By JOHN EGAN
Driving as an independent contractor for ride-hailing services such as Uber and Lyft isn't as simple as jumping into your car and cruising around to pick up passengers.
Before stepping into the ride-hailing world, you've got to make sure your smartphone is smart enough, check your auto insurance, weigh the extra wear and tear on your car, and potentially worry about health insurance and other benefits that are not available to independent contractors (who are not employees) - and these all might end up costing you.
Here are four potential costs to consider before becoming a driver.
1. Sizing up your smartphone
Lyft requires drivers to own an iPhone or Android phone. Uber goes a little further: Drivers must have an iPhone 5 or a newer version, or an Android device running 4.0 or beyond.
Harry Campbell, founder and CEO of The Rideshare Guy, a blog and podcast for ride-hailing drivers, says that after your car, a smartphone is the one of the most important tools for an Uber or Lyft driver, as both ride-hailing services run on mobile apps that can't operate on a regular cellphone.
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Dick Knupp, an Uber driver in State College, Pennsylvania, says that he didn't realize how much data the Uber app would gobble up each month.
Knupp's iPhone is supplied through his full-time employer, which monitors his smartphone usage and charges him if he exceeds the data limit.
It can get costly if you go over your data limit - Verizon charges $15 for every GB of data that you use over your limit, no matter what your plan is, for example.
And this may be on top of what's already a substantial monthly cost. According to a 2016 report from research company J.D. Power, the highest average smartphone bill in the U.S. was $137.
For their part, Uber and Lyft offer discounts on their drivers' monthly smartphone bills. If you drive for Uber, you get a 15 to 18 percent discount on your monthly bill if you use AT&T, Sprint or Verizon.
Lyft provides its drivers with a 15 percent discount on monthly cellphone bills through Verizon.
2. Upgrading your auto insurance
Both Uber and Lyft are clear about insurance: You must have personal auto coverage to become a driver.
When you're on your way to pick up an Uber or Lyft passenger, or you're dropping off or ferrying an Uber or Lyft passenger, your car is covered by each service's commercial liability insurance.
Uber's commercial liability policy covers $1 million per incident, such as a crash, as does Lyft's commercial liability policy.
Liability coverage is the standard coverage provided by Uber and Lyft, but they do layer on other types of coverage; for example, Uber provides $1 million in bodily injury coverage per incident involving an uninsured or underinsured motorist.
Loretta Worters, a spokeswoman for the Insurance Information Institute, says a personal auto policy generally won't cover the use of your car for Uber or Lyft.
However, some auto insurers sell supplemental coverage, at an additional cost, that covers ride-hailing trips, she says. One provider of supplemental coverage, Mercury Insurance, says a ride-hailing policy can cost as little as $60 a month.
Why would an Uber or Lyft driver want to consider supplemental coverage? Auto insurance company Safeco explains that commercial insurance provided by Uber or Lyft doesn't cover an on-duty driver who's between passengers. Also, your personal auto insurance isn't in effect when your ride-hailing app is on, potentially leaving you with a gap in coverage.
For a personal auto insurance policy that likely doesn't include this supplemental coverage, a monthly premium can range from less than $50 to several hundred dollars, based on factors such as where you live and your driving record, according to Trusted Choice, a network of independent insurance agents.
3. Additional wear and tear
Knupp says he put about 30,000 miles on his 2011 Ford Flex last year and expects to rack up another 40,000 miles this year.
"I'm quickly running it into the ground," he says.
Since signing with Uber in April 2015, Knupp has had to cough up about $900 for new tires after the tires he'd bought a year earlier wore out, he says. He also pays $70 to replace his synthetic motor oil every 5,000 miles.
Uber and Lyft don't offer figures regarding how much mileage their drivers log annually, but Lyft says the average Lyft trip is two to three miles.
So if the typical Lyft driver, a part-timer, racks up 10 trips a week at three miles apiece over the course of a year, that would add up to 1,560 miles - and that figure doesn't include the miles you might rack up driving to and from your home.
4. Lack of benefits
As independent contractors, rather than employees, Uber and Lyft drivers don't qualify for traditional workplace benefits, such as health insurance and 401(k) plans.
"That's one of the reasons why I think ride-share driving is best suited to part-time work," Campbell says. "You won't get any medical or unemployment benefits as a driver, so make sure to take that into account."
However, Uber and Lyft do provide some perks for drivers. For example:
- Through a partnership with retirement platform Betterment, an Uber driver can open an individual retirement account (IRA) with no fees during the first year, as long as the person drives only for Uber.
- Uber drivers qualify for 15 percent discounts on tires, oil changes and other car-related products and services at AutoZone, Firestone, Maaco, Meineke, Midas, Jiffy Lube and Valvoline.
- All Lyft drivers receive 20 percent off roadside assistance through Allstate.
- Through a rewards program from Shell stations, Lyft drivers can save up to 7 cents per gallon on gas.
If you're considering becoming a ride-hailing driver to get some extra cash, make sure you're well-informed about the potential extra costs you might face when you sign up.
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