The Pros and Cons of Signing Up with Ride Sharing Companies Such as Uber and Lyft

The Pros and Cons of Signing Up with Ride Sharing Companies Such as Uber and Lyft

by Lisa C. Johnson, Esq., November 2014

By creating apps that match drivers and riders, companies like Uber and Lyft have pushed the idea of hailing a cab further back into the 20th century. There is a great deal of competition between the two companies, but let’s take a look at them from the perspective of what it’s like to be an Uber Partner and Driver and a Lyft Driver.

Become an Uber Driver or Become a Lyft Driver

Lyft requires their drivers to be at least 21 years old and own a car in good working condition that is no older than a 2000. A smart phone is needed to use the app. Plus, there is a phone screening, an interview in person and some background checks.

Becoming an Uber driver seems to require a bit less. Uber driver requirements involve providing some paperwork. Once approved, an Uber driver is given a phone with the app. A Forbes article reports that this is what happens. “When Michael Coe, 38, signed up to be an Uber driver in Washington, D.C. a few weeks ago, he was shocked to find that once his driver’s license and identity paperwork had cleared, he was asked to come in to pick up a phone—then put on the road with no training except a 13-minute video on how to use the Uber app.” The article goes on to say that drivers who want more training have to pay for it themselves.

Harry Campbell, known as The Rideshare Guy, was interviewed on the blog Budgets Are Sexy. While he is an engineer by day, on weekends and holidays he earns about $20.00 an hour on average driving for both companies. He says that he meets interesting people, enjoys the flexibility and likes that he can control how much money he makes by working as hard as he needs to. He does note that there are some other things to consider as well, such as: having to pay for gas and tolls; wear and tear on your car; and getting hit on if you are a woman.

Campbell goes on to comment about how he sees the two companies. “I think the future looks good for Uber (recently valued at $18 billion) and Lyft, but there are lots of ongoing issues with insurance, permits and driver pay. In fact, over the past year the war between Uber and Lyft has really gained momentum with each company trying to poach each other’s drivers and continual fare cuts.”

A Lyft driver review was mentioned by Bouchaib El Hassani of New York City, who was interviewed by Business Insider. He goes out of his way to make sure that his passengers enjoy their ride. He has water, gum and candy for them. The music is jazz or classical and he keeps phone chargers ready too. “The rider and driver give each other a rating out of five stars, which Bouchaib says helps eliminate bad behaviors on both ends. Drivers are less likely to be willing to pick up passengers with low scores, and drivers with bad reviews are eventually kicked off the service.”

Legal and Tax Risks

There are some issues to be mindful of for would-be drivers. An Uber driver posed a question on the TurboTax AnswerXchange regarding taxes not being taken out of his paycheck. The answer appeared to be from another member of the community and stated that the driver is not an employee, but is an independent contractor. Most likely this is true and it’s possible that this work could have some unintended tax consequences. Drivers may want to put some earned money aside to cover any unexpected tax bills.

Car insurance is another issue. The average driver has personal car insurance policy, not commercial. A personal policy will not protect a driver when they are using their car for commercial purposes. Further, the insurance company could cancel their personal policy or possibly not to sell them a personal policy at all if the driver lets them know that they intend to use it for doing ride share work.

Buying a commercial policy might be the driver’s best defense, especially for that gap in time when the driver has the app on and is waiting for fare, but there is no passenger in the car, as discussed by Life & Limb, The Policy Genius Blog. In a lawsuit against Uber, the company is denying liability because the driver did not have a passenger in the car at the time of the accident.

Similar to the average pay reported by The Rideshare Guy, a BuzzFeed article found that Uber driver pay was about $21.90 per hour. For some, becoming a driver for either company or both might be a good way to earn some extra money for the holidays. However, it’s best to know what they are getting into before starting.