people would find it helpful – please let me know in the comment section below.

Happy hunting!