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The pros and cons of ridesharing

If you ever wanted to become an Uber driver or took an Uber instead of a taxi, you’ve come across rideshare. Whether it’s Uber, Didi, Ola or GoCatch, anyone can earn income from their own cars or pay to ride in someone else’s car. However, it’s worth knowing what you might be in for. To share or not to share – we look at the pros and cons of ridesharing.

Why become a rideshare driver?›

How does insurance work with rideshare?›

What are the downsides of rideshare driving?›

Why would I use rideshare?›

What are the downsides of using rideshare?›

What about congestion?›

Why become a rideshare driver?

There are lots of good reasons why you might want to use your own car for paying passengers.

First, it’s one way to ensure it doesn’t stay parked for 95% of its useful life (or 49.4 weeks a year). Owning a vehicle that spends most of its time stationary is wasteful, so it makes sense to find a way to use it more.

Second, the fixed costs of maintaining your car – registration, CTP greenslip, pink slips, other insurance – are much the same, whether you use it or not. NSW drivers can pay over $1,200 per year for registration, CTP, insurance, pink slips. If you use the car only 5% of the time (2.6 weeks per year), it costs you $462 per week of use – plus petrol and parking!

Third, it’s a way to earn extra money on a flexible and casual basis. How much you earn depends on how much you work and which rideshare provider you use. Here are the main ones in Australia:

  • Uber – Uber says drivers can expect to earn $35-$40 per hour before 27.5% commission
  • Ola – Ola offers new drivers an introductory rate of 7.5% for 30 days then its standard commission of 15%
  • Didi – Didi commission is 12-13% since Didi Advance was introduced to reward or punish drivers depending on trips completed, accepted and cancelled during the week before.

Some people enjoy the opportunity to meet interesting people on the job, or just to get out and about in their own city or town. It’s a good way to help people who can’t drive to be mobile, those who don’t want to or can’t use public transport, or people who prefer not to drive to social gatherings.

How does insurance work with rideshare

Using your vehicle for rideshare is one way to make the most of it without incurring too many extra costs. Insurance for rideshare is much the same as for any personal vehicle.

You have to have CTP insurance to register any vehicle in Australia. Rideshare drivers must have CTP insurance to cover them for any personal injury claims made against them in an accident. Since April 2018, rideshare drivers with a fare-paying passenger also pay 10 cents per km for journeys starting in metro regions and 6.6 cents per km when starting in country areas.

The greenslips.com.au calculator does not directly ask owners if they use their cars for rideshare. It asks whether they are using it for business, claiming for GST, and how far they travel each year (which may be longer with rideshare). Each of these can add to the greenslip price.

Unlike other drivers, rideshare drivers must have third party property insurance. This is the minimum level of cover for repairing damage to somebody else’s vehicle or property in an accident. Comprehensive insurance is better, because it covers the driver’s property as well as the property of others.

Rideshare companies offer their own insurance cover:

  • Uber covers drivers for $20 million
  • Ola covers drivers with a contingent liability policy
  • GoCatch covers third party injury or property damage if the driver’s insurances do not fully cover it.

Note, insurers may list “carrying passengers for money” as a general exclusion in comprehensive insurance so it is crucial to check first. 

What are the downsides of rideshare driving?

Of course, rideshare is not always what it’s cracked up to be. The reasons why you might want to do rideshare might equally be why you choose not to do it.

First, if you use your car more often, it has to withstand more wear and tear, there is more chance of an accident, and you may have to replace it earlier than usual.

Second, while fixed costs are much the same, you have to take out more car insurance than you might by choice. The variable costs of servicing at recommended intervals, tyres, brakes and weekly fuel bills will be higher. If you are driving longer distances, always check fuel prices nearby.

Third, a good income from ridesharing is not guaranteed. Rideshare Drivers Association Australia (RSDAA) claims drivers are increasingly working for more than one provider because it’s hard to make a living with just one. The RSDAA says earnings have dropped a lot in recent years and the trick is to minimise downtime between jobs.

In 2018, Australia Institute estimated rideshare earnings of $14.62 per hour across Australia or $18 per hour in Sydney. These were below the minimum wage and less than half those required under the Modern Award.

