With the rising popularity of Uber, Lyft, and other ridesharing companies, using your car to make a little extra cash may seem like a great idea. However, while driving for a ridesharing company works for many car owners, it is more complicated than just signing up and showing up.
You might make good money through ridesharing, especially if you live near a big city, but you also have to consider the costs and restrictions your new job makes you subject to.
In this blog, we cover five considerations that many prospective drivers forget.
1. Insurance Coverage Requirements
The insurance you have for your personal vehicle only covers situations that qualify as just thatpersonal. When you also use your car for business purposes, you encounter situations that aren’t covered in your personal policy.
Because you will use your vehicle for commercial purposes, you must disclose your ridesharing occupation to your insurer. If you choose not to report your commercial driving or choose not to change your policy, your insurer may drop your coverage.
2. Local Regulations
Ridesharing companies have expanded quickly and many cities and states still do not have a standard way for regulating ridesharing.
Because of this difficulty, some locations have banned ridesharing entirely. In other places, you may have to drive a newer model car, have specific insurance coverages, or submit to a background check before becoming a ridesharing driver.
Check your local regulations to ensure you operate within the law in your area.
3. Taxes for Independent Contractors
When you work for a ridesharing company, you technically work as an independent contractor. While your day job pays you at a specific time and takes taxes directly out of your paychecks, your ridesharing income will work differently.
When you work as an independent contractor, you must pay your taxes to the IRS directly. If you make a lot of money through your ridesharing work, you may need to pay estimated taxes. Essentially, when you pay estimated taxes, you project how much you will make for the year, determine taxes based on that amount, and make quarterly payments.
Because independent contractors often pay a higher tax rate and the filing process can be complex, you may want to work with a tax professional.
4. Vehicle Wear and Tear
Your daily commute puts plenty of wear and tear on your car, but ridesharing can cause even faster deterioration. When you put more miles on your car overall, you must replace your tires and change your oil more often. Additionally, drivers who work in cities often go through brake pads more quickly.
To minimize wear and tear, avoid idling and schedule routine maintenance as needed.
5. Work-Related Expenses
Ridesharing companies claim that their drivers make enormous amounts of income for the hours they work. This claim can be true depending on where you work. However, you must also consider the expenses that come with a vehicle-dependent occupation.
Remember, much of the money you make will go toward paying for gas and the other expenses listed above. Consider calculating your estimated insurance cost, taxes, and other expenses before deciding to drive for a rideshare company.
Take all these factors into consideration to decide if ridesharing represents a viable option for you and your vehicle.
Think driving for a ridesharing company could work for you? Consult with Great Northern Insurance Agency to find the right insurance coverage to keep you safe and compliant with laws in your area.
