Wednesday, October 23, 2019

Don’t Let Your Kids Become Uber Delivery Drivers

It's becoming an increasingly common situation – parents with children who have been driving for a year or two, are good drivers and who have their own cars think that being an Uber driver is a good way for the kids to earn some money. The hours are flexible so the driving can be done around school hours and other busy times. The money looks good too. The simple calculation done is to take the driver’s per mile income and reduce the gas cost. What is left is the profit that will make the children more independent and reduce the financial burden for the parents. Unfortunately, that is not the whole story.

Image Courtesy: Pexels
What It Really Costs the Driver
There are other costs that need to be entered into the equation – depreciation, vehicle wear, service costs, higher insurance rates, etc. An example of how misleading this simple equation of income minus gas equals profit can be was recently reported in the news. A car owner wanted to make some extra money in his spare time. His car was worth about $20,000. He drove for Uber for a couple of months and made $5,000. During that time the value of his car dropped to about $15,000. About 80% of the driving he had done during that time was for Uber, so about $4,000 of the value drop was due to that. Then there were the extra service costs and new tyres, both of which were needed much sooner than normal because of the Uber mileage. 

The insurance rates also went up because of the endorsement required to cover ridesharing. All in all, these totaled up to more than $3,000. The bottom line is that in the months that he drove for Uber, the driver earned $5,000 but the depreciation and service, insurance and parts costs were in excess of $7,000. In other words, driving for Uber was a big loss. The danger here is that in many cases people drive for Uber for months enjoying the extra cash in hand. It is only after quite a few months that the actual costs involved begin to dawn on them and by then, they have incurred significant losses.Some of those who drive for ridesharing apps think that driving more miles will offset some of their losses. The problem here is that Uber only reports mileage done with riders in the vehicle, which is usually far less than the total miles driven.  Uber drivers lose in every way. When it comes to letting kids drive for Uber or delivery, it is the parents who end up footing the bill.

The Risk Factor

The more a person drives, no matter how good a driver he or she is, the greater the possibility of being involved in an accident. Insurance will, in most cases, not accept a claim filed because of an accident while the vehicle is being used for ridesharing. Endorsements may be available, but that coverage is only for when the driver is between rides and stops when a rider enters the vehicle.

If you want to go ahead with the ridesharing, talk to an insurance agent to understand what the risks are and what the additional coverage will cost.

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