Rideshare Driving: A New Way to Finance Car Ownership?

Getting a new car is an exciting prospect. A new set of wheels opens a world of possibilities — and with the popularization of ridesharing apps like Uber and Lyft, this is truer now than ever before. Millennials have been exploring ridesharing as an opportunity to earn some extra cash, and better afford their auto loans on top of other debts like student loans. For young adults looking to combat debt or poor credit, rideshare driving easily beats flipping burgers.

However, many new on-demand drivers fail to realize that they need to make some substantial investments in order to succeed in the business. Maintenance and liability issues can leave newbies wondering if they got in over their heads. What are the pros and cons of ridesharing? Is earning cash through this method an effective way of paying for a new vehicle?

Pros: Goodbye, Debt!

It is easy to see why young adults are drawn to the idea of rideshare. It doesn’t require any sort of special training and offers flexible scheduling. This extra income can offset the cost of loan payments associated with owning a vehicle, giving you the freedom to truly advance in life.

No Special Training Required

For most rideshare applications, no special training is necessary to start accepting fares. A look at Uber’s requirements, for example, shows that you only have to spend a few minutes taking a driver screening online. For college graduates who want to avoid incurring any additional debt through required training courses, this is a breath of relief. As long as you have a decent driving record and no serious concerns in your criminal history, you should be set to drive.

Earn Money With a Flexible Schedule

Whether you are looking for a part-time gig or a full-time job, rideshare driving is a viable choice. Considering that 44 percent of all graduates struggle to find work, or are stuck in low-wage, dead-end jobs, it doesn’t take a genius to see why a flexible, readily available job would be appealing. Driving for a couple hours in the afternoon on a weekend can help millennials make ends meet.

Cons: Hello, Unexpected Costs!

When deciding whether or not to become a rideshare driver, keep in mind that there are some costs to rideshare driving. For some millennials, maintenance and liability issues may make it impractical to pursue this route.

Maintenance

Putting more miles on your car means more operating costs — and, on average, full-time rideshare drivers clock in over three times as many miles as the average American. This inevitably results in substantially higher fuel and repair costs. In one year of operation, it is not uncommon to spend over $2,500 on fuel and $1,000 on car washes. Add the costs of maintenance and repairs and you are looking at some hefty costs.

Fortunately, drivers can deduct operating expenses when filing their taxes. As a driver, you must vigilantly tabulate these costs. This can help offset some of the associated maintenance costs (yes, those car washes are tax deductible!)

Liability

In terms of liability, you must be prepared in case you are involved in an auto accident. For some rideshare companies, a personal auto insurance policy should suffice. Uber, for example, does not require any additional coverage, and even provides supplemental insurance coverage.

Other companies, on the other hand, might require drivers to have a commercial insurance, as well as a commercial driver’s license. For millennials looking to reduce their debt, this requirement might make ridesharing an unfeasible source of revenue. These requirements may differ depending on the state you will be working in, so it is essential to research the requirements before diving in.

Choosing the Right Vehicle to Get Started

After weighing the benefits and drawbacks of ridesharing, you may be wondering how to get started. There are many considerations when choosing your rideshare vehicle. While buying a used vehicle is a thrifty option, be sure that your chosen vehicle at least a 2010 model or newer. Most older vehicles are not acceptable to major rideshare companies. Furthermore, your vehicle must have 4 doors. A full size 4 door SUV, sedan, or crossover is ideal.

For millennials looking to supplement their income with some part-time driving, a less expensive vehicle is preferable. Full-time drivers, on the other hand, should be willing to spend extra for a more fuel efficient car.

Balancing Finances

Don’t have an appropriate car for ridesharing? Even if you can’t afford a car out-of-pocket to get started, financing a new vehicle is easier than you might think. Millennials who struggle with debt may have a poor credit score. Don’t let your credit score dictate your future. If you think rideshare driving is for you, consider getting a car loan. With bad credit car loans, young adults can get the financing needed to get a new car.

Before seeking financing, do some legwork. Tabulate the cost of student loan payments and living expenses. Afterwards, try to estimate how much you will be earning. How many hours do you anticipate you will be driving? Uber drivers, for example, earn an average of $14.85 an hour. Will you be doing other work? Total your earnings, then subtract your costs. Use this figure to find your best loan term.

When financing a car, try to aim for the shortest loan term that you can afford. Car loans are a great way to demonstrate your creditworthiness. Keep in mind: regularly making car payments can help millennials improve their credit rating, but allowing the interest on a car to exceed the cost of the car itself will negatively impact your score.

Thousands of millennials are tackling loans head-on by taking on additional work. After weighing the pros and cons, consider if rideshare driving is right for you. Even if you don’t have an appropriate vehicle, financing options are available to those looking to get started. Depending on your circumstances, rideshare driving might be a great way to pay off debt and improve your credit score