Uber and Lyft have changed the way many of us commute. I haven’t taken a taxi in ages and ridesharing options like Uber/Lyft provide a quick, convenient and affordable alternative to taxis. Uber/Lyfts are generally clean, the driver friendly and the ease of paying and/or splitting fares is awesome. When in need, taking an Uber/Lyft is a no-brainer. There are certainly a lot of awesome facets of being an Uber/Lfyt driver and I’d be lying if I said I hadn’t considered it. Driving (mostly) cool people around whenever I felt like it and getting some decent cash? Pretty convincing! I wonder if any of you have considered and are actually driving for a car service. Before pulling the trigger and picking up a new side hustle (totally YMF approved), I’d like to talk you through some of the costs involved that you may not be considering right of the bat.
Let’s first start with the pros of driving for Uber/Lyft. Probably one of the first and maybe one of the coolest perks is that fact that essentially you’re your own boss and can work whenever/wherever you’d like. You really can’t beat the flexibility. Don’t feel like working one day? Well don’t turn the app on. Feel like working a few hours before or after your regular day job? Absolutely allowed! The second pro is that really anybody can do it. As long as you’ve got a smartphone and a car that’s in decent shape you’re hired! No fancy training or additional purchases needed and you can start relatively quickly. And can we talk about the money? Getting paid $5-$15 on average for a drive that’s not too long/far, why not? Definitely a great way to tack on some additional cash or in some instances; become a new full time job!
Unfortunately, driving for Uber/Lyft isn’t as rosy as it sounds. Although it might vary from company to location to situation, expect a commission of around 20% to come right off the top of any fare you earn. Still, 80% isn’t bad considering you’re just showing up and driving people from A to B. One of the bigger costs that I’d point out is the maintenance, upkeep, gas and insurance on your car. Uber/Lyft passes along a fare to you, and that’s it. You are responsible for keeping your car running. That means that all the gas, maintenance and upkeep costs will come as an expense out of the fare. So after taking out the 20% commission, you’ll also have to subtract the gas costs, oil changes and repairs. Insurance companies will also be interested to know that you’re now using your personal vehicle for commercial reasons, which likely will come with higher rates. Of course you could opt to skip telling them that, but you’d probably be in a lot of trouble if something goes wrong! Also, don’t forget about the hidden cost of time; your phone won’t be beeping with rides all the time and there will likely be some down time waiting for rides.
For better or worse; Uber/Lyft will classify you as an independent contractor. Being an independent contractor in theory means you are your own boss, which is decently true with Uber/Lyft. You set your own schedule and work your own hours. But, as an independent contractor, you will be responsible for paying the taxes that your employer would have. That means an additional 7.65% Social Security Tax and a 1.45% Medicare tax. But, on the other hand, you can take expenses off your income, most likely in the form of a $0.56/mile deduction. Instead of deducting the maintenance/gas etc, you’ll just depreciate $0.56/mile. Finally, if you’re driving full time, you’ll need to have health insurance or face a tax penalty.
If you are interested in driving for Uber/Lyft; I’d recommend asking your driver on your next ride and get their thoughts! Or if you currently/have driving for them; leave your thoughts in the comments!
A couple of resources that I used for my research:
Finally; a cool graphic I found that did some helpful math!