If you are looking for a bit of extra cash, then driving for a company like Uber or Lyft may seem like an easy option. You provide rides in a car you already own on your schedule, so you can work it in around your existing job and responsibilities. Although the pay may seem high, you must be aware of some of the hidden costs of driving for a service like these. The following can help you prepare.
Your main expense is likely going to be insurance. Your standard auto policy may not cover you if you are driving your vehicle for commercial purposes. In this case, you will need to invest in a commercial auto insurance policy. This policy is designed to cover the higher miles you are putting on the car, since this increases the chances of a claim. It also provides coverage for the paying passenger in your vehicle in the event that they are injured in an accident.
Your maintenance costs on your car will likely go up. You will need to have basic services, like oil changes and new tires, done more often since you will be putting more miles on your car. You may also have more general repairs to plan for, since most driving of this kind is stop and go—which can prematurely wear out parts. Plan to put aside 5 to 10 percent of your daily earnings so you can cover any maintenance problems immediately when needed.
#3: Car cleaning
A clean car is a must, since this is part of the service you are being paid to provide. Some drivers find it well worth it to invest in a vacuum and upholstery shampooer that they can use from home, while others prefer to take their cars in for a full wash. Whichever option you choose, make sure you include it in your budget.
When driving for one of these services, you are not an employee. You are an independent contractor, which basically means you are self-employed. You will be responsible for not just your taxes but other required payments like social security and Medicare, which are offset by your employer if you aren't self-employed. You will also need to pay these taxes quarterly instead of annually. Some drivers opt to increase their withholding at their full-time job to cover these.
For more help, talk with a professional accountant or insurance agency in your area.