Methodology to Estimate 2024 Rideshare Driver Costs in Massachusetts

Rideshare drivers are independent contractors, fully responsible for the costs of operating vehicles they use to perform rideshare service.

Two basic methodologies can be used to estimate rideshare driver costs.

​1. Allocate the full fixed and variable costs of auto ownership to the miles devoted to performing rideshare service.
In this approach, a driver’s full vehicle ownership and operating costs, – fixed costs associated with lease or loan payments, mandated basic auto insurance, taxes, and licensing fees, and variable operating costs (fuel, maintenance, and depreciation) are included in computing a driver’s cost per-mile and per-hour for rideshare service.

Using AAA data, the U.S. Bureau of Transportation Statistics estimates that the average cost of owning and operating a vehicle in the U.S. in 2023 was 81.2 ¢/mile, based a vehicle driven 15,000 miles per year.  Adding an average 18,000 incremental miles per year driven for rideshare service reduces the implied annual cost per-mile for auto ownership and operating costs to 51 ¢/mile (a lower figure, reflecting the allocation of fixed costs over increased total mileage for personal and rideshare driving).  Based on data from Gridwise, in 2024, Massachusetts Uber drivers drove an average of 26.6 miles working hour.  This yields an approximate hourly vehicle cost of .51 * 26.6 = $13.57/hour.

As an alternative metric to estimate a rideshare driver’s vehicle operating costs, the IRS  allows individual business owners to deduct 67 ¢/mile from their rideshare income for miles driven in rideshare service.



2. Apply only the incremental costs specifically associated with operating a vehicle for rideshare service to estimate a driver’s costs per mile.
In this approach, it is assumed that the driver would own a personal vehicle under any circumstances, so only the costs directly attributable to the incremental miles devoted to rideshare service are calculated. As such, personal car insurance costs, license plate and other vehicle ownership fees, and vehicle depreciation associated with personal travel are excluded.  That leaves three applicable rideshare vehicle operating cost elements.

1.Operating cost - 2023

• Fuel: 15.9 ¢/mile
• Maintenance/Tires: 9.8 ¢/mile
• Source: Bureau of Transportation Statistics, USDOT
  https://www.bts.gov/content/average-cost-owning-and-operating-automobilea-assuming-15000-vehicle-miles-year
  
  

2.Depreciation

• Depreciation: 8 ¢/mile
• Assumptions
  Based on the change in vehicle resale value for a 2018 Toyota Camry LE level sedan in average condition with 84,000 miles, driven an additional 56,000 miles for rideshare service.  Non-rideshare mileage = annual average household vehicle mileage per year of ~14,000 miles for 6 years.  Average additional rideshare mileage = average of 15 hours per week, 50 weeks per year at 25 miles per rideshare miles per hour of service for 3 years ~ 56,000 miles.
  
  Trade-in value of car with 84,000 miles = $17,075
  Trade-in value of car with 140,000 miles = $12,600
  Value of rideshare depreciation = $17,075 – $12,600 =$4,475
  Rideshare depreciation per mile = $4,475/56,000=8.0 ¢/mile
• Source: Consumer Reports Car Value Estimator  https://www.consumerreports.org/cars/car-value-estimator/results?modelYearId=8073
  
  
  

3. Supplemental Rideshare Insurance

• Average annual cost of full coverage auto insurance in MA: $1,673
  Source: Bankrate.com
  https://www.bankrate.com/insurance/car/average-cost-of-car-insurance-in-massachusetts/
  
  
• Supplemental rideshare coverage
  Estimated at 20% of personal auto insurance premium = .2 x $1,673/18,750 rideshare miles per year  = 1.8 ¢/mile
  Source: The Rideshare Guy
  https://therideshareguy.com/rideshare-insurance/
  
  

Summing up these three elements, the estimated 2024 Massachusetts rideshare driver cost per mile totals (15.9 + 9.8 + 8.0 + 1.2) = 34.9 ¢/mile.  Based on an analysis by Big Lake Data  of rideshare data from Gridwise, in 2024, Massachusetts Uber drivers drove an average of 26.6 miles working hour.  This yields an approximate hourly vehicle cost of .35 * 26.6 = $9.31/hour.