Uber is an increasingly popular ride referral service that enables smartphone users to request a ride from a fleet of dedicated drivers. With over 40 million active monthly riders, Uber has become a genuine alternative to traditional taxi services (leading thousands of taxi drivers around the world to engage in a great deal of activism to try to stop it).
Uber’s riders request over five million rides per day worldwide. Their needs are being met by over 160,000 Uber drivers in over 300 cities in the United States plus over a million more Uber drivers in 75 other countries. Fifty thousand new drivers sign up with Uber every month to meet the increasing demand for rides. If you’ve ever thought that you might like to drive for a living, here is everything that you need to know about how you can become an Uber driver.
The reasons that millions of riders have switched from taxis to Uber include the following.
For smartphone users who are already accustomed to ordering products and services through their smartphones, the Uber experience should be familiar. You install the Uber app on your Android, iOS, or Windows phone. You create an account on Uber, including a credit card to which all your rides will be charged. When you need a ride, request it through the Uber app. GPS lets Uber know your location, of course. The following video guide will help you install the app and create an account:
If there is an Uber driver somewhere nearby, the app will inform you about the cost of the ride, who the driver is, the type of car, and how long you’ll have to wait for the car to arrive. When the car arrives, Uber will send you a text message.
Unlike traditional taxi services, Uber’s rating system provides a significant incentive for their drivers to do their best to satisfy their customers. Uber users get to rate their drivers on politeness, safety, and car cleanliness on a scale from 1 to 5, and they can check the current rating of a particular driver. When rating a trip, a user also has the option of tipping his or her driver via the Uber app. Lower-rated drivers will get fewer tips and probably fewer customers. Interestingly, drivers can also rate users on politeness. Rude or hostile users will probably get poorer service from drivers. Really low-rated drivers or users may even be banned from Uber altogether. Thus, there are incentives for both drivers and riders to make the Uber experience pleasant and satisfying.
As long as you can pass Uber’s background check, you shouldn’t find it difficult to become an Uber driver (unless your city imposes some difficult requirements of its own).
Install the Uber app on your smartphone and create an account on Uber, including the bank account into which your earnings will be paid.
When you’re ready to start picking up passengers, tell the Uber app that you’re going online. Then wait.
Before long, the app will notify you about a passenger requesting a ride and show you a map with the passenger’s GPS coordinates. You pick up the passenger and take the person to his or her destination. Aware that the passenger can rate you afterward, you do your best to make the passenger feel welcome, comfortable, and satisfied.
Make sure you understand clearly where your pick up location is to avoid late arrivals
You just keep repeating this process, being notified about passengers and taking them to their destinations, until you’re done for the day. Then you tell the Uber app that you’re going offline. You can rate your passengers on their behavior.
Uber will deposit the money that you’ve earned into your bank account.
To become a successful Uber driver, there are several issues you need to deal with.
Let’s look at each of these issues in turn.
Requirements for Uber Drivers
Before you can start to become an Uber driver, you must make sure that both you and your vehicle meet the various requirements. This is especially important if you are investing in a new vehicle to become an Uber driver; make sure that your vehicle meets the requirements for the type of Uber service you plan to provide. (We’ll discuss Uber services later on.)
To qualify as an Uber driver, you must be at least 21 years of age and have at least one year of driving experience. (If you’re under 23, you must have at least three years of driving experience.) You must have a valid driver’s license and valid insurance. You must also pass a background and criminal check before you may drive for Uber.
Insurance. Your personal auto insurance policy may not cover you while you are working commercially as an Uber driver, so make sure you have proper coverage. Uber has liability insurance to cover you while you are working as an Uber driver, but it may not be enough coverage. Uber offers $1 million in liability coverage for picking up a rider or driving one. However, for the times during which you’re waiting for a passenger to request you, their liability coverage is just $100,000 per accident and they offer no collision coverage. (If you’re involved in an accident in which you are found at fault, your medical liability can easily top $100,000 plus collision damage.) Check with your insurer about how much additional coverage you need. Recognizing the growing popularity of ridesharing through Uber and other companies, some auto insurers now offer rideshare insurance that you can add to your existing personal auto insurance policy for an additional premium. Here is more about the insurance issues that might arise:
Local Requirements. In addition to meeting the general requirements of age, experience, driver’s license possession, and insurance coverage, you must also meet any additional requirements imposed by the local government or local Uber management. For example, to be an Uber driver in New York City, you must obtain a Taxi and Limousine Commission (TLC) driver license. To qualify for a TLC license, you must complete a 24-hour For-Hire Vehicle (FHV) course and undergo a fingerprint-enabled criminal background check, a driving record check, and drug testing. Also, you must have TLC plates on your vehicle.
