Rideshare Driving: What are your Expenses and Cost Per Mile?
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Disclaimer: I am not a financial expert, so do your own research.
In this article, we will cover what your basic business expenses are and how to determine your cost per mile. This is not an exact science, but we should be able to come up with a good estimate to work with. Knowing this will help you build a better budget and figure out how much you need to work, so that you are working for your benefit and not just the benefit of the rideshare company.
How to Figure Out What Your Monthly Car Payment SHOULD Be
You might be thinking, “I already know what my car payment is.” But that is not what I mean. If you are using your car for rideshare, you will probably need to pay more than your monthly payment to make sure you can have your car paid off before it starts needing serious repairs.
Here is something that few people mention when it comes to buying a car and using it for rideshare. Figure out how many miles you think the car you are purchasing can go before you will need to trade it in. My Toyota Corolla can probably go more than 175,000, before it starts to have serious issues.
Now take the number of miles the car has on it, my car had 10,000 on it when I purchased it, and subtract that from 175,000 (175,000–10,000 = 165,000). This is how many miles I have until I want to have it paid off and possibly trade it in. Now, divide what you owe on the car by 165,000. So, let’s say that I paid $19,000 for my used Toyota Corolla and have 165,000 miles left on it, before I want to trade it in. My cost per mile is 11 cents. I am going to track my miles each month and then multiply the total miles by 11 cents, and that is what I am going to pay as my car payment. I put about 3,000 miles per month on my car, so each month I am going to pay $330 per month.
The good news is that, with this formula, you will pay your car off even earlier than you think, because the extra money paid each month will go towards the principal of the car, which will reduce the overall interest paid on the loan. In other words, the loan will probably be paid off before you reach 175,000 miles. But, check with your car loan company and make sure that the extra payment amount will go to the principal. Most loans will do this automatically, but some may require a separate check.
Car Insurance
Car insurance can be confusing and tricky as a rideshare driver. I am not an insurance expert, so do not take my advice here as legal advice. Do your own research. But, in general, Uber and Lyft only provide you with bodily injury and property damage liability insurance when you are waiting for a ride. This means that they will not cover damage to your car or another car during this time. When you are en route to pick up a passenger or have a passenger in the car, they extend that coverage, and cover your car, and the other car. But this insurance has a $2,500 deductible. Yes, you heard that correctly. If you have an accident, and are at fault, you will have to pay $2,500.
Most car insurance does not cover you when you are waiting for a ride, unless you have a rideshare waiver or add-on to your insurance. You need to contact your insurance company and make sure that you are covered during this time. Some insurance companies do not even offer rideshare insurance. And yes, it will cost you more than your basic insurance.
You need to make sure that you have enough money to cover Uber and Lyft’s 2,500 deductible, if you are in an accident. Even the best driver, can make a mistake. If this is your primary source of income and you are in an accident (that is your fault) and can’t pay the $2,500 deductible, you are not only out of a job, but also a car.
Uber Insurance Info: https://www.uber.com/us/en/drive/insurance/
Lyft Insurance Info: https://www.lyft.com/driver/insurance
So, now let’s estimate my cost per mile for insurance. I pay about $200 per month for my car insurance and I will divide that by the 3,000 miles I drive per month. So, my cost per mile for insurance is 6 cents. (200/3000=.06)
Gas
Gas is pretty straight forward. You will just have to figure out what the average cost per mile for gas is in your area. For me, right now, it is around $3 per gallon, and I average about 27 miles per gallon, so my per mile cost is 11 cents per mile. (3/27=.11)
Car Cleaning
I go to a spray car wash service each week (or more as needed) and wash and vacuum my car. Then, as needed, I have a deep clean done. My cleaning service probably averages $40 per month, which works out to just 1 cent per mile.
Car Maintenance
Most cars today recommend an oil change every 10,000 miles, but my car manual suggests every 5,000 if you use the car as a taxi. I want my car to last as long as possible, so I do an oil change about ever 6 weeks. This works out to about $74 divided by 6,000 for 2 cent per mile.
A good tire should last, at minimum, 36,000 miles. And let’s say that 4 tires plus installation would be about $600. This means that tires should cost us about 1.5 cents per mile.
Health Insurance
As independent contractors, we rideshare drivers must provide our own health insurance. Prices for health insurance can vary greatly around the country and discounts via the Affordable Care Act can really help. As I understand it, where I live, has some of the best insurance prices around. I have a good solid Bronze plan for about $50 per month and don’t have any serious health issues. So let’s say that I spend about $100 in premiums and other fees per month, which works out to about 2.5 cents per mile.
Miscellaneous Supplies
As a rideshare driver, we don’t have many other expenses other than charging cables, seat cushions, seat covers, and air freshening supplies. We can just keep this simple and say .5 cent per mile.
The Grand Total
Once we add all of this up, my total per mile is estimated around 35.5 cents per mile. I average about $1.68 gross profit per mile. So, my net profit is about $1.33 per mile.
And Now, Some Good News
As a rideshare driver, you get to claim what is called the “standard mileage deduction” on your taxes. The standard deduction for 2021 was 56 cents per mile, and it will be higher in 2022. Basically, you get to deduct 56 cents per mile from your taxable income. To be clear, this does not mean all miles you drive, just miles you drive while working. So, trips out of town or to the grocery store do not count. Even your drive home at the end of the night does not count. Uber and Lyft will give you a report of your on-app miles in a tax report at the end of the year. (You can also find monthly reports on Uber’s website under Tax Information.)
Also, to be clear, this does not mean that you make 56 cents for each mile you drive. It means that you get to deduct that much from your taxable income. If you drove 36,000 miles at 56 cents per mile, you would be able to deduct $20,160 from your taxable income. If your tax rate is 12% and your self-employment tax rate is 15.3%, your real cash savings would be $5,503.
(If we do the math, per mile, this would work out to 15 cents per mile. 3,000 miles per month at 56 cents per mile is $1,680. We multiply that time 27.3% (12% Federal Tax and 15.3% self-employment tax) and we get 458.64. Then we divide that by 3,000 miles and we get 15 cents per mile.)
So, now I can subtract 15 cents per mile from my per mile cost of 35.5 cents and now I am at 20.5 cents per mile, for a net profit of $1.33 per mile.
Conclusion
Being a rideshare driver can be profitable, if you keep the numbers straight, keep your car in good condition, and keep enough money in the bank for emergencies. You have to treat it as a business.
If you do the math above, you should be making a net profit of more than $1 per mile. If this the case, then your next step is to figure out your other personal monthly expenses, how much you want to save per month, and start working enough hours to produce that income.
If you are making a net profit of less than $1 per mile:
- Is your car too expensive?
- Does the car not get good gas mileage?
- Is the car requiring too much maintenance?
- Are you not making enough per mile?
- Are you working at times when rates are low?
- Are you not working the quests, surges, etc?
- Are you not working when tips are high?
- Are you accepting rides that pay too little?
If you decide to sign up to drive for Uber or Lyft, please use my referral links, or codes if you sign-up directly in the apps:
Uber Referral Link / code: h1u313krg1pw
Lyft Referral Link / code: ARTHUR28323
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