When Uber and Lyft announced upfront fares, many drivers were cautiously optimistic – most drivers always wanted more information about passenger distance and destination, and this seemed like a good step in the right direction. However, are upfront fares just another word for “rate cuts”? Senior RSG contributor Sergio Avedian shares his spreadsheet calculations and analysis to help you determine if upfront fares are a rate cut for you!
Update (12/22/22): Uber reached out to our editorial team to let us know that this was not a glitch and during the time frame we looked at in California (prior to the roll-out of the new upfront pay for everyone), drivers were shown an ‘Upfront Fare’ which we document below, but a driver’s actual pay was adjusted based on actual mileage and time. With the new upfront pay system, the fare you see on the accept screen, is the fare you should receive, unless there are major deviations from the route. See below for more details.
Over the past few months, Uber and Lyft have been making changes to upfront pay. This takes on different names depending on the company, including upfront pay, upfront fare, and what I like to call ‘upfront fares destination’ or UFD. Basically, upfront pay was touted as bringing drivers more “transparency and choice” when it comes to earning and taking the guesswork out of what drivers may earn.
Well, as a longtime rideshare driver, I’ve been there, seen that. While I’m fortunate to drive in Los Angeles, California, a top-tier rideshare market, I always drive for myself, not the gig companies or even the passengers.
Over the past six years, I have seen at least four rate cuts that I can clearly remember. Not one active driver from then and now can come to me and claim that they are making more money today than in 2016. That is due to rate cuts Uber and Lyft unleashed upon the community in a race to the bottom. Now, it looks like upfront fare changes are another sneaky rate cut for drivers.
Uber and Lyft Release Upfront Fares
By the time you read this, trip requests will include extra information. Before you accept a request, you’ll be able to see how much you’ll make and where you’ll go.
The amount you see up front is calculated using several factors, including base fares, estimated trip length and duration, pickup distance, and surge pricing.
According to Uber/Lyft, payments for factors that are not predicted, such as wait times and tips, are still added after the trip. To help you make your decisions, Uber will show the cross streets closest to the pickup and dropoff points. As always, it’s up to you to decide if you want to accept requests.
According to statements made by both companies, when trips take a surprise turn, when there’s unexpected traffic, for example, or a change of address, the fare will be adjusted accordingly.
So far, so good, right? Well, we have been talking about the problems with Upfront Fares for the past month on Show Me The Money Club (SMTMC). What do you think? Please, comment below!
Our analysis:
How Are Upfront Fares Calculated?
What is glaringly different between upfront fares and the old version is that distance and duration of trips (Mile/Minute Rate Card) are no longer part of how fares are calculated. Instead, the new algorithm will factor in more data before it spits out the fare for the drivers.
With these new changes, according to Uber, you’ll earn less than before on:.
- Long and relatively quick (traffic-free) trips
- Trips to high-demand areas
You’ll earn more than before on:
- Short trips
- Routes that will go through traffic
- Trips with a final destination in a low-demand area
- Trips that require you to drive a long distance to pick up the rider
Both companies called this a rebalancing, and their CEOs during their interviews with Harry called this more transparent and ease of earnings. Every time I heard those phrases over the past seven years, it was a cut. So, I was skeptical until I got my hands on a sizable sample. Recently, due to a code glitch we documented on the Show Me the Money Club, I was able to get my hands on an excellent sample of my own data.
Please comment below. Is that what you are experiencing? You will see my detailed analysis below and make sure to subscribe to the Show Me the Money Club livestream held weekly!
My Analysis of Upfront Fares
Update (12/22/22): Uber reached out to our editorial team to let us know that this was not a glitch and during the time frame we looked at in California (prior to the roll-out of the new upfront pay for everyone), drivers were shown an ‘Upfront Fare’ which we document below, but a driver’s actual pay was adjusted based on actual mileage and time. With the new upfront pay system, the fare you see on the accept screen, is the fare you should receive, unless there are major deviations from the route.
So the ‘Upfront Fare’ seen in the screenshots below was actually the fare Sergio was presented with on the accept screen. And then at the end of the trip, it was adjusted based on actual mileage and time, so a 2.45% discrepancy makes sense in this scenario.
On the $23.41 trip, Uber says that the rider mistakenly put in the same origin and destination and that is why the fare adjusted from $10.49 to $23.41, which was in Sergio’s favor. But we are hearing from many drivers that with the new system, route deviations are not always being accounted for, so this is a topic we’ll continue to monitor.
Recently, while I was checking on some trips from July of this year, I discovered that a coder made a huge mistake and displayed not only the fare I was paid for trips but included the new Upfront Fare. After checking how far this glitch went, it was my pleasure to discover that I had my hands on a goldmine of data, six months’ worth to be exact.
The following is what I saw on over 500 trips, jackpot!
In less than 24 hours after the show, the ‘Upfront Fare’ line was removed.
Now that we know what the ‘Upfront Fare’ amount really was, the analysis below isn’t applicable anymore.
Comparing Upfront Fares to the Old Model (Mile/Minute)
When Uber and Lyft show me the money, I am happy to drive. I have a strategy for every offer they present to me. If it is a hefty Quest or guarantee, I make sure I target short trips and finish them with minimum-fare trips. Otherwise, I only drive when and where there is demand and when I can stack all bonuses and incentives offered for that specific week to maximize my earnings.
You’ll see from the comparisons below that overall, the new upfront fares destination (what we refer to as UFD) is a 2.45% cut on driver earnings, at least from what I was able to compare with my own driving records and earnings.
My Conclusion
A lot of drivers feel like the new upfront fare system is a rate cut and Uber hasn’t released any data to show otherwise so I think it’s reasonable to worry that as the algorithm becomes more of a black box, drivers have less transparency into how much they’re paid, what Uber’s cut is, etc. Ultimately though, drivers have wanted to see upfront fare information for almost 10 years so it’s a good thing it’s here. If that comes with even a 5% rate cut, that may not be ideal but I bet a lot of drivers would still make that trade. We’ll continue to keep a close eye on how this all shakes out.
What do you think? Let us know in the comments below!
-Sergio @ RSG