There are five common types of Uber services, each based on a particular style of vehicle: UberX, UberXL, UberSELECT, UberBLACK, and UberSUV. You need to decide which type of service you want to provide. Typically, the higher-end Uber services charge the highest rates. Let’s look at the general requirements for vehicles for each type of Uber service. (Note: Uber’s actual vehicle requirements vary from one city to another. Check with Uber for the specific vehicle requirements for your city.)
UberX is the lowest-cost Uber ride, so its vehicle requirements are the simplest to meet. To qualify for UberX, your vehicle must be a 2002 or newer four-door sedan in good condition that can seat at least four passengers plus yourself as the driver. (For example, a Chevrolet Cobalt can qualify.)
UberXL is also relatively low-cost but provides passengers with more room than they would get with UberX. To qualify for UberXL, your vehicle must be a 2002 or newer SUV or minivan with no cosmetic damage that can seat at least six passengers plus the driver. (For example, a Ford Explorer can qualify.)
UberSELECT (known in some cities as UberPlus) is a more expensive option for upscale rides. For UberSELECT, your vehicle must be a 2009 or newer entry-level luxury car with a leather interior and no cosmetic damage that can seat at least four passengers plus the driver. (For example, an Acura can qualify.)
UberBLACK is the luxury alternative to UberX. For UberBLACK, your vehicle must be a 2012 or newer luxury car in excellent condition with a black (of course) interior and exterior. (For example, a BMW 5-series sedan can qualify.)
UberSUV is the luxury alternative to UberXL. For UberSUV, your vehicle must be a 2012 or newer luxury SUV in excellent condition with a black interior and exterior that can seat six passengers plus the driver. (For example, a Lincoln Navigator can qualify.)
Finally, some cities also offer UberLUX driving. This is Uber’s ultimate luxury ride, which requires a 2012 or newer top-of-the-line vehicle in excellent condition. (For example, a Tesla Model S can qualify.)
What if you don’t already have a vehicle that can meet the requirements for the Uber service you’d like to provide? You shouldn’t spend a tremendous amount of money to obtain a vehicle solely in hopes of becoming a highly successful Uber driver. But if you’ve been thinking about getting a new vehicle anyway, consider getting one that can also meet Uber’s vehicle requirements.
The most obvious option is to just buy the vehicle outright. Uber offers discounts at local auto dealers. It even offers its own financing for drivers even if their poor credit has kept them from getting financing elsewhere. (As you might expect, Uber’s interest rates for poor credit risks are naturally higher.) However, what if you don’t want to commit to becoming an Uber driver just yet? In that case, consider renting or leasing a vehicle that can meet Uber’s requirements. Try working as an Uber driver for a while and see how well you do before you commit to purchasing a dedicated vehicle. Uber has partnered with the Hertz rental car company to help aspiring Uber drivers rent cars at special rates temporarily. Another rental option is HyreCar, a peer-to-peer rental car company that caters explicitly to ridesharing drivers from Uber and similar companies. You rent a car from some other driver that doesn’t currently need it. And when you’re not working as an Uber driver, you can rent your car to some other driver that does need it. The following video discusses the most appropriate cars for Uber.
Many Uber drivers try to work a certain number of the peak hours in their city. The term “peak hours” refers to the times during which the greatest number of riders are using Uber’s apps to request rides. Typical peak hours are as follows:
Not only are there more people seeking Uber rides during these times, but the higher demand for rides also bids up the average price per ride (called dynamic pricing), making it doubly advantageous for Uber drivers to work during these hours.
In your city, the peak hours may occur at slightly different times. You may also decide to do more specialized runs, such as from the airport to your city’s hotel district, which may have peak hours of its own. To determine the precise peak hours in your city before you become an Uber driver, you can search online, read message boards about Uber driving in your city, or talk to established Uber drivers locally.
If you’re willing to work on Saturday nights, you can earn considerably more
How much you can earn as an Uber driver largely depends on the city in which you work and the hours during which you work. It’s usually recommended that you work during as many peak hours as possible.
To begin with, Uber takes a 25% commission on every fare that you pick up. Your earnings come from the remainder. A study of 1,150 Uber and Lyft drivers found that the average Uber driver earns $15.60 per hour before expenses.
