Rideshare drivers are considered independent contractors for whichever company they work for. As independent contractors, each driver is responsible for their own expenses.
Before you begin ridesharing, it is important to know what expenses you will typically incur so that you can plan accordingly and make changes where needed.
The expenses a rideshare driver encounters can be divided into two groups. Direct car expenses and indirect car expenses.
Direct car expenses include the following:
• Car payments/financing (if any)
• Taxes and fees
• Car Insurance
• Routine Service
• Car repair
Indirect car expenses include the following:
• Electronics - phone, charger, dashcam, etc.
• Parking and Toll charges
• Health insurance (if ridesharing is your full-time job)
• Items for passengers e.g., water, gum, mint etc.
If you are new to ridesharing or are moving to a new city or starting work with a new rideshare company, you will realize that it is difficult to accurately estimate what your expenses will be in each of the above categories ahead of time.
Some of your expenses like your car payment, if you have one, will stay the same but others will not.
It is therefore recommended that for the first month on the job, you spend the time not only learning the ropes but also tracking your expenses.
How to Track Expenses
Expenses can be tracked manually or automatically. We recommend that you track them automatically using expense tracking software.
The benefit of using expense-tracking software is that you can record expense items immediately and therefore track your expenditure better. It also saves you a lot of time.
Intuit's QuickBooks Self Employed software is popular amongst rideshare drivers as it is easy to use. Not only does it allow you to enter and track your expenses, it also links to your bank accounts so you can compare your income against your expenses. Also, if you use Turbo Tax to file your taxes, the two systems are compatible. Information is easily uploaded from one to the other. This saves you time when you have to file your taxes.
In this article, we shall focus on direct car expenses as the car you choose to use greatly impacts your expenses over time.
Direct Car Expenses
Rideshare drivers often make the mistake of focusing only on gas and mileage when they are calculating their expenses. This is a mistake because while gas and mileage costs are clearly visible expenses, there are others costs that are not as visible but still need to be taken into consideration. These include depreciation and age of the vehicle for example.
The following comparison between a 2012 Hyundai Elantra (GLS) and a 2012 Prius Two shows you how the choice of your car impacts your expenses.
2012 Hyundai Elantra (GLS)
|Year 1||Year 2||Year 3||Year 4||Year 5||5 Year Total||Per Mile (60K Total Miles)|
|Taxes and Fees||$738||$50||$50||$50||$50||$938||0.0125|
|Cost to Own||$6,512||$3,960||$3,729||$4,523||$4,624||$23,348||0.3113|
2012 Prius Two
|Year 1||Year 2||Year 3||Year 4||Year 5||5 Year Total||Per mile (60k total miles)|
|Taxes & Fees||$1,167||$50||$50||$50||$50||$1,367||0.0182|
|True Cost to Own ®||$7,931||$4,655||$4,331||$3,696||$4,906||$25,519||0.3403|
Key Observations from the above comparisons.
The more expensive the vehicle, the quicker it depreciates and the more you need to pay to maintain it and get repairs done.
The more mileage a car has the greater the cost to maintain it even if it has great fuel efficiency.
If you are yet to decide on a vehicle to use for ridesharing this is a perfect exercise to undertake so that you get the best value for your money. If you already have a car this exercise can still come in handy especially if ridesharing is your full-time job. Knowing how your vehicle either increases or decreases your take home revenue after taxes and expenses is crucial.
Sites like Edmunds.com can be used to compare the above costs for different vehicles.