The Hidden Cost of Driving for Uber: How Straight-Line Depreciation Affects Your Vehicle's Value
Understanding the True Cost of Being an Uber Driver: The Role of Depreciation in Your Expenses
As an Uber driver, it's essential to understand all the costs associated with driving for the platform. One cost that is often overlooked is the depreciation of your vehicle. Every mile you drive adds to your car's wear and tear, which can impact its future value.
To help understand the impact of mileage on your car's value, let's look at the straight-line depreciation method. This method allows you to estimate an asset's depreciation over time based on the assumption that its value will decrease in a linear fashion.
I purchased my 2022 Prius for $33,000 and expect it to be worth $3,000 when I sell it at 300,000 miles. Using the straight-line depreciation formula, I can calculate the depreciation per mile as follows:
Depreciation per mile = (Cost - Salvage Value) / Useful Life
Plugging in the values for my Prius, I get the following:
Depreciation per mile = ($33,000 - $3,000) / 300,000 miles = $0.10 per mile
This means that my Prius will lose approximately 10 cents in value for every mile driven. Throughout 300,000 miles, the total depreciation is expected to be $30,000, leaving the vehicle with a predicted value of $3,000 at the end of its useful life.
Another way of looking at it: On a night when I Uber 200 miles, depreciation costs me $20.
It's important to note that the straight-line method of depreciation results in a constant amount of depreciation each year. This is in contrast to other forms of depreciation, such as the declining balance method, which results in a higher amount of depreciation in the earlier years of an asset's useful life.
As an Uber driver, it's essential to consider the depreciation of your vehicle in addition to other costs like fuel and maintenance. By understanding how the value of your car is expected to change over time, you can make informed decisions about when to sell or trade-in your vehicle.
