One of my biggest beefs with the income numbers that companies like Lyft and Uber provide is that they don’t subtract the true cost of operating your vehicle. I think a lot of drivers under-estimate these costs since they are delayed and let’s face it, we may just not want to think about it. Today, RSG contributor, Christian Perea takes a look at the operating costs of a few different vehicles and gives his take on which car works best for rideshare drivers. Hint, the answer depends on a lot of different factors.
After last year’s price cuts, it has become more important than ever to select the right car. Although it seems that the slew of price cutting has slowed down for most markets, I still don’t think we are safe and future iterations of price cuts may manifest themselves differently than in the past. So if you are thinking about getting into this as a driver, it’s important that you choose a car that will offer the best value for you and your passengers.
Getting a BRAND NEW CAR is not always the best idea, and in many ways it can sink your career as a rideshare driver before you even leave the lot (and shortly after signing the note to your 24.99% Prius). You don’t want to literally drive yourself into bankruptcy right?
Now conversely, you also want to avoid buying the cheapest car available with four doors. I made this mistake with a 2005 Passat thinking I could get a cheap deal. It turned into a maintenance trap with new brakes, brake calipers, radiator, and was finally killed off by an oil delivery issue to the motor.
(If you’re in need of maintenance, YourMechanic is a great option as they will come to your home or business. Right now, new customers can get $20 off their first service with the code ‘RSG15‘).
So where is the sweet spot? I recommend something that is at least three years old, with low mileage and preferably under a great warranty. Old enough to be past the steepest portion of the depreciation curve yet still new enough to be trusty and reliable.
But really, it all breaks down to this question: What does it cost to drive your car one mile?
This cost comprises more than the amount of gas used per mile. It has to account for things like depreciation, new tires, new brakes, maintenance, insurance, state fees, car washes, financing and more. It is difficult to calculate a lot of these costs due to the unique situation of our ownership though.
We place a great deal of miles on our cars but utilise them to a far greater degree than the typical driver. We go through oil changes at about the same rate as haircuts, and lets not forget that noise your shocks are making that you are pretending to not hear (or is it your transmission? OH GOD please don’t be the transmission!!)
So after a bit of searching, I came across a calculator that allows for the real inputs of our driving costs. This includes the cost of credit and other factors in operations costs.
Below are some examples of typical cars I see being used for rideshare. You may be surprised to see the differences in operation costs. When using the calculator, I assumed that they were purchased with 5k down, and financed at 5% interest, driven 40,000 miles per year. Obviously these results vary depending on those two factors, and you can see costs rise rapidly with higher interest auto loans or poor maintenance metrics. Feel free to check out the calculator and find out what your costs are.
2015 Mercedes C300
Price: $38400 New MSRP
Unique Ability: Uber Plus
Cost Per Mile: $0.53
We all want to drive a nice car when we are sitting in them for up to 50 hours a week. This will obviously come at a hefty premium, and it won’t make sense to go out and buy that brand new Mercedes/BMW unless you spring for the classes that can do UberBlack. Although that comes with a hefty increase in costs too.
2013 GMC Yukon
Price: $43000 @30k Miles
Unique Ability: UberXL,Black Car, SUV, Lyft Plus.
Cost Per Mile:$0.63
This will open you up to all of the income streams for rideshare. Since you will want to get onto Uber Black, you will probably end up with a TCP/Livery number. This means you will also be able to build a base of private clients. If you are in this for the long haul, this may be the best option for you to grow your transport business while using Uber as a sort of set of training wheels for lead generation.
2015 Toyota Prius
Price: C:$22590, V:$26985
Unique Ability: Actually make money in LA/Nashville.
C: $0.26, V:$0.30
Probably the most common vehicle in rideshare, the Prius C/V setup is going to pay you back in the long run. Just beware that random people may try to enter your car when you are on a break or driving to get breakfast.
Price: $15000 @ 35k Miles
Unique Ability: Comfortable, sensible, economical.
