How does Uber estimate the price of trips?

Jon York

Member
Nov 30, 2018
103
21
18
What City & State do you work in?
New York City
Ever since Uber began a practice called "upfront pricing" drivers have been increasingly upset over what they perceive as a way to charge passengers more while paying drivers a smaller percentage of the actual fare.

So, how does Uber estimate the fares exactly? Well, they do have a formula which is public information - they have a set price for base fare, cost per minute and cost per mile. Based on that, the only variable left is how many miles and how many minutes will any given trip take. And that's where the funny stuff seems to come in.

Here are the components that make up every fare:

Base Fare: otherwise known as a pickup fee. This is a flat fee that is charged to every passenger regardless of the length or duration of their trip. It’s usually just a couple of dollars.

Cost per Mile: This is a price per mile which usually hovers around $1.00. In New York City it’s $1.75 which is higher than most of the rest of the country. It’s important to note that originally this was $4.50 a mile in New York city so it has been cut quite drastically since Uber started there. Similar cuts have happened all across the world leading to much driver discontent.

Booking Fee: This fee was an addition to Uber’s original operating model. It’s usually a couple of dollars and was originally called a Safety & Security fee. Now they just call it a booking fee. It’s just a way for Uber to collect a couple of more bucks on each ride (times millions of rides a day) that they don’t have to share with the drivers. They keep 100% of it.

Surge Pricing: Surge pricing kicks into gear when there is more demand from passengers than there are drivers to meet the demand. This is always figured as a multiplier of the normal price. For instance it might be 1.3x the normal price or 2.1x the normal price.

Tips: Tips are a relatively recent addition to Uber’s pay structure. Originally Uber told passengers the tip was included in the price. And when the price was a lot higher back then, most drivers didn’t mind. They were more than happy to work even without tips. But as Uber slashed the prices drivers became more desperate. Now tips are an integral part of driver pay.

Minimum Fare: Each level of Uber’s services (uberX, uberXL, uberBLACK, etc.) have a minimum fare. For uberX the minimum fare may be $5 and for uberBLACK it may be $15. The minimum fare increases for each level of service depending on that level’s rates.

Upfront Pricing: So, whenever a passenger calls for an Uber, Uber knows their pickup location and they have to put in their destination before they can complete the request for a car. Uber takes all of that information and combines it with the above components that make up each fare to calculate the final fare. The only variable is how far and how long the trip will take. Uber estimates that based on what their favorite GPS maps program tells them the time and distance will be.

But in estimating time and distance, that gives Uber (and Lyft) a lot of room to play with the price. Drivers have seen fares where they got paid less than 50% of what the passenger ultimately paid. (In the screenshot below, the driver got paid just 51% of the fare… when we were told we’d get 75%-80% of the fare originally). That shows that Uber sometimes grossly overestimates the time and distance so they can purposely charge the passenger a lot more. But they always pay drivers based on the exact time and distance that the trip actually took. So if a driver finds a shorter quicker route he’ll make less money than if he was able to replicate the route Uber used in their estimate.

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Graham

Member
Feb 4, 2019
141
10
18
What City & State do you work in?
Glendale AZ
All seems pretty fair to me; the price estimations, not the part where the driver is seeing so little of it. I understand that the driver has to pay the platform something because that's how they find the ride. But 49 percent is simply ludicrous. 'Finder's fee' stuff should never even go above 30 percent, in my book, and even that's pretty high!