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The Pros and Cons of Ridesharing

The future is now. In most cities, you can pull out your smartphone and catch a ride for about half the price and wait time of a traditional taxi. Ridesharing services have upended the on-demand transportation status quo. These services are always looking for new drivers and tout the opportunity to “partner up” with them as an ideal part-time gig. But, before you open your doors to strangers, here’s what you should know.

Is the Money Good?

A few years ago, when ridesharing was fresh on the scene, companies made claims of annual income in the six figures to attract drivers. However, in many places, pay rates have dropped significantly. Some cities already have more drivers than the number of riders can support. That, combined with the fact that ridesharing companies don’t pay for any of the drivers’ expenses (like gas, oil or vehicle maintenance) might mean you could wind up making less than minimum wage.

However, there’s plenty of opportunity for part-time, supplemental income. If you live near a college town or major city, there’s almost definitely an active bar/entertainment scene that you’ll be able to cater to on weekends.

The barriers to entering the market are very low and you can stop anytime you want, so it’s definitely worth trying it out for a week to see if it seems right for you. Requirements vary by city, but ridesharing websites streamline the whole process, so you could be picking up fares in no time!

Take Things Seriously

If things go well during your first few weeks and there’s enough demand in your area that you can see doing this for the long term (part-time or full-time), then it’s time to treat your new occupation like a real business. You should be recording all of your expenses in a spreadsheet so you can easily calculate how much you’re actually making per hour.

Of equal importance is making sure your insurance policy gels with ridesharing. Many auto insurance companies have been crafting new, accommodating policies, but others are still playing catch-up. Accidents that happen while you have a ridesharing passenger in your car are covered by the service’s insurance, but could result in your personal policy being cancelled.

Depending on your level of commitment, it might make sense to invest in a new vehicle specifically for your business. Fuel-efficient vehicles, like hybrids, are ideal.

If you do buy a new car, look into taking a section 179 expense deduction (see IRS Publication 946, Chapter 2). Otherwise, you’ll have to decide between deducting your actual expenses and taking the standard mileage deduction (see IRS Publication 463, Chapter 4, “car expenses” and Chapter 5, table 5-2 on how to adequately record mileage).

Reviewing Your Reputation

The ridesharing review system is extremely important. Unlike taxi service, where there is generally no recourse if a minor issue arises (such as a driver refusing to turn on the air conditioning), passengers now can communicate with each other about their experience. Hence, it’s important to keep your car clean and your behavior congenial.

Fortunately, passengers also get reviewed, so you’ll have some notion about the people you’ll be driving. Beware, though, you are opening your car to strangers. Usually the review system is adequate, but there’s always the chance that someone will behave badly — attempting to smoke, drink or commit some other unseemly act. Keep calm, keep them in line (or kick them out) and drive on.

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