Looking for a Side Hustle? Here Are 5 Unexpected Financial Hurdles Every New Rideshare Driver Faces

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Ridesharing is one of the most popular side hustles, but it can be costly. Here are five unexpected expenses you need to prepare for. 

When most of us think of side hustles, ridesharing is probably one of the first to come to mind. It can be a great gig — flexible hours, no need to market yourself or find an existing client base — but it also has its challenges.

Below, we’ll look at five financial challenges new rideshare drivers face and how you can overcome them.

1. Vehicle costs

Rideshare companies typically have strict rules about the types of vehicles you can use when working as a rideshare driver. Some of these rules, like ensuring the vehicle has seat belts, are pretty understandable. Others, like ensuring the car has no visible cosmetic damage, might seem unnecessary. But when you’re working for a ridesharing platform, you have to follow its rules.

If you don’t have a vehicle that adheres to current guidelines, you may have to pay to make repairs to yours or even purchase a new vehicle. This can cost a lot of money upfront. If you don’t have enough cash, ridesharing may not be the best side hustle for you right now.

Be sure to review all driver and vehicle requirements for the ridesharing platforms you plan to work for so you don’t run into any problems. If you have any questions, reach out to the company for more information.

2. Fuel costs

This may not qualify as “unexpected” since you probably know that if you’re going to be driving more, you’ll also be spending more on gas. But it’s important not to underestimate these costs when calculating how much you think you’ll make from a ridesharing side hustle.

It’s a little difficult to predict because gas prices vary by location and over time. But try to estimate how much you think you’ll spend based on how many hours you plan to spend ridesharing. Then, decide whether your profits are still worth it to you.

If you decide to go forward with ridesharing, be sure to keep track of how often you drive for the ridesharing provider and hold onto your gas station receipts. You can write off these costs as a business expense on your taxes.

3. Maintenance costs

More miles driven means more wear and tear on your vehicle, and sooner or later, it’s going to need maintenance. And remember those vehicle rules we talked about above? Those still apply, even after you’ve been driving for the company for a while.

If your car starts rusting because you’ve been driving it around a lot more, you can’t just let that go. You need to get it fixed so you’re not in violation of the platform’s rules, or else the company could suspend you.

And it goes without saying that if something happens that makes your vehicle impossible to drive, you won’t be able to work as a rideshare driver until it’s fixed. And you won’t be able to use your car for personal activities either.

Maintenance costs are virtually impossible to predict, so the best thing you can do is save for them in an emergency fund. Keep this cash on hand so you can quickly address vehicle problems as they arise without taking on debt.

4. Insurance costs

Your regular auto insurance policy won’t be enough when you start working as a rideshare driver. You need a special policy that covers ridesharing if you want your insurer to cover accidents while you’re working.

Fortunately, most of the big-name auto insurers offer some sort of ridesharing protection. But you usually have to pay extra for this. This will raise your insurance costs every year you work as a rideshare driver. But shopping around before you purchase a policy can help you pay as little as possible.

5. Taxes

When you work a traditional job, you don’t have to worry about taxes that much until it comes time to file your return. But they’re more of an ever-present concern when you have a side hustle like ridesharing. You’re considered self-employed, so you have to pay estimated taxes throughout the year — in April, June, September, and January of the following year.

Those with regular jobs may not have to worry about this as much as someone who gets most of their income from self-employment. If you believe you’d get a tax refund from your regular job, that extra might be enough to offset what you owe in taxes from ridesharing. But if you don’t pay enough throughout the year, you could face penalties.

Paying quarterly estimated taxes is the safer bet if you’re worried about owing the government. You can use the worksheet in Form 1040-ES to calculate how much you should pay. Keep in mind, you could owe your state government as well.

None of this is intended to discourage you from working as a rideshare driver. It can be a great way for some people to earn extra cash. But like anything, it’s not a great idea to jump in without considering whether the possible benefits outweigh the costs. If any of the things discussed above worry you, you may want to consider other side hustles instead.

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