Want To Be a Lyft or Uber Driver?

11 Things You Should Know

Ride-sharing companies Uber and Lyft make it easy to become an Uber Partner or Lyft driver. You simply download the Uber driver app or Lyft equivalent, sign up online, pass a background check, and demonstrate that your car meets the company standards. Within a week or so, you’ll be a Lyft or Uber driver, carrying passengers around town and making a bunch of money.

Well, it’s not quite that easy or lucrative, despite the marketing. Deciding to drive for one of the car sharing companies is a more complex business decision, and you need to take all of the costs and risks into account before you make the leap. You’ll be using your personal car, so there are insurance, financing, and leasing implications that you need to consider. The rules vary by location and company, so there’s a significant amount of research that you’ll want to do before you commit.

How It Works

The services work in a similar manner. Once approved as a driver, you download the Lyft or Uber app and tell it that you are available to give rides. When a customer requests a ride, you are notified by the app and directed to a location for pickup. You provide the ride using turn-by-turn directions from the app or another navigation system, and drop off the passengers at their destination. No cash changes hands, as the customer’s credit card is automatically billed for the ride. The customer has the option to give feedback about your service, and you have the opportunity to give feedback about the customer.

Uber and Lyft are the two biggest players in the ride-hailing market (technically a more accurate description for the industry), with Sidecar coming in a distant third. Each service has its plusses and minuses, so you’ll want to research which works best for you. Many people drive for both companies.

A lot of the time I use Uber/Lyft, the driver is using a different app for directions such as Wayze or Google Maps

Car Requirements

In order to drive for one of the services, you’ll need a car that meets their minimum specifications. Generally, that means a car that has four doors (not including rear hatches), seats at least four passengers in addition to the driver, has current in-state license plates and proof of insurance, and is relatively new. The allowable age of the car depends on the company and the specific city where the car will be operated.

Cars are required to pass an inspection, though it varies by the location and company whether the inspection is self-reported, done by a representative of the company, or done by a government agency.

Car Purchasing and Rental Programs

If you don’t have a car that meets the standards, there are several programs popping up to get you wheels. Kia frequently offers buying incentives for Uber drivers, with discounts of $500 common.

In some cities, General Motors and Lyft have partnered with the Express Drive rental program that puts Lyft drivers in Chevy Equinox crossovers for a fixed price that includes insurance and maintenance. Drivers can use the GM vehicles for up to eight weeks at a time. If the driver meets a certain number of Lyft rides given, the weekly rental fee is waived.

Rental car company Hertz is partnering with both Uber and Lyft to rent cars that have been rotated out of their normal rental fleet to ride-sharing drivers. Uber itself has created Xchange Leasing LLC to lease vehicles to drivers with no credit history or a poor credit history. However, the subsidiary has faced controversy, being compared by some to predatory subprime lenders.

Purchasing From a Bank or Credit Union

If you choose to use financing from a bank or credit union to purchase a car for Uber or Lyft service, there are some pitfalls to look out for. Your financial institution may consider such financing to be a commercial loan, triggering a significantly more difficult application process and different loan terms to reflect the car’s more rapid depreciation and the loan's higher risk of default. If you tell your bank or credit union that the vehicle is for personal use and they later find out that you are using if for a ride-hailing service, they can declare your loan to be in default due to an inaccurate application and call the entire balance due or repossess the vehicle. The best advice is to tell them upfront what the car is for; you might find that some lenders have special programs for ride-sharing drivers.

Insurance

Uber and Lyft consider drivers to be independent contractors and not employees. For one thing, it means that although they provide some insurance while a passenger is in the car, you’re pretty much on your own most of the time. Fortunately, in many states insurers have created special policies for Lyft and Uber drivers. Trying to get by with just a personal auto insurance policy it risky at best, as even admitting to your insurer that you drive for a car-sharing company is grounds for immediate cancellation of your auto insurance policy. 

Maintenance

Since you’ll be driving your car a whole lot more, and mostly doing so in stop-and-go city traffic, you’ll want to figure out how much more you will face in vehicle maintenance costs. You will go through brakes and tires faster, and if your car is out of warranty, you'll need to be ready for unexpected repairs. Operating a car without everything functioning properly can result in a suspension from your ride-sharing company or lower reviews from customers.

Fuel Costs

Fuel prices continue to be low, but before you commit to driving for a ride-hailing company, you will want to consider whether it could still be profitable if gas prices were considerably higher. Fuel costs come directly out of your wallet and will probably be the highest expense you incur. If you’re considering what car to use for Uber or Lyft, fuel mileage should be a top consideration.

Working Weekends

In most cities, the most successful drivers will tell you that the big money is found on Friday and Saturday nights. Not only does that mean that you’ll have to give up your weekend nights, it also means that you’ll have your fair share of intoxicated passengers. The cost of cleaning and maintaining your car’s interior needs to be included in your math when determining business costs.

Taxes and Accounting

Since you are considered self-employed, you will need to closely monitor your income and pay federal self-employment tax, state taxes, and local taxes and fees, plus sales tax in some areas. In some cases you will be required to make estimated tax payments each quarter. A business license will be required in some municipalities but not others. The IRS will require detailed records for proper allocation of your vehicle expenses between business and personal use.

Of course, Uber and Lyft will take a significant share of your gross earnings in exchange for providing the technology that finds customers for you and manages customer and driver payments. Lyft’s app allows customers to tip drivers, while the Uber app does not.

Safety

Potential Uber and Lyft drivers need to look at the level of personal risk they are willing to take on. You’ll be carrying strangers into areas of town you might be unfamiliar with. Although you can decline trips, you do so at your financial peril, so you will need to constantly balance your need for cash with your personal safety. As an independent contractor, you can’t count on Lyft or Uber to have your back, like they would be required to if you were an employee.

Income

How much money will you make? It depends on how much you drive and when you drive. Generally, the numbers marketed by the ride-hailing companies don’t reflect the expenses that you will incur in driving your personal car to transport strangers. Your best bet is to talk to current Uber and Lyft drivers in your area to get an idea of what they make. There are lots of variables involved, so you’ll want to find drivers that closely mirror your situation and goals.

If you have decided that the ride-sharing landscape is for you, check out our new  or used car rankings to find the right wheels for your new endeavor, and then use our Best Price Program to get the best deal available. Follow the expert staff of U.S. News & World Report on Twitter and Facebook for the latest car-buying advice.