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Uber is an alternative taxi service in which individuals use either their own late model cars or lease late model cars from familiar rental car firms. The driver gets paid 75% of the fare.
Major Threat to the Business Model
Most Uber drivers use their own cars rather than renting at exorbitant prices from major rental car firms. The large number of miles, the threat of robbery, the enhanced chance of collisions, and a myriad of other potential liabilities has led major insurance firms, such as State Farm Insurance, to not place riders on policies for cars used for Uber. This leads many of the irresponsible types who rely on Uber for income to not notify their insurers that a family car is being used for Uber. In case of an incident, the insurer cancels the entire policy and notifies Uber. Then, Uber discontinues the app service to that driver.
Generally, the fares are cheaper than that for commercial taxicabs and the vast number of Uber drivers means you get very quick pickup.
For the vast numbers of Americans unemployed or underemployed, Uber was an attractive means for making a living. Promising substantial incomes, Uber attracted many drivers. By 2017, nearly 100,000 drivers are working in the Chicago area alone.
This large number of drivers means that the individual driver can make a barely subsistence income. For example, the queue at O'Hare International Airport numbers about 200 Uber cars waiting up to 1.5 hours for a fare. The impending amount of fare is not disclosed to the Uber driver, so that one can accept a fare that will pay the driver $10.
It's even worse during the summer when college students looking to earn spending money drive the family car for Uber.
Furthermore, clients can get a lower fare by traveling as a group, providing less income for the driver.
The Uber corporation makes the same amount for its managers once an area is saturated. In short, the corporate managers earn very heft salaries but the Uber driver, even he who works at the trade full-time, can not make more than a typical $60 to $80 per 10-hour day.
The weekly lease is about $250, or about $1000/month. Many Uber drivers, after the lease fee and the cost of gas, net $30 to $40 per day.
It was a good business model that met a demand, but it is not an attractive alternative for anyone who has a family to support or a mortgage to pay or is seeking a better life style.
An Actual Weekly Accounting
This is an actual weekly accounting for a Chicago Uber driver. He was on the road from 7:00 a.m. to 5:00 p.m. daily and averaged 6 to 7 fares each day. The Enterprise Rent-a-Car rental fee was $285.50, the additional $100.27 were fees. The cost of gas was not included. The driver in fact LOST about $100 after paying for gas. Uber customers, drawn to Uber because of the low fare, very rarely tip.
• Trip Earnings $385.78
• Deductions & Fees - $385.77
• Incentives & Other Payments $0.00
Total Payout $0.01
• MON, JUN 5 $63.07
• TUE, JUN 6 $51.97
• WED, JUN 7
• THU, JUN 8 $52.03
• FRI, JUN 9 $67.91
• SAT, JUN 10 $54.63
• SUN, JUN 11 $96.17