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Want to Drive for Lyft or Uber? Here’s How to Actually Make Money
When it comes to the gig economy, Lyft and Uber are among the most sought-after employers. But can you actually make money driving for them? And how much do you really net?
According to TIME, the median take-home pay for Uber drivers is about $155 per month. But, depending on where you live and your strategy, it can be much higher.
“Uber charges different rates in different markets, and big, bustling cities tend to have more passengers in need of rides, so it makes sense that driver earnings have also been found to vary widely by city,” explains finance reporter Rob Wile.
Want to drive for Lyft or Uber? Here’s how you can set your own schedule, run your own side business, and make good money.
1. Understand the Market Where You Live
As the studies reported in TIME demonstrate, your profits as an Uber or Lyft driver vary widely depending on your city, your competition, and how you strategize your hours.
But actual profits might not be as rosy as these studies suggest. According to Wile, Uber provided BuzzFeed with internal figures that told a slightly different story from externally-conducted research.
“[After] expenses were factored in, drivers in three markets - Detroit, Houston, and Denver - earned only $8.77, $10.75, and $13.17 per hour, respectively,” Wile reports.
If you can’t change locations to earn a higher rate in a more competitive market, then you can - and should - learn how to drive more strategically.
2. Keep Your Expenses Low
At first, it can seem like driving your own vehicle for a ride-sharing service is a relatively low-cost way to make extra money.
But there are plenty of hidden costs to running your own business - even if that business happens to be your own car!
According to Dave Sutton, a spokesperson for the Taxicab, Limousine, and Paratransit Association, some of these expenses might ultimately be high - and unexpected.
“People who use their personal vehicles to drive professionally will be dismayed at the heavy wear and tear placed on their cars,” Sutton told personal finance blog MoneyUnder30.com.
“[A] ridesharing driver may find he has to replace his vehicle after just a few years of driving, much more quickly than he or she would imagine - a huge unanticipated cost,” he added.
Here are a few common expenses for ridesharing drivers to keep in mind before signing up:
- Fees from the ride-sharing company. Both Uber and Lyft take a percentage fee off the top of every fare you collect. For Uber, the fee is 25%, and for Lyft, it’s between 20 and 25%. Don’t forget to factor this into your hourly earnings.
- Your smartphone contract. Even if you already own a smartphone and pay for data, using the Uber or Lyft apps to collect fares is still a business expense. You may want to drive for a few nights and weekends to get a sense of how much data you use up on an average trip, so you can calculate how this cost will affect your bottom line.
- Gas. If you’re driving more, obviously you’ll be spending more on gas, too. That’s now a business expense, so keep careful tabs on your gas expenditures and miles for tax purposes.
- Insurance. You’re required to pay for your own car insurance policy as a rideshare driver - but these policies cost more than personal ones. Learn more at NerdWallet.com.
- Car detailing. You’ve probably already noticed that just about every Uber or Lyft car is spotless. That’s because drivers regularly wash and detail their cars in order to get a high rating. Factor this cost - as well as wear and tear on your vehicle - into your budget, too.
- Snacks and other rider perks. Some drivers will offer snacks or bottled water. That can eat into your bottom line, especially if you’re not making a high hourly rate.
- Taxes. When you’re a contract worker, your income is taxable. That means you’ll need to set aside 25% to 30% of your earnings to pay state, local, and federal taxes at the end of the year. Read up on what to expect when it comes time to file at Turbo Tax.
Just like any small business owner or contract employee, you’ll have to balance how much income you make against your expenses in order to determine the profitability of your work.
If you have a new car that can withstand wear and tear, and are savvy about lowering your expenses, then driving for Uber or Lyft might be the right side gig for you.
3. Drive at the Right Times
Driving strategy can be especially tricky for new ride-sharing drivers.
Sure, everyone wants to pick up bar-hoppers on the weekends - but that means the competition during those hours will be fierce!
Harry Campbell, an Uber driver and ride-sharing blogger, points out that Uber and Lyft’s most successful drivers understand how to manipulate surge pricing and heat maps.
“It’s not hard to figure out when the busiest times to drive are since Uber/Lyft send out weekly summaries and heat maps, but you have to realize that it’s not just about when lots of passengers are requesting rides,” Campbell writes at his blog, TheRideShareGuy.com.
“As a driver looking to maximize your income, you also have to consider times/places when there aren’t a lot of drivers out,” he adds.
Campbell suggests trying very early mornings on weekends - when partygoers may be heading home - and early morning airport runs.
If you’re not competing for fares at these times, you’re more likely to generate business that’ll keep you driving and earning.
4. Stay Put
This tip comes from blogger Glenn Carter, a sharing economy expert who writes for the personal finance blog TheCasualCapitalist.com.
According to Carter, logging extra miles while you wait to accept a fare can be a waste of time, effort, and money.
“Driving around and chasing business rarely works, and increases your costs substantially,” Carter writes. “Don’t drive 15 miles for a fare, unless it’s a big one.”
Avoid driving around during peak hours, unless you’re swamped by competition, Carter adds. This will help you cut down on your expenses, including gas and detailing.
5. Get a Sign-On Bonus
One of the perks of the gig economy is that there’s no ideal time to start. If you think you’re ready to drive today, give it a shot!
But Campbell, “The Rideshare Guy,” says there are times when signing up means you’ll get a hefty bonus.
“Rideshare sign-up bonuses can fluctuate wildly by market and time of year, but it’s not unheard of for a brand new driver to be offered $500 just to sign up and do 75 rides (on top of the pay you get for doing the rides),” Campbell explains.
Want to know what the current sign-up bonus is in your area? Campbell suggests writing a message to their customer support team to inquire.
6. Don’t Limit Yourself
While it might take some time for you to get the hang of driving for Uber and Lyft, more experienced drivers can work for both services - and make more. According to Campbell, this is a common practice - and it’s how he makes most of his money.
However, while Uber may be part of the sharing economy, it’s not so keen on sharing its drivers.
In a 2014 story from CNN, drivers reported receiving threats from Uber about splitting their time between ridesharing apps.
"They called and told me I cannot be working for both platforms - that I can't be working for Uber and Lyft at the same time," one New York-based driver told CNN. This clearly isn’t true - and reports of this behavior have tapered off since then.
Now, thanks to a new app called Mystro, it’s easier than ever to juggle ridesharing apps so you can make a profit (no matter what those Uber recruiters say).
7. Know What to Write Off
If driving for Uber and Lyft is your first time working as a contractor, then navigating the change to your taxes might be tricky at first.
Learn which expenses are deductible - and how you should track them for your accountant.
The better you are at tracking details like mileage and gas, in addition to expenses like detailing and snacks, the lower your taxes will be - and the more money you’ll get to keep.
Read more about how to organize your taxes as a rideshare driver over at The Balance.
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