Here's Why I Would Never Start Rideshare Driving Without Considering These Major Financial Factors

Driving for ride-hailing services is a really popular side hustle. And it can be a lucrative one. In fact, the Rideshare Guy indicates that Uber drivers typically make around $15 to $25 per hour.

However, before jumping into driving, it's important to consider a few key financial factors to determine just how much money is actually likely to end up in your checking account if you try out this gig. Here are four of the biggest ones.

1. The increased cost of auto insurance

A standard auto insurance policy will typically not provide coverage while driving for Uber or Lyft, because it's considered commercial use of a vehicle. And while Uber and Lyft provide some secondary insurance coverage, drivers are expected to maintain their own policies.

Unfortunately, adding a ride-hailing endorsement to an auto policy comes at an average cost of $94 per year. It's important to factor in this added expense.

Furthermore, the more often a person drives, the greater the chances of a crash happening just due to pure chance. Simply put, if you spend 40 hours on the road a week as opposed to 10, there's just more time for something to go wrong. And having an accident can substantially increase auto insurance premiums for years, so this potential risk has to be taken into account.

2. The added cost of wear and tear on a vehicle

Driving a car more naturally means that there's more wear and tear. The tires and brakes will need to be replaced more often, and the oil will need to be changed more frequently. Putting more miles on a car also increases the rate at which it loses value.

And you'll likely need to buy a car sooner than you otherwise would since you're putting so many miles on your vehicle (and since Uber and Lyft both impose rules for how old a car can be to be used to drive passengers).

If you have to buy a new car a few years sooner, and incur added maintenance and repair costs each year, this can really add up, so be sure to consider these expenses. To figure them out, consider how many extra miles you're driving each year and how that affects your repair and maintenance needs.

For example, if you need to get your oil changed every 5,000 miles and you put an extra 10,000 miles on your car a year due to driving for Uber or Lyft, you'd need to factor in the price of two extra annual oil changes.

3. Extra fuel costs

If you are driving more, it stands to reason that you'll go through more gasoline. This one is an easy one to calculate.

• Pay attention to how many miles you drive and what your gas mileage is.
• Once you see how many extra gallons of gas you're using via this approach, multiply that number by the price of a gallon of gas

4. Self-employed taxes

Finally, there's one more thing you may not think about -- added taxes. When you drive for Uber or Lyft, you are an independent contractor and not an employee. You will get a 1099 form and you will have to pay your own small business taxes.

Beyond budgeting for this additional expense, you also need to realize this means you're personally going to pay more Social Security and Medicare taxes. Your employer usually covers half of these taxes when you are a traditional worker (called a W-2 employee). But as a 1099 contractor, you must pay both your half and the employer's half so taxes will cost you an extra 7.65%.

These extra costs are very important to think about before you decide if driving a ride-hailing vehicle makes good sense for you. Be sure to do the math before you dive in.