rideshare driverAs they work to grow their presence, you may have thought about driving for a ridesharing company, a service that assists with arranging rides through a smartphone app or via other means, as a side hustle or full-time gig. While becoming a rideshare driver could earn you some extra bucks, some of that hard-earned money may need to be used for the unanticipated expenses that come with the role. Keep reading to find out some of the financial impacts of being a rideshare driver that you should consider.

You may need to pay for a new vehicle

Depending on what car you currently have, you may need to get a new vehicle if you want to become a rideshare driver. That’s because various ridesharing companies have vehicle requirements that you’ll need to meet in order to become a driver. These requirements may include the number of doors your car has, the number of passengers your vehicle can carry, the type of vehicle (e.g., a taxi is likely a no-go), your vehicle’s age and your car’s condition. Keep in mind that your vehicle would also have to meet any city or state requirements. If your current vehicle doesn’t satisfy your state’s and ridesharing service’s criteria, you’ll have to be prepared to pay up for a vehicle that does.

You may need more auto insurance coverage

When it comes to thinking about the financial impacts of being a rideshare driver, you’ll also have to consider auto insurance costs. While some companies may provide some coverage when you’re on the job, like when you’re waiting for a request and transporting a rider, they may not when you aren’t actively working. For this reason, you may want to make sure that you have personal auto insurance for the times when you’re driving your car for personal use, along with enough coverage for ridesharing. Because each company’s coverage policies differ, however, make sure to learn more about the specifics of what your insurance offers.

Gas may get pricey

If you’re going to drive for a rideshare service, you’re probably going to have to think about how much gas you’ll be using as a rideshare driver. It’s a good idea to prepare yourself for any gas costs, as gas is something that can easily be overlooked and, unfortunately, these costs could negatively affect the flow of money into your bank account. In May 2018, CNBC reported that drivers for Lyft and Uber in the U.S. were “hurting,” since gas prices were the highest they had been in four years. It’s also good to keep in mind that while some rideshare companies may extend certain offers that could reduce gas costs, such as a fuel rewards program or a debit card, you’ll still likely need to cover some of the gas costs. If you opt to become a driver and you pay for the gas yourself, consider using a credit card that earns cash back on gas, such as the Bank of America Cash Rewards credit card, which earns 3% cash back on a category of your choice (including gas as an option) and 2% cash back at grocery stores and wholesale clubs (up to $2,500 per quarter in choice/grocery/wholesale club purchases, then it’s 1% back). Doing so will help you make the most of your gas purchases on and off the job.

You may have to upgrade your phone

Rideshare companies may have requirements regarding the cell phone you use for their services, which is something that should also go on the list of financial impacts to consider. Depending on what rideshare company you want to drive for, you may find that you’ll need to get a new smartphone to become a driver. Additionally, since you’ll need to be able to access the ridesharing app at all times, you may have to consider an unlimited data plan, as going over your data limit could get expensive.

Taxes may get more complicated

If you’re a rideshare driver, your taxes will probably get more complicated. That’s because some ridesharing companies essentially treat driving partners as independent contractors, so you may have to file taxes as if you’re your own boss (e.g., companies may report how much you’ve earned on 1099 forms instead of a W-2). As a rideshare driver, you will have to take care of the federal, state and local taxes applicable to you, and when it comes to your taxes, you will have to report self-employment income if you aren’t considered a company employee.

There might be license fees

Depending on where you live, your local government may require you to get a business license to be a rideshare driver. If that pertains to you, you’ll likely need to foot the bill for any business licenses you may need on the job. If you don’t get a business license, you may be subjected to penalties for not having the required documentation.

Toll fees may add up

While some ridesharing services will automatically charge passengers for tolls incurred during their rides, you may need to pay for toll fees incurred when you’re going to fetch a passenger or after you’ve dropped them off. Do note, however, that this also depends on the rideshare company you drive for, as different companies may have various policies and processes. For that reason, make sure you read the company’s terms and policies before you sign up to be a driver.

Car maintenance and repairs

As you may have guessed, when you become a driver, you’ll also have to pay the costs to maintain your car and to make any repairs — unless a rider you picked up on the job damaged or made a mess in your vehicle, in which case it may be possible to receive an inconvenience fee or other fee charged to the rider for reimbursement. The rideshare company you partner with may require you to get regular vehicle inspections, and you’ll likely have to cover those inspection fees. Maintenance and repair costs can also add up over time if you’re racking up miles on the job, so you’ll want to take these fees into consideration when you’re thinking about whether you should really become a rideshare driver or not.

Depreciation

Lastly, you’ll want to keep depreciation in mind. That’s because all that driving could result in a dock to your car’s trade-in value. If you’re looking to pay off your loan and make a down payment for a new vehicle, being an active rideshare driver and wearing out your car might not be the best idea, based on information from Ridester.

Now that you know more about some of the financial impacts of being a rideshare driver, learn more about other aspects that could affect your financial health. To get started, take a look at other articles on our website about personal finance.

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