Lyft, Uber ride-share drivers in a hurry to pay down debt


Ride-share drivers drive down debt fast
Ride-share drivers drive down debt fast

Why are so many people eager to transport strangers to and fro? Driving down debt is one major reason.

Since skidding onto the scene in 2009, the ride-sharing business has taken off, with one major company, Uber, saying it adds 50,000 new drivers monthly. According to a December 2014 study by Uber, a major motivating factor for many of its ride-sharing drivers is to shed debt.

The study found 28 percent of Uber drivers under age 30 spend their driving income on student loan repayment and 20 percent put the extra cash toward medical bills.

Earning extra cash via ride-share companies to meet specific financial goals is just the ticket, claim many of the nouveau chauffeurs. While not a panacea for everyone, if you can do it -- and do it right -- it can be an empowering way to sideswipe big balances.

How ride-share works for workers
Uber and Lyft are the dominant players in the ride-share space, though less prominent regional and specialty companies such as Shuddle (for young customers) and Sidecar (to deliver foodstuffs and other tangibles) are popping up throughout the country.

For the driver, however, most companies function in similar ways: After enrolling, passing a series of background and vehicle checks, and learning the smartphone application, they're ready to transform their vehicle into a moneymaking machine.

I think driving for Uber is a great way to chip away at debt because you don't have to do it every week. I really just drive when I want to or every time I see our balance.

-- Harry Campbell
Aerospace engineer

Barry Mendelson is a financial adviser and fan of ride-sharing as a method for people to delete or avoid big balances.

"It provides flexibility because you're not locked into a part-time job with hard hours," says Mendelson, who is also 2015 president of the Financial Planning Association of the East Bay, in Northern California. "I love it when people go out on their own. They're taking initiative! They can work when they want and escape the normal employer-employee relationship."

Who is paying down their debt by driving?
The majority of ride-share drivers are part-timers who hold another job; for Uber, 75 percent fit this profile.

Dealing with debt is a common motivation, says Harry Campbell from Los Angeles. Campbell runs The Rideshare Guy blog and podcast, an information outlet for peer-to-peer drivers. More, he's a full-time aerospace engineer as well as an occasional Uber, Lyft and Sidecar driver.

Campbell started driving to augment his income so he could whittle down his wife's obligations. As a third-year medical student, she's not quite in earning mode yet; her student loans are currently running over six figures.

So in the car Campbell goes. "I am able to basically cover the interest by driving, although I will admit I'm not able to really pay down much of the principal since I'm only driving part-time," he says. "I think driving for Uber is a great way to chip away at debt because you don't have to do it every week. I really just drive when I want to or every time I see our balance."

By day, Boston resident Yuri Cataldo is a marketing and communications professor at Emerson College; by night, he slips behind the wheel as a Lyft driver.

Why the double life? "To bring in extra cash to pay down credit cards and save money," Cataldo says. His current credit card bill is around $5,000, and while he aims to use the car-sharing business as a way of zeroing it out, he doesn't have a specific date in mind for when that will happen. Cataldo is open to what his side gig may bring in as he's only just begun driving.

So far, though, he's impressed. "It was very easy to start up; it took a week to get greenlighted. And I like driving. There are times I can't focus, and driving makes me think more clearly. Why not use the car to make money along the way? My car gets great mileage, so that helps. I can make $24.75 an hour on a Friday or Saturday night since that's peak time."

In addition to his full-time job, Cataldo also runs his own startup company. The surplus cash he earns by driving helps him focus on his jobs without having to worry about having enough money to meet expenses.

Then there's the opportunity to avoid borrowing too much in the first place. Ayanna Mackins from Washington, D.C., is a single mother, preschool teacher and graduate student. Rather than joining the ranks of the degreed indebted, she's is covering her higher education experience with Lyft earnings. 

As a longtime passenger, Mackins knew that the job offered the flexibility and financial boost she needed. Through smart budgeting and driving a few times a week, she's is speeding past the student debt trap while saving money for special occasions, such as a trip to New York City for her daughter's birthday.

