Confused About Uber Pricing? Here’s How it Works.

Confused About Uber Pricing? Here’s How it Works.

Uber rates are one of the great mysteries of this lifetime. But they don’t have to be! If you’re confused like everyone else on where these prices come from, you may or may not be relieved to know that they are not being pulled out of thin air.

Confused about Uber Pricing? Here’s a basic overview of pricing at the time this was written

Price Per Minute$0.13
Price Per Mile$1.00
Fee if you Cancel$5.00
Booking Fee
(Used to be called ‘Safe Rides Fee)
Can be $2.45 immediately
Base FareA flat fee for every ride, usually
around $1.00 depending on the
area and if surge pricing is
in effect.

Uber does not charge per person except in special Uber X cases, but there are many other factors, including surge rates, as well as many other payment measurements developed by Uber.

You don’t deserve to live in a state of confusion about where your money is going during your commute. We will explore when prices are the highest for Uber, why the prices fluctuate; if Uber is cheaper than Lyft, as well as a comparison of Uber to taxi cabs. By the end of this article, the Uber pricing mystery will not seem so elusive to you, and you’ll be able to choose the right ride for you going forward!

Why Do Uber Rates Vary?

The things that will impact your ride price and the factors that raise your fee are:

  • The base fee may be different (this is for every ride and used to be called ‘Initial Fee’). This goes back to Uber or the driver to cover the cost of coming to pick you up before the ride is charged/measured.
  • Booking Fee is separate and was formerly called ‘safe rides fee.’ This fee helps cover Uber’s business expenses and overhead. This includes things like getting driver’s inspections, insurance, background checks, etc. It is usually $1.00 per ride, but depending on your city, it can be up to $2.50 per ride.
  • Distance traveling (does include the distance the driver had to travel to pick you up)
  • Market/city you’re in (larger cities may be more expensive than smaller ones, but Uber may not be in many smaller towns or in the countryside)
  • The time it takes to travel (you are only charged for the duration you are physically in the car)
  • Number of miles
  • If there’s a big sporting event/concert happening in the area
  • Surge Pricing – If the demand for rides is up for any reason or high traffic, prices go up
  • If your driver has many tolls/fees along the route you’ve selected
  • Tipping – will be added to the ride’s total if you choose to tip
  • Type of Uber – if you’re getting Uber X or a private ride, this will be more expensive than a regular Uber ride or ridesharing.

So as you can see, there are a lot of influences affecting the price you will pay which is why it varies so much.  To a rider, it might seem as though the price is randomly calculated.  In fact, it’s not, and there is a method behind the madness.

Can Uber Charge Per Person?

Uber does not charge per person, despite what you might have heard. You are paying per car, not per person. So even when you are ridesharing, your fee is based on your ride, not how many friends you bring along for that ride.  So long as everyone can fit in the vehicle—obviously.

The only time you may be charged per person is if you’re upgrading from Uber to Uber X.

Uber X is a private and more luxurious version of Uber that commonly will charge per person.

It shouldn’t be a significant amount, but you may be charged an additional $1-$2 for a second passenger.

Is Uber Cheaper During Certain Days or Timeslots?

This is another scenario that will greatly depend on your location. It can basically be broken down as follows:

  • Uber will be cheaper when there is less traffic
  • Uber will be more expensive during rush hour (supply and demand)
  • Uber will be cheaper on the weekdays
  • Uber will be more expensive on the weekends

The ideal times to book for cheaper rates are:

  • 9 am-12 pm (after rush hour traffic to work)
  • 2-4 pm (before rush hour traffic home)
  • Later at night so long as it’s not after midnight.

These will fluctuate if major events are happening in town, or if there is a huge surge of ride requests in the area when requesting a ride. There are only so many Ubers, so their value will intrinsically go up if more people need them than the number of cars available.

What Is Surge Pricing?

The way that Uber defines surge pricing is as follows:

  1. Demand for rides increases – This could be due to an unexpected increase, such as events or rush hour, which causes more people to request a ride at the same time.
  2. Prices go up – Since there are only so many Uber drivers in the area, supply and demand will cause rates to skyrocket in some cases as high as $100 to go 10 miles (as I’ve seen with my own eyes at a concert event in 2018).
  3. Riders pay more or wait – as Uber puts it, you pay the rate they offer, or you wait for the crowds to pass and the rate to lower to its status quo again.

