Answer.
The costs and expenses incurred on rideshare options like Uber and Lyft cannot be overemphasized. From the routine maintenance costs to the cost of fuel, all these add up and cut down the earnings notably. The expenses that can range from routine to personal self-employment costs are so high that about 4% of drivers make less as compared to their spending. In this article, we will take a look at the different expenses incurred by Uber and Lyft drivers.
Uber and Lyft driver spending.
The costs and expenses associated with the Uber and Lyft rideshare options are:
Registration. Inspection. InsuranceGasMaintenanceMiscellaneous costs. Depreciation.
Registration.
Depending on the state, vehicle registration is a yearly expense that can cost anywhere between 8$-300$.
Inspection.
Car inspections are done routinely by the Department of Motor Vehicle. Depending on state regulations this can take place 2-3 times a year and the costs can range from 150$-250$.
Insurance cost.
Insurance is a compulsory requirement for all vehicles and can range anywhere from 400$-800$ monthly.
Gas.
With the current rise in gas prices, Uber and Lyft drivers have been hit hard, with many choosing to drive shorter miles and fuel-less to minimize the gas expense. The drivers were incurring a cost of about 300-600$ per month on gas, but that cost has now risen by almost 50%.
Maintenance cost.
From oil changes to tire and brake repairs, the routine maintenance cost can average 2000$-10,000 per year depending on the model, make, and age of your vehicle.
Miscellaneous expenses.
There are additional costs like car cleaning services, traffic, and parking tickets that may be unforeseen and difficult to gauge but still add up on the expense list.
Depreciation.
Depreciation is a cost that most drivers do not consider when taking a gig in Uber/Lyft but it is a substantial cost. It is highly dependent on the model and mileage of a vehicle but sites such as kkb.com can easily calculate the estimated depreciation value of your vehicle for you.
Cost of upgrading.
Uber and Lyft have minimum vehicle requirements that have to be met by drivers to keep operating. This may lead to a necessity to upgrade and oftentimes, drivers cannot meet this cost along with the loan payments they make. Factoring in depreciation may also mean that the vehicles they are currently using may not give back enough value to offset this cost.
In addition to the costs above, there are also personal costs that are necessary such as:
FICA donation. Health insurance. Pension. Personal liability insurance.
These costs are not paid for by the employer so drivers have to make personal contributions towards them.
It may not be possible to calculate the exact costs and expenses that a driver should expect from these rideshare services, mainly because not all drivers incur the same costs. Depending on location, choice of vehicle, number of trips made, or mileage, every driver’s book may look different. The most important thing is to track your expenses and make a judgment for yourself.
Conclusion.
Although the revenue from rideshare services, Uber and Lyft are substantial, a potential driver should be aware of the costs and expenses associated with it to plan. With the cost of gas and other related expenses rising, it has become extremely difficult to break even. Smart individuals may have to reduce their spending on other expenses to offset this increase. For this to happen, it is crucial to be aware of all spending and make the necessary adjustments or risk going out of business.
Frequently asked questions.
How much do Uber and Lyft take from their drivers?
Uber charges its drivers 25-30% of their earnings for the use of its application. Lyft on the other hand charges 20% inclusive of tax for the same.
Who earns more, Uber or Lyft drivers?
The average earnings of Lyft drivers are about 18$ per hour. Uber drivers earn slightly less, at 15$ per hour, but Lyft drivers enjoy higher revenue through tips.
Can I write off mileage using Uber or Lyft?
Although both Uber and Lyft record the mileage while you are on a trip, you can deduct the distance covered between trips, before starting a trip and that covered on the way home.
How much should I put away for taxes as an Uber or Lyft driver?
The tax amount is directly dependent on several factors, but planning for at least 25-30% for both self-employment and income tax should be a great start.
