Is the car you’re driving killing your profit margin?
As a rideshare driver, your overhead costs are all related to your automobile. There are fixed costs (loan payments, insurance, registration) and variable costs (maintenance and gas).
You want to be driving more miles on the clock. More miles billed means more money for you. Those increased miles decrease the impact of your fixed costs because they (usually) don’t go up as you drive more. Variable costs, however, can have a big impact on your bottom line as you drive more.
The more fuel efficient your car, the lower your gas costs. That part is obvious. What is less obvious is the point at which it’s worth it to buy a more expensive but more fuel efficient car. Is it worth it to drop an extra $10,000 on a car that may only save you $20 a month? No, at least not if economics are your only concern (we’ll set aside environmental concerns for another post). Though, if the more efficient car is only $2,000 more and would save you $120 a month? Um, uh, still not sure. We need to call in the big boys for this one.
Enter the US Energy Department and their site https://www.fueleconomy.gov/feg/hybridCompare.jsp. It’s a calculator that lets you compare a hybrid car to its standard combustion equivalent and see how much money it would save you every month as compared to the increased cost of buying it.
It’s especially helpful because you can adjust details like the miles you’ll drive every year, the cost of gas, and the interest rate on your car loan.
As an example, a Honda Civic Hybrid gets 12 more miles per gallon than its non-Hybrid cousin and costs about $2000 more. Based on gas being $3.00/gallon and you driving 25,000 miles a year, you’d save about $50 a month on gas and would break even on the difference between the two cars in about three years.
Of course, if your miles driven increases to 35,000 miles a year and you assume that gas might cost closer to $3.50 a gallon - your monthly savings increase to $82.50 and your payback period is under 2 years. The numbers can be even starker with other models - a Prius gets 20 more miles to the gallon than a standard Camry and the break even point for that choice could be under a year.
The calculator assumes that you’re picking between two new models - but what if you’re considering trading in your existing ride for one that’s more efficient? A lot will depend on the improvement in mileage you see and the increased cost of your new ride. Again, assuming gas is $3.00/gallon and that you’re driving 25,000 miles a year, you could save over $100 a month by switching from a car that gets 20 mpg to one that gets 30 mpg. If your mileage increases from 20 mpg to 60 mpg, the savings could hit almost $200 a month.
Play with the calculator, consider how much driving you want to do in the future, and decide if the time is right to make a switch.