How to Avoid Surge Pricing?

You are not forced to book at that surge rate, but the rate is what it is so you can accept it or not. Sometimes waiting only 10-15 minutes will lower the rate substantially.

Waiting is truly the only solution to this, or you agree to pay the surge rate.

The standard rate for Uber could be multiplied to three and four times the standard rate and may reduce within the hour. The only time it probably won’t go back to its standard rate is if it’s very late at night and there are fewer Uber drivers available for trips.

Uber is a 24-hour service, and someone will be around to pick you up at all hours of the day.  Since there will be significantly fewer drivers at 4 am than there will be at 4 pm, the rates may be slightly higher.

To give you an example of a 45-minute ride, if you pay $1.16 per mile and $0.42 per minute, it would cost $18.90 ($0.42 times 45 minutes = $18.90) + ($1.16 times the number of miles traveled). These two numbers together ($18.90 + miles figure) will equal the total of your ride.

Cancellation Fees with Uber

If you cancel your trip, you may be charged a cancellation fee.

You won’t be charged this if you can cancel before your driver has been selected or starts heading towards your pickup location. If you have already been assigned a driver, this is where the cancellation fee comes into effect.

Another scenario in which you may be charged a cancellation fee is if you have booked a ride and your driver arrives at that pickup location but you are nowhere to be found.

If your driver has to wait for several minutes and cannot find you, you will be charged a cancellation fee to make up for the driver’s time and the inconvenience.

To give you the financial overview of what the cancellation fee will cost you, Ride-Sharing Driver writes that, “The fee in these situations is variable, typically up to $5. For Uber Black and SUV, the cancellation fee is $10. The Uber no-show cancellation fee: You will receive a cancellation fee if your driver arrives at your location, and you don’t arrive at their vehicle after 5 minutes.”

You can be charged up to $0.10 per minute of the driver’s wait time if he waits for you to arrive for too long or the driver may just cancel on you if it takes too long.

Sometimes you can get the cancellation fees waived. This will happen if you’ve been waiting for your driver much longer than expected, or if the Uber app detects for itself that your driver is arriving slowly to the pickup location.

If you want to dispute a charge, contact Uber at Review My Cancellation Fee.

The Different Pricing Between Uber X VS. Uber Black

When you open the app and select a standard ride – this is Uber X.

When you select to have a fancy ride with a larger van/higher-quality vehicle that is at a higher rate – this is Uber Black.

Uber Black offers you luxury cards that are only black (hence the name) and will usually double the cost of your Uber ride compared to standard trips. You also get a more professional driver, and the selection process for hiring is slightly more involved to become an Uber Black Driver.

The way that Ridester explains the types of cars is as follows: The type of vehicle you ride in will be one of the most immediately obvious differences between UberX and UberBLACK. With UberX, the only requirements are that the vehicle is made after a certain year (the year varies from city to city) and be able to accommodate four passengers.

Beyond that, drivers have a lot of discretion in the service they provide. This makes sense for UberX since the service is all about providing convenience and value. So expect to ride in anything from a Toyota Camry to a Honda Accord, but don’t expect anything fancy (though it can happen sometimes).

Each Uber X and Uber Black will hold between one and four passengers.

If you need more space than this, you may have to take two Ubers, or you can pay slightly more for UberXL, which will hold up to six people. The equivalent with 6 passengers for Uber Black is called UberSUV.

Ideal Occasions to Use Each Uber Type

It can basically be summarized that Uber Black is for:

  • Impressing a date
  • Showing up to a corporate event
  • Experiencing a bit of status for a night

The standard Uber X is best for:

  • Heading out for a night of drinking with friends
  • Needing a quick commute to work
  • Anything where you don’t care what you look like to people (which should never be the case but it’s fun to enjoy the fancy-life from time to time!).

If you want to arrive in style or look sleek, Uber Black will be the way to go. If you don’t mind rolling up in a Corolla for half the price, Uber X classic will be your best option.

Where the Base Charge Comes From

As mentioned, the base fee will be added if your driver has to commute a long duration to pick you up. It’s a way to charge for this, although the company will tell you they don’t charge for the time you’re not in the car.

Someone needs to cover those expenses, and that someone won’t be Uber, it will be the customer – YOU! The base fee is just the minimum price of entry to get yourself in the car. So if you want a service, you’ll have to pay for it.

