The hidden ride-share cost sheet
When you start to ride for Lyft or Uber, you will be faced with only a few facts regarding income and expenditure. You will be blinded by numbers that amaze you and will want to become the next ride-share mogul millionaire.
Well, its time to get off your high horse and wallow in the dust with us mere mortals and learn the hard truth about ride-share driving costs.
Hidden vehicle costs
All vehicles have hidden costs, the obvious ones that are not hidden include gas, maintenance, replacing tires and insurance fees. The hidden ones are depreciation and car market value, monthly interest on loans and indirect operating costs and fees, and then don't forget the end of the year taxes.
A new car will depreciate around 20% in its first year and then by 15% annually depending on its make and model. As the car value depreciates, its maintenance costs rise at the same time. As the car ages, the more maintenance and parts replacement occur. There is a car/value ratio which is set around the three-year mark. A three-year-old car will depreciate by 38-45%, but it will not have reached the maintenance outage stage.
Here is the list of hidden car costs:
- Vehicle purchase cost including fees
- Annual loan interest
- Car Depreciation
- Monthly Insurance premiums
- Daily gas expenditure
- Vehicle maintenance
- Car cleaning
- Special purchases of items used to promote comfort
Now that we have listed eight car costs let's look at actual car cost per mile, rather than brood over all the different brands and makes; we will present the case of the most used car to date, the Toyota Prius, a real cost saver, and comfortable car.
Make: Prius C , Model: Toyota , Year: 2017
- Price: $24,685 MSRP
- Miles Per Gallon: 12
This car is considered to be one of the most commonly used cars in ridesharing today.Its low purchase price and low gas costs make it a perfect tool for maximising income while reducing overheads.
Now, before we break down, the prices, take into account that most calculators only consider the direct expenses and forget unexpected costs such as cleaning, or even special cleaning after some poor drunk puked up all over your back seat. They also don't account for the various electronic gadgetry you installed, such as a dash cam and more.
The hidden costs per mile for a Toyota Prius C 2017 model with 36 months driving at 50,000 miles a year.
- Car market price including fees: $24,685
- Yearly interest on loans: 3.79%
- Yearly Depreciation: 15%
- Yearly Insurance costs: $1,350
- Gas price per gallon: $2.35
- Number of Miles per gallon: 50
- Annual maintenance: $800
- Monthly car cleaning costs: $25
- Special gadgetry and comfort items: $2,250
- Vehicle operational hours (Periods 2 & 3): 4
Total expenditure per miles: $0.31
This is a four hour day, four hours of rideshare driving only and not including period 1 hours.
Most ride-share drivers do not drive continuously, only the truly dedicated professionals do this, and they maybe drive around 7-8 hours net period 2 & 3 driving time. Period 1 driving time can be an hour or more a day. Also note, that your car is parked 83% of the time when you are not working and during your other work hours. Add it all up, and you reach around 16-17 hours a day for a fully dedicated professional driver, for the rest of us, it's about 20-22 hours a day of rest and 4-2 hours a day of driving.
When we look at lost car time, we entertain the thought that maybe sub-leasing the car to another driver would be a possibility, since the car is already authorized for use, all we need to do is register another driver to it and just take a percentage of their work as a lease for the car. This works well with drivers seeking to work but not being able to buy or lease a car for whatever reasons.
Uber has introduced a Xchange lease program that is affecting the rideshare industry. The new program gives the Uber driver an added advantage over other ride-share companies since it lowers the financial risk involved with leasing a new or used car. It also speeds up the clearance bureaucracy getting you a car lease in record time.
More Hidden Costs
Up till now, we discussed the cars direct and indirect costs; we must now add the operational costs that ride-share companies take.
Uber takes 25% of 28% and Lyft 20%, and you must add to that the city sales tax of 8.825% and the Black car fund of 2.25%, so Uber is 25-28% depending on which car you use and Lyft reaches 30%.
Now you need to calculate your income, to evaluate your net income before tax and then deduct the hidden costs to know what you are left with in hand.
This is a much simpler process, the average income per mile for Uber is around $1.018, and we deduct the expenses above, which is $0.31 we are left with $0.708 per mile.
Bottom line, the average income per mile for a rideshare driver ranges between $0.28 - $0.31, and this was calculated on a 3-year lease car with all added expenses you could consider. Take into account this does not cover extra costs you might incur if you are sued or if you need to participate in a deductible collision insurance claim. Also, remember, this is not the final say, you have to add the end of year taxes to complete the picture. That's correct, $0.31 does not include the taxes you pay on the remaining income!