Is Ridesharing Really a Good Way to Make Extra Money?

Ridesharing services are becoming more popular as a way to make extra money, but are they really worth it? Big-name apps like Uber and Lyft are likely available in your city, constantly on the lookout for new drivers. As long as you have a car in decent shape and a clean driving record, you can probably sign up as a driver.

If you're in need of some extra cash or a profitable way to spend your free time, this may seem like a perfect gig. But there are complexities to consider before getting yourself involved; for example, what happens if you get into a car accident? How much will you really be making? And is this a safe side gig to pursue?

Photo: Uber

The Money

Let's start by talking about the money, since this is the biggest motivation for most new rideshare drivers. The fare system is going to be different for every city, and you may see periodic increases and decreases of the "cut" your company takes from each ride. However, you can expect to see the same ballpark between apps and areas; most of the time, you'll immediately lose 20 to 30 percent of the fare to the company you work for.

You'll also need to account for the expenses of maintaining a vehicle, fuel, and other costs. It's typical for new drivers to only consider fuel expenses when calculating costs, but don't neglect the depreciation of your vehicle (and other maintenance costs). The IRS mileage rate is now 58 cents per mile, which means you can expect vehicle maintenance costs in a similar amount as you drive.

Let's take a look at what that might look like for an average driver. A typical ride of 10 miles might cost $16. The company might take 20 percent, knocking that down to $12.80. The $0.58 rate for maintenance and upkeep means you'll face $5.80 in expenses, reducing your total take to $7. And that's not taking into account the time or distance you spend going to pick this person up initially. When all's said and done, your hourly rate may be quite low, and you'll owe taxes on whatever you make.

City Regulations

Also keep in mind that not all cities treat ridesharing services the same. Some cities are known for being rideshare-friendly, offering designated pickup areas and other amenities to encourage more ridesharing drivers. Other cities tend to be friendlier toward taxis, and explicitly forbid certain ridesharing practices, or don't allow rideshare drivers in some areas. This can affect your profitability, as well as your ability to drive consistently.

Insurance and Accident Coverage

You'd be forgiven for thinking that your personal insurance coverage would cover you in the event of a car accident while driving for a ridesharing service, but this isn't necessarily the case. Driving for a ridesharing service is considered a business, so you'll likely need some kind of commercial auto insurance policy. Otherwise, you could be held exclusively liable for the damages. Call your auto insurance provider and see what kind of coverage or extensions they offer for ridesharing drivers, and investigate any policies that ridesharing services offer their drivers.

The Risks

It's important to think about the risks you'll face when driving as well:

1. Personal safety. While driving for a ridesharing service, you may have the power to deny certain riders, but for the most part, you'll be picking up strangers and carrying them in your personal vehicle. In some isolated cases, this can present a safety risk; someone might try to hurt you or steal from you. However, these cases tend to be few and far between, even on a national scale.

2. Vehicle damage. A bigger, more present risk is the possibility of vehicular damage. If you get someone intoxicated as the bars begin to close, they could vomit or spill food in your car. Other people may track in mud, or conduct themselves in a way that damages the vehicle's exterior. How do you plan to handle this? Many ridesharing services compensate drivers for these damages, but this isn't guaranteed.

Your Personal Enjoyment

Don't neglect the personal enjoyment factor. Some people genuinely enjoy driving other people around, and like the idea of making small talk with other people. If this is something that appeals to you, the extra money would be an extra perk—and not the sole reason for driving. However, if you detest the idea of driving strangers around, this may not be the best choice for a side gig.

Driving for a ridesharing service can be a valuable and fun way to make some extra money, but it isn't going to make you rich, and it isn't the right approach for everyone. Do your research in advance, and be sure to weigh your options carefully before getting started.

See also: How To Prepare For That Long-Pending Road Trip.

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