There are online calculators that can help you estimate your earnings depending on the state you live in (Hudlr)
Maintenance and fuel expenses can amount to 20–30% of your income. Internal Uber figures have shown that when these expenses were subtracted from their pay, drivers in Detroit earned only $8.77 per hour, those in Houston earned $10.75, and those in Denver earned $13.17. This means that starting in 2018, drivers in Detroit will earn less than the Michigan minimum wage. However, the median Uber driver earns less than the average Uber driver does. This means that there must be many Uber drivers who are earning a decent living to make the average so much higher than the median.
Still, these figures represent net income before taxes. As a self-employed contractor, you’ll also be responsible for paying your own income tax at all levels: federal, state (if any), and local (if any). An Uber driver earning about $25,000 this year will fall into the 15% federal income tax bracket.
You’ll also be responsible for paying a self-employment tax to cover Social Security and Medicare taxes. The self-employment tax rate for 2017 is 12.4% for the Social Security tax plus 2.9% for the Medicare tax. As you can see, the total tax burden can be significant.
Keep in mind that you must pay self-employment tax if your yearly earnings from Uber are $400 or more
On the other hand, because you’ll be using your car for business reasons, you’ll be able to deduct many car-related expenses from your income tax: Fuel, car repairs, car washes and auto detailing, auto insurance premiums, interest on your auto loan if any, and depreciation of the car. You’ll also be entitled to a mileage deduction for every mile driven for business reasons. Every mile, including the mileage you accumulate just by driving to pick up an Uber passenger and driving away after you’ve dropped the passenger off at his or her destination. You’ll also be able to deduct the fraction of your smartphone expenses that involves Uber driving.
You may also have other tax deductions such as the Uber commissions, the cost of any background checks you must pass to become an Uber driver, and even the premiums on your health insurance policies.
Tips for Successful Uber Driving
So far, we’ve looked at how to become an Uber driver and how to get your first riders. But how can you become truly successful at this job? Let’s see.
As an independent contractor, you effectively have a business that you must manage. You must track your own working hours, earnings, and expenses – Uber doesn’t do any of that for you.
As explained earlier, you are responsible for paying your own income taxes and self-employment tax, so you must track all your earnings and expenses and compute your tax deductions from your expenses. (This includes keeping track of every Uber-related mile that you drive.) Fortunately, there are useful smartphone apps and PC applications for such purposes. Or you can just create some spreadsheets. There are spreadsheet templates available to track hours worked, earnings, etc.
If you’ve never been an independent contractor before, you may be surprised at how long and complicated your tax return can get. You can’t be earning money as an Uber driver while you’re trying to fill out your tax returns by hand. Instead, consider using good tax-preparation software (such as TurboTax) to speed up the process of filing your tax returns.
You can get a tax-preparation software at any Walmart or online (Mike Mozart)
You’re competing with your fellow Uber drivers for passengers, tips, and high ratings. You want to show prospective passengers that you’re the best.
How highly you’ll be rated by your passengers will partly depend on what they’ll think of you personally. Certainly, you’ll need to be friendly, courteous, helpful, and outgoing, someone who can make a stranger feel comfortable in your vehicle.
Also, do something that helps you stand out positively from other Uber drivers. Provide your passengers some extra simple amenities (such as smartphone or tablet chargers, facial tissues, or breath mints) to make them feel more comfortable. Such little touches can mean the difference between receiving a four- or a five- star rating or the difference between a generous tip or no tip. Of course, the purchase of such simple amenities for your customers is tax-deductible too.
Impeccably clean interior, nice odor and your smile will usually help you get better ratings
Uber has made a name for itself as a company that tries to stay at the forefront of technology. To fend off restrictive regulations, legislation, or judicial rulings, Uber also tries to respond to various concerns of the communities in which it operates. As a result, there will often be changes to Uber’s operations that you’ll need to be aware of, especially those that may affect your pay.
For instance, in some cases, you may be eligible for Uber’s hourly guarantee. Uber may guarantee to pay you a particular hourly rate as long as you meet certain qualifications such as how many trips you accept and how many trips you perform per hour. To decide whether guaranteed pay is worth it, you need to do a good job of tracking your earnings without it.
For the longer term, you should familiarize yourself with advances in autonomous (self-driving) vehicles and the extent to which Uber will take advantage of this technology. Uber management has stated their intention to move away from human drivers toward autonomous vehicles, dramatically reducing the cost of a ride. Uber has already performed some preliminary experiments with autonomous vehicles. Here you can see their experiments in Pittsburg:
Should that technology prove highly successful for Uber, the employment prospects for Uber driving (and indeed for all ridesharing companies) will be diminished.
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