Taking Uber instead of taxis or public transit is an increasingly popular method of getting back and forth in many major metropolitan areas of Canada. Given the Uber boom, becoming an Uber driver has become a way for many Canadians to earn a living or supplement their income.
However, one major barrier to entry is having a suitable and reliable vehicle. This is where car loans come into play. Getting a car loan is often a requirement for many prospective Uber drivers. Let’s explore ways to finance the purchase of a vehicle to help you get started on your new venture.
Key Points
- Covering the cost of a car to become an Uber driver can take many forms, including car loans, personal loans, leasing, and renting from Uber.
- To maximize your chances of securing financing, be sure to improve your credit score, pay down as much debt as possible, and consider a less expensive vehicle to minimize your loan amount.
- If you’re thinking of becoming an Uber driver, be sure to factor in all costs in addition to financing, including Uber service fees, car maintenance, insurance, and fuel.
Loans For Uber Drivers In Canada
There are a few options available to help you fund the purchase of a vehicle.
Traditional Car Loans
A conventional auto loan is the most common way to cover the cost of a vehicle purchase. If you’re planning to buy a car to start a job as an Uber driver, you can use a car loan to finance your car. These loans are offered by banks, credit unions, and alternative lenders.
With a traditional car loan, you borrow a lump sum of money to purchase the vehicle and repay it in regular installments over a set time period. If you have good credit, you may get approved with a bank at a lower rate. If you have bad credit, you may need to apply with an alternative lender, and you’ll likely pay more in interest.
Learn more: Best Car Loans In Canada
Personal Loans
Another option to consider is a personal loan. This type of