Sometimes these fees will only be there at the start of the ride, and after about 8-10 minutes, standard charging will kick in. After these first 10 minutes, it should level out and be normalized in rates, but before this – you are subject to your area and time rate.

An example of this is if you were charged $5.77 for a 4.2-mile pickup that took 11.2 minutes of commute time. As The Verge describes this example given from Uber themselves:

“Riders will see long pickup fees as part of their upfront fare on trips, with an estimated long pickup fee showing in the fare breakdown. In other words, Uber’s algorithm will guess how long it will take your driver to get to your location, and then charge you based on that guess.”

The Verge

If your driver has to commute a longer duration to pick you up, this will absolutely raise your rate.

Aaron Schildkrout, who is the Head of Driver Product at Uber, says that “if it’s a 40-minute pickup, which hopefully never happens and is extremely rare, it would be some segment of 40 minutes.” This is because the driver could commute for 40 minutes to pick you up, and then you only want to go one block.

This rarely happens as there is usually a driver in closer proximity to you.

Ridesharing Prices

Ridesharing is when you split the fare with a friend or stranger that you can share the car with and end up at your own unique destinations.

Like carpooling, it makes the ride cheaper for everyone involved and is a wonderful way to utilize Uber if you’re trying to penny-pinch.

You will simply call for a ride, then select to add friends, and split the fare through the app. It is very straight forward, and this saves time in having to swap cash back and forth with your friends on cash apps. It simplifies the process of riding with friends and divvying up the fees.

Co-Riding with a stranger in your Uber is called UberPool, and it can drop the rate of your Uber by around 40-50%.

This is huge when you consider the savings you’re already getting as compared to a taxi.

Uber Compared to Taxis

To break down the main difference between each of these:

  Uber Taxis
Originated 2010 1800’s
Apps Yes Not directly, but they’re trying to develop one to compete with Uber.
Get to know price before selecting a ride Yes No
Safety 103 Uber Drivers accused of sexual assault or abuse. Always confirm the license and name of the driver before hopping in the vehicle Taxi safety is nothing new but always check that it is a registered taxi with a number and no strange signage
Background Checks required of drivers? Uber is recently starting to tighten up on background checks following many allegations. Taxis are usually required (depending on city and state) to obtain special licenses and fingerprint checks. Both Uber and taxis are seeking to increase safety screening and background checks in their hires.
Pricing Usually cheaper for long distances, known to be 40% cheaper than taxis on average (40% is the figure posed by  multiple sites). It will, of course, depend on if you’re doing UberX, Uber Black, or splitting with Ride Share. It can be slightly cheaper in cities like New York City that have heavy congestion. NYC taxis charge more adequately for these situations compared to Uber, which doesn’t necessarily read congestion in its pricing metric.

Most people are of the opinion that Uber has overtaken taxis and cabs making them a thing of the past, but as mentioned, it can be cheaper in highly populated cities during rush hour traffic.

According to a 2017 report, “Uber rides surpassed that of yellow taxis, with an average of around 289,000 rides per day compared to taxis’ some 277,000 per day.”

Since the price difference will really depend on your area, I encourage you to do your local research and determine which method of commuting will be the most affordable for your lifestyle/city.

Uber Compared to Lyft

Now for the main competitor of Uber, Lyft! These natural rivals are always competing for clients and trying to knock out taxis from existence altogether.

Each of these companies has really devastated the taxi industry.  In places like Turkey, the taxi drivers are killing the Uber drivers for stealing their business and livelihood. Depending on where you live, it can be a scary time to be an Uber driver, and also a very lucrative time.

  Uber Lyft
Filed to go Public Uber did so after Lyft in what could be the biggest stock offering in years Went public first
Apps Yes Yes
Get to know price before selecting a ride Yes Yes
Offer rideshares? Yes It’s called Pool
Offer Premium rides? Yes – Uber Black, Uber SUV, Uber XL Yes, Lyft CL, Lyft Lux Black, Lyft Lux Black XL, and Luxury SUV
Pricing Relatively similar, will depend on your area, but Uber may price-surge 3-8x’s the normal pricing. Relatively similar, will depend on your area, but Lyft will price surge usually 1-4x’s as much as the normal rate, which can sometimes make it cheaper than Uber during peak traffic hours.

As you can see, Lyft is staying just a half-step behind Uber, and they’re really trying to one-up each other as much as they can. You will always be able to see the price before booking, so my advice would be to test each.