These cars seem popular. Offering more room than a Prius and more power for hills with lower maintenance costs while sacrificing MPG. They are also usually very well appointed with leather and gadgets and hold their value well. The Camry has a special place in my heart as it’s the car my mom drove us around in for TEN YEARS. It was purple.
2008 Toyota Prius
Price: $8000 @ 80k Miles
Unique Ability: Iconic model, fat margins.
The “Toaster” Prius is this generation’s VW Bug. The first Hybrid adopted by the masses that kicked off a race from all other automotive companies to produce their own hybrids, many of which still do not hold up to this original. At sixteen cents a mile, it is probably the best value proposition for Uberx/Lyft/Sidecar, but you must get it at the right price as they tend to be sold above ‘Blue Book’ value.
2003 Honda Odyssey
Price: 7995 @95k Miles
Unique Ability: Lyft Plus, UberXL, Shuddle.
Everybody hates on the Minivan, but truth be told you are probably going to get the best bang for your buck with an old minivan. It opens you up to XL and Plus while getting similar gas mileage as a standard sedan. Your passengers may be inclined to rate you lower for an older car, so make sure you keep it clean and have some way of making it comfortable and pleasant.
1987 Honda Elite 80
Unique Ability: Postmates
You will be limited to only postmates, but now you get rid of the headache of basically paying for your vehicle. If you live in a densely populated area that favors postmates or other food delivery, you are going to have almost no operating costs while having the ability to weave through traffic. You will also experience the adrenaline rush of being invisible to other cars.
Price: $5.74 Million
Unique Ability: Dispersing Traffic, Automatic 5 Stars with San Andreas PD.
I just wanted to see how much it would cost to do this in a tank. The Leopard 2 only seats 4, so I think it’s limited to Sidecar until Uber rolls out its “Panzer” option in June.
When Uber launched its leasing program last year, earnings were roughly double what they were today in most markets. The whole subject of how terrible this turned out for many drivers is deserving of an article (and investigation) in of itself.
Essentially, these leasing options were offered in a partnership with Santander to lend to those who could not afford a car for Uber. Nerdwallet eventually advised drivers of the dangers of the lease, while KQED actually covered a story of a driver who was trapped after the price cuts. The drivers signed up for an $800/month lease payment, were still accountable for gas and insurance, and then the rug was pulled from beneath them on their earnings. This program caught a lot of heat and criticism for being predatory. When it comes to the leasing option, I advise having an exit strategy.
In fairness, Uber did partner recently with BAMA Leasing to offer a more flexible leasing option where the driver would have the option to return the vehicle after 30 days of driving with 2 weeks notice. The lease offers up to 30000 miles a year and can be as low as $137/week including taxes and maintenance (oil changes, brakes, and tires!). I haven’t found anyone who has used this program yet, but it seems to be at least an effort by Uber to offer a more viable solution to new drivers.
Breeze operates a program in a few markets for leasing. They offer Leases for Priuses running about $200 a week similar to Uber. Obviously this is expensive, but Breeze may be available when the Uber BAMA Leasing option is not. They also let you return the car and terminate the lease with two weeks notice and take a lot of the hassle out of things.
You will want to consider that if you drive the lease exactly 30,000 miles you will reach the maximum efficiency of the lease without being charged for going over the yearly mileage. At 200 a week, that is 9600 a year in lease payments generating .32 cents a mile in expense to solely pay the lease. At 30MPG, you add in an additional .116 cents per mile for .43 cents a mile. Considerably higher than many of the options explored above, and it makes the lofty assumption of maximum utilization of the lease terms.
If you have to lease to get into this, I advise having a very realistic exit strategy. I would eye that Honda Odyssey minivan above or something similar. It would give you ownership of the vehicle, while opening you up to the income streams from UberXL, and Plus. Being patient in getting the optimal setup will make your life much easier down the road.
Readers, what type of car do you drive and which vehicle do you think is the best for rideshare?
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-Christian @ RSG