Most people who drive passengers for a living do so as independent workers. You might assume a taxi company pays an hourly wage, but many companies operate more like rental agencies with drivers leasing the vehicles they drive.
A cabbie typically spends the first half of a shift earning enough to cover rental costs, insurance and fees, and the second half of the shift earning money for themselves.
There is very good money in delivering passengers, but it’s also why many drivers work full time or at least regularly enough to make the costs worthwhile. If you only pick up passengers occasionally, you may be better off arranging shared trips informally than becoming a rideshare or taxi driver.
Insurance Costs
If you’re delivering passengers, your personal auto policy usually won’t cover you while you’re working, so you’ll need a commercial or rideshare policy. Some insurers won’t cover drivers who work for app-based services because of the many variables involved; drivers should review options like Insurance for Taxi and Rideshare Owners and Drivers to compare coverage available for this line of work.
If you lease a cab from a company, the company may provide insurance, but depending on local regulations you could still need to purchase additional coverage through the company’s provider, similar to renting any commercial vehicle.
Rental Fees
Many cab companies charge drivers a percentage of fares rather than a flat daily fee. That percentage is often around one third of the shift’s fares, which can make low-earning shifts hard to profit from.
A talented driver can make hundreds in a single night, and companies typically do not take a percentage of tips, but drivers should factor rental and administrative fees into any earnings estimate and consider specialized options such as Rides Insurance (Rideshare & Delivery) for additional protection while working.
Fuel
Whether you drive a taxi or pick up app-based passengers, you’ll use more fuel than if you only drove for personal use. For example, a typical ten-mile ride might leave you with a modest net after fares, while fuel and maintenance can take a noticeable share of your take-home pay.
Estimate your vehicle’s fuel efficiency and local fuel prices when calculating whether part-time driving will be profitable.
Driving for a living can be rewarding, but it’s difficult to make a worthwhile profit as a part-timer unless you carefully manage costs and schedules. If you want help comparing coverage and costs, consider discussing your situation with an agent by choosing to talk to an agent.
Frequently Asked Questions
Do I need special insurance to drive for Uber or Lyft?
Yes. Your personal auto policy usually won’t cover you when you’re driving passengers for pay, so you’ll need coverage that specifically includes rideshare or commercial passenger transport.
Who is responsible for insurance if I lease a vehicle from a taxi company?
The leasing company often provides a primary insurance policy, but local rules or the lease agreement may require drivers to carry supplemental coverage; always review the company’s policy and your lease terms.
How much do taxi rental fees typically take from fares?
Many companies take a percentage of fares—frequently around one third—so low-earning shifts can be unprofitable after fees and expenses.
Can I deduct driving expenses on my taxes?
Drivers who work independently can often deduct business-related expenses like fuel and maintenance, but you should consult a tax professional for guidance specific to your situation.