Meanwhile, meeting “interesting people” will not always be pleasant and drivers have to deal with conflicts of all kinds on the job. Ideally, they need good people skills to handle anyone who threatens them or their vehicle.

Why would I use rideshare?

Even if you’re not interested in driving for rideshare, you may consider paying to travel in other people’s cars. There are lots of reasons why people use rideshare.

First, our traditional form of share travel – public transport – is just not that popular. Sydney is the public transport capital, which people use at twice the national rate.

Some think public transport is just too slow. Northern Beaches Council ran an experiment to gauge travel time on the 26kms journey from Newport to Chatswood. The results were surprising:

Method Time Average speed
Cycling 57 minutes 27kmh
Car 64 mins 24kmh
Bus + train 91mins 17kmh
Buses only 116 mins 13kmh

The fastest way to travel from Newport to Chatswood was by bicycle, followed by the car. In this case at least, public transport was certainly slow.

Most Australians (87%) prefer to drive to work, even though the risk of injury on the road is four times higher than for people on buses. Especially in the 45 to 54 group, 60% said they would rather change their driving hours than take public transport – even one day a week. This was before Covid. In spite of local congestion, bad weather or poor road conditions, many now prefer the comfort and familiarity of their own space.

Since Covid, some people do not have to go to work everyday. If they go into the city less often, they may be willing to spend more on rideshare. There is also evidence to suggest more people are using rideshare to meet their friends at their homes, rather than in pubs or clubs in the CBD.

Uber continues to be more popular than taxis. Independent Pricing and Regulatory Tribunal (IPRT) found over two thirds of Sydney respondents had used Uber, Ola, GoCatch, DiDi or taxis in the last 6 months. Half of Sydneysiders used a taxi in the past 6 months.

  • Passengers rate taxis higher than Uber for safety, driver skill and navigation
  • They rate rideshare better than taxis, for waiting times, availability and value
  • 40% of passengers say they would use cabs if they were cheaper.

What are the downsides of using rideshare?

After steady growth from 2014-2018, rideshare use has levelled off to match taxis. Not everybody wants to use rideshare because of downsides like safety or lack of privacy.

One downside is perceived safety, which respondents to the IPIRT study rated higher for taxis. Uber first released a safety report in 2019, which outlined 3,000 reports of sexual assault in the US between 2017 and 2018. Some factors that improve perceived safety in rideshare are the ability to send tracking to friends, the rating system, facial recognition and automatic payments.

Rideshare may be less attractive to people who are concerned about Covid precautions in other people’s cars. Some companies have claimed an increase in people replacing their use of public transport with rideshare. But people with concerns about hygiene are less likely to want to share cars at all.

Did you know most of us don’t really like sharing? Western cultures tend to prefer being self-sufficient and free of obligation to others. Meanwhile, rideshare is not really sharing at all, because passengers have to pay for it. Sharing usually means being generous and giving something for nothing.

Ultimately, we value privacy and that’s obvious in the way we still prefer to travel cocooned in private cars.

What about congestion?

Griffith University says carpooling and share travel in Australia has actually fallen in recent years. There are on average only 1.2 people per car and, in suburbia, only one car for every person. That’s not sharing.

If more people prefer to travel in their own cars, you might assume this would increase road congestion. In fact, this has not happened. According to David Hensher at Sydney University, this is because more people are also working from home.

There was a 10-15% drop in peak hour congestion between March and September this year, similar to school holidays. In the future, many people in managerial or professional roles will keep working from home 1 or 2 days a week. Hensher claims this has turned out to be better than government policy for combating congestion.

A recent McKinsey survey of “mobility behaviour” post-Covid found
: 40% would fly less, 32% would take trains less, and 32% would travel by private car more often.

In the end, whether to take part in ridesharing as a driver or passenger is a personal choice. It’s just one mobility option out of many.

Corrina Baird

Writer and expert greenslips.com.au

Corrina used to lend her car to her kids and discovered first hand what Ls, Ps and demerits mean for greenslips. After 20 years of writing and research in financial services, she’s an expert in the NSW CTP scheme. Read more about Corrina

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