Hey Cool Car Fans,
As The Cool Car Guy, I get contacted by people for every kind of make, model and type of vehicle. I also end up using Lyft and Uber on a regular basis to get from one place to another. Usually it is after I drop off a vehicle with a client and I need a ride back. What I’ve discovered is how many people are putting a ridiculous amount of miles on the wrong vehicles for their “taxi business”.
THE ATTRACTION OF LYFT AND UBER
Let’s face it. Millions of people need a way to earn additional money and turning a vehicle into a part-time or full-time taxi cab seems like a great idea. The fact that you can download an app on your phone, call up a Lyft or Uber driver and catch a cheap ride from point A to point B for a minimal charge is pretty amazing. These companies are earning billions off a service business with very little overhead since their drivers are using their own vehicles for the service. However, it can be costly for a driver if they don’t know what they are doing.
For example, I recently grabbed a ride from an Uber driver in her 2014 Cadillac SRX. As I usually do, I looked at the odometer on her vehicle and it was clipping away at over 49,000 miles. I asked, “Did you lease this vehicle or purchase it?” She said that she had done a one pay lease. I said, “How many miles did you purchase?” She said, “My lease is coming up and I purchased 30,000 miles, so I’m over my miles.” I said, “By almost 20,000 miles and at $.25 a mile if you give it back, you’re looking at writing about a $5,000 check. I would get out of this vehicle tomorrow if I were you.” She turned in her vehicle and wrote a check.
Some of you may be wondering why I didn’t help her to buy out her lease and the answer to that is that based on her buyout with GM, I knew that she would lose more than $5,000 buying the vehicle. Fortunately, she had leased it and she had a guaranteed buyer which was General Motors, so she could give the vehicle back to them and write a check. When they sell it at auction they will be losing more than the $5,000 she gave them for the additional depreciation. Take that Suzy Orman and Dave Ramsey, who tell people that they should never lease a vehicle! If she would have financed that vehicle she would have been in way worse shape trying to unload it with 49,000 miles.
HOW TO ACTUALLY DRIVE FOR UBER AND LYFT
I could tell you story after story like the one above because most of the people I know driving for Uber and Lyft are “clueless” about cars, trucks, depreciation, let alone running a taxi service. I’m not trying to be mean, but many people just join these companies and start driving for money. I’ve taken rides in expensive Lexus, a Porsche, Toyota Tundra’s, Expeditions, Yukons, the list goes on and on and I just shake my head most of the time.
So how do you actually run an Uber or Lyft taxi business? First off, as some people are trying to do, you can’t copy the taxi cab companies. They have a fleet of the same vehicles that they can use as parts when they are through putting a million miles on them. The average Uber driver has one car that they are trying to make some money driving. However, what you can do is very simple math.
For example, I have a guy who wants out of a 2007 Range Rover right now that has about 105,000 miles on it and they are good for at least another 50,000 to 100,000 miles, but they can be expensive to repair and maintain. This vehicle sold new with a $76,535 MSRP and you can buy one used for $10,000 or less with 105,000 miles . That’s massive depreciation! Let’s assume that you earn $.50 a mile on average driving for Lyft or Uber and your vehicle cost after taxes is about $10,000. I think you can actually find vehicles for under $10,000 and this math works even better, but you need a decent vehicle that people want to ride in to keep your ratings high.
You can see if a vehicle qualifies at this link: UBER Requirements.
Let’s assume that you’re going to drive 50,000 miles at $.50 a mile on average for your taxi service. That’s $25,000 that you will earn on a $10,000 vehicle, so you will NET $15,000 minus expenses, like fuel and maintenance. Now, you have a 2007 Range Rover with 155,000 miles and you throw it on Craigslist or trade out of it and get another inexpensive ride that you can earn another $15,000 on. A 2005 Range Rover HSE with about 155,000 is trading for about $3,500. So, you should be able to recover most of your maintenance costs and some of your vehicle cost based on putting 50,000 more miles on a 2007 Range Rover.
You can do the same thing by buying a $10,000 Toyota Corolla, Nissan Versa, VW Jetta or Passat, etc. If you can get 100,000 miles out of a vehicle at $.50 a mile that’s $50,000 minus the cost of the vehicle, interest, fuel, depreciation, etc. This is a different model than I’m seeing that most people who I’m grabbing a ride from are using for their business. I’m sure that there are other models that work as well, but this is an idea of how these Lyft and Uber business ventures can work for people who are looking to drive for these companies.
Auto Consultant – John Boyd: The Cool Car Guy
John is an auto consultant who owns CoolCarGuy.com that is a licensed car dealership in Lone Tree, CO. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! firstname.lastname@example.org or Twitter @coolcarguy