Ride-share companies are changing how people get around cities. Lyft, Uber, Gett, Haxi, Sidecar and others are competing intensely, some call it a “war,” with each other and with cab companies over riders and their money.
For freelancers, underemployed and unemployed people, ride-share driving represents a new source of part-time income. In the video below, Money Talks News finance expert Stacy Johnson asks ride-share drivers why they like this work. After watching, keep reading to learn more about ride-share driving and how much drivers really make.
It’s easy to get started. “If you’re at least 21 years old, have a license, personal auto insurance, and a four-door car in good condition, you can sign up to be a driver” for Uber, the largest ride-sharing company, Business Insider says.
Here’s a look at earnings, costs, and some pros and cons of becoming a ride-share driver.
Things to consider
Ride-sharing is a new business. It is experiencing fast growth and intense competition. But can you make a full-time living? The jury is still out. Lots of drivers love the income — supplemental income, anyway — the flexibility and independence the work provides. Other drivers complain they are hardly covering their costs.
If you’re considering this line of work, keep in mind that:
- Change is constant. Before investing in a new car or other equipment, understand that pay, costs and working conditions are fluid. In some markets UberX has lowered prices repeatedly, writes an Uber investor. Some cities have banned or are regulating ride-sharing. The Seattle Times says that Uber, Lyft and Sidecar are “changing their business models in preparation for those regulations.”
- Drivers are self-employed. Drivers use a company’s software and, sometimes, its equipment, but they work for themselves. They use an app to connect with riders, to record trips driven, and to bill and get paid. They don’t carry cash or collect payments. Riders use mobile software to summon drivers and pay the company by credit card.
- Pay varies. Total fares may include a base fare, a charge for time and a charge per mile. Drivers get a percentage after the company gets a commission. Fares vary by city, by time of day and because some companies are dropping their fares to undercut competition.
- Tipping varies. Uber doesn’t allow drivers to accept tips, for example. It’s optional at Lyft and Sidecar, where customers tip electronically and drivers keep 100 percent of the tips.
- You can earn bonuses and incentives. Drivers may earn bonuses for the number of trips driven, new-driver sign-ups, and for referring passengers and other drivers to a company.
- The industry has its problems. Competition with taxi companies also is intense and highly political, the Sunlight Foundation says. Other issues include local regulations, the need to comply with the Americans with Disabilities Act, insurance coverage and airport policies, LXBN writes. Some unhappy Seattle area drivers have formed an association to advocate for themselves with the drive-share companies, The Seattle Times said.
- Driving can be risky. A Salt Lake City Uber driver told KUTV that a passenger held a gun on him. PandoDaily wrote about armed robbers targeting ride-share drivers in Los Angeles and elsewhere.
- Your insurance may not cover you. You’ll be required to have your own auto insurance. But it may not help if you get in an accident while operating your vehicle as a livery service for transporting paying passengers. Coverage offered by industry leaders Sidecar, UberX and Lyft varies. Generally, their coverage will apply if your insurance denies your claim or when you are providing a ride. But it may not cover you between rides. You need to understand the particulars. You may need to buy commercial insurance. The National Association of Insurance Commissioners lists questions drivers should ask of their insurers and their ride-share companies.
The dynamics of driver pay
Drivers report a wide variety of pay, and earnings vary by city and by driver. Some are surprised to learn the difference between gross pay (what you earn in total) and net pay (what’s left after your expenses). The Washington Post interviewed a disillusioned Uber driver:
“I thought 80 percent of the fares was a very good deal, but in reality Uber was making more money than I was,” said [Demek] Dagnachew, 49, who quit the job last month. “I had to pay taxes, gas, mileage and for car maintenance and repairs. I was spending time and making $3 per hour.”
A driver’s expenses can include: company commissions, any financing costs for your vehicle, gas, car insurance, health insurance, taxes, retirement savings, vehicle maintenance and depreciation.
For comparison, taxi drivers and chauffeurs earn $25,200, or $12.12 an hour, on average, according to 2013 Bureau of Labor Statistics numbers. The top 10 percent of taxi drivers averaged $36,850, or $17.72 an hour.
Pay at three companies
Here’s a quick look at driver pay at three of the more successful companies.