Input your destination to each app and see which one will be most affordable. You can also see the rider that pops up once someone has chosen to pick you up. If you don’t like the ratings on one driver, see if there’s a higher-rated driver on Lyft or the price is lower.

Comparing Uber, Taxis, and Lyft Together

To give you a quick breakdown from Certify’s Tax Data:

The average cost of each ride:

  • Average Uber cost: $25.73
  • Average Lyft cost: $19.20
  • Average taxi cost: $29.52

Ratings for each ride:

  • Uber rating: Below 4.5 (closer to 4.0)
  • Lyft rating: Over 4.5 (closer to 5.0)
  • Taxi’s rating: Less than 4.0 (closer to 3.5)

So what we see here can be summarized as Lyft is cheaper and has the happiest customers. Those are quite important figures to note, but again, the rates will depend on your area.  Uber can easily be cheaper in certain cities. Do your research and use that information as your guide for the right rideshare company for you.

Why Their Competition is Good for Consumers

We’re so lucky to live in an age where we have options! It’s not as if we are monopolized into only having one taxi service to choose from and we have to take what we get and like it! No. We have options and can shop wisely to get the best options for our needs.

Another major perk of there being so many competitors is that since they are competing for our business, each has to make their offering/price look the best.

What this means to us as the consumers:

  • Lower prices
  • More competitive amenities
  • Everyone has to offer amenities to keep up with the competition
  • Every company tries to one-up each other which gives us better products/services
  • Increases the chance you’ll have great customer service
  • Keeps prices from escalating out of control

In a monopoly, it’s easy to get price-gouged and treated unfairly as a consumer.

But with everyone taking metaphorical swords to each other in this rideshare battle, the consumer comes out the champion with a plethora of high-quality options, only competing to offer better quality and options.

How Much do Uber Drivers Make?

The wages for uber drivers will vary, but according to CNBC, Uber wages are, on average, $10.87 an hour.

How Uber hourly wages compare to the minimum wage in major U.S. cities

  • $8.25 – Miami
  • $8.6 – New Jersey
  • $9.25 – Baltimore
  • $9.65 – Minneapolis
  • $10.2 – Denver
  • $10.87 – Uber wages
  • $11 – Boston
  • $13 – New York City
  • $14 – San Francisco
  • $15.45 – Seattle

Source: Economic Policy Institute. Compensation after paying extra Social Security/Medicare tax of 7.65 percent paid by self-employed.”

The article describes a driver named Rick Mendell whose only job is driving for Uber: “He’s 65 and works around 70 hours a week for the company, earning around $1,200. ‘That’s what it takes to pay the bills,’ Mendell said.”

$1,200 divided by 70 hours = $17.14, which is closer to what was reported by CNBC on gas prices in which they reported that “Uber drivers on average make $18 an hour, according to a study co-authored by Uber’s chief economist.”

Drivers are offered a credit card for cashback on gas and fuel rewards, which offer each driver 5-7 cent discounts on each gallon of gas.

It doesn’t appear that Uber drivers are getting rich fast, but the company is certainly succeeding with projections of their worth being nearly $90 billion.

Happy Riding!

Uber is a wonderful service, and we should feel very grateful to have it. The way I see it is if you don’t like the prices – no one is forcing you to use the Uber service.

If it’s out of your budget, find a more economical way of getting around like a bike, public transportation such as a bus, metro, or hitch a ride from friends.

You are at the mercy of Uber’s pricing and do not have to opt for this method of transportation. There is not much room to complain about it if you rely on Uber to commute.

Uber has truly saved lives bringing people to and from nights out that used to end with many more people deciding to drive after drinking. We are blessed to live in the age of Uber, and any business should be allowed to charge enough to cover their expenses and make a profit, so long as they are not gouging their prices out of control.

Uber is more affordable than most taxis and certainly cheaper than owning a car as you don’t have maintenance, gas, or insurance to worry about.  Click here for your Uber Price Estimate and book a ride today!

Dan Ferrantelli

I'm Dan Ferrantelli. I discovered rideshare through my wife and daughter who used the service a full year before I decided to try it. Now I am a part-time Uber & Lyft driver and love sharing my experiences with others. I'm also an entrepreneur who has developed several businesses and I have a passion to write! I hope you enjoy the articles I post. Kind feedback is always welcome.

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