Drivers for Uber and Lyft have to cover the costs of their vehicle, personal liability insurance, gas and a smartphone.
They also pay commissions for using the apps, which can be as high as 25 percent per trip depending on how much they drive. On top of that, Uber charges booking fees, which can eat away at driver profits.
Uber and Lyft require you have a four-door car that is usually less than a decade old.
The cost of ownership for a 2015 Honda Civic, which is the top recommended car for Uber drivers by auto researcher Kelley Blue Book, is $6,172 annually, or about $118 per week.
Uber and Lyft offer financing programs for drivers to buy or lease vehicles. However, drivers with good credit can often find better deals on their own. For example, Mitchell bought a 2012 Toyota Prius with an auto loan through his credit union rather than use financing from Uber.
Generally, you do not need an additional insurance policy to drive for Uber and Lyft, but it is a legal gray area. Some insurers have dropped policyholders once they’ve found out they are driving for ride-hailing services.
Both Uber and Lyft provide up to $1 million in liability protection and other insurance benefits when you’re driving with passengers.
You can also buy rideshare policies from insurers, but 90 percent of 1,000 drivers polled by The Rideshare Guy blog do not have that coverage.
Regulations are rising for Uber, Lyft and their drivers. Thirty-four states and more than 69 cities have passed legislation governing ride-hailing companies and another six states have enacted legislation mandating minimum insurance requirements.
In New York City, it can take up to three months, 60 hours and $3,000 in fees for drivers to obtain a license from the city’s Taxi Limousine Commission, according to Uber.
Drivers for Uber and Lyft are independent contractors, which means they have to handle their own income taxes and keep tabs on their business expenses. Uber and Lyft track the mileage for drivers, but only when they are carrying passengers.
After expensing the mileage, Mitchell said he owes very little in income taxes for his work with Uber.