Why not use the car to make money along the way? My car gets great mileage, so that helps. I can make $24.75 an hour on a Friday or Saturday night since that's peak time.

-- Yuri Cataldo
Emerson College professor

Projecting income can be tough
How much one can expect to earn by ride-share driving depends on myriad factors. Currently, Uber drivers keep 70 percent of their fares and Lyft drivers take home 80 percent. The tip is typically embedded in the fare, though no commission is extracted from it. Bonuses, such as working in high demand time slots and driving for extended periods are often available, and can up the intake considerably.

Predicting actual earnings, though, is not an exact science. The business model is in a constant state of flux. When Uber first hit the road, the company kept just 10 percent of the ticking meter. Drivers are also expected to absorb their own gasoline, insurance and vehicle maintenance costs, all of which vary. There are unpredictable slow times, too, which can erode drivers' margins.

According to the Uber study, the average hourly pay is between $16 and $30, depending on the city. Subtract the associated expenses and those figures drop precipitously. Still, even if the driver nets $7.50 and drives only 10 hours per week, the total would be about $300 for the month. That minor sum would make a major difference in a moderate credit card debt load.

For example, a $5,000 bill at 17 percent APR would take 13 years and about $4,030 in accumulated interest to repay by sending in just minimum payments. Yet a fixed payment of $300 would eradicate it in under two years, costing just $744 in interest. Commit to driving additional hours or during more profitable times and  the goal will be achieved sooner and cheaper.

Chart: How Uber drivers spend the job's income
Many Uber drivers spend the job's income to pay down big bills

Know when to hit the brakes
While taxiing to boost income and manage debt clearly has its advantages, like all solutions, there are disadvantages, including "expensive liability insurance and the wear and tear on the car," says Mendelson.

Mendleson cites perceived (and real) danger as another concern. The safety fears of picking up unknown individuals dissuades many women from exploiting this option. In fact, women comprise only 14 percent of U.S. Uber drivers and 30 percent of Lyft drivers. Since Shuddle passengers are unaccompanied minors, the company usually hires mothers, but exists only in the Bay Area so it is hardly a universal option for indebted women.

Not everyone wanting to jump into this business will meet company criteria, either, especially when it comes to transporting people (versus a burrito and pint of ice cream to a hungry human). Derek Davis is a certified public accountant and one of the founders of SharedEconomyCPA, an accounting firm located in Orange County, California. Davis says ride-sharing companies require cars be up to a certain standard.

"You may have to purchase new tires and upgrade your car to ensure it passes all of the tests," says Davis, who explains that it typically costs a few hundred dollars to get a car sufficiently fine-tuned. Once working, drivers need to keep the car clean and running smoothly and buy coffees and meals when on the road.

By far the biggest financial pitfall of the ride-share movement is not planning for federal and state income taxes and then being hit with a huge bill at the end of the year. Drivers are responsible for paying their own taxes on what they earn, and most must file estimated returns and pay on a quarterly basis. So, saving a portion from each paycheck is essential.

After that, "the best thing a ride-share driver can do is keep track of business costs," says Davis. Correct deductions are key to paying less in taxes, so more remains for debt goals.

For those ready to embark on the ride-sharing wave and reposition their finances for the better, Campbell says to be prepared to adopt an entrepreneurial spirit. 

"Whether drivers realize it or not, they're actually out there running their own businesses, dealing with clients and having to worry about profitability on a daily basis," says Campbell. "The best drivers really do rise to the top. As more and more sign on to the platform, and business becomes more competitive, the drivers willing to go above and beyond and experiment with new strategies, times and places are the ones having the most success."

See related: You did WHAT to pay off your debt?, Money epiphanies: Hearing, heeding the call to change

Published: October 28, 2015

Join the discussion
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.

If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.

The editorial content on is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.

Follow Us

Updated: 10-22-2016

Weekly newsletter
Get the latest news, advice, articles and tips delivered to your inbox. It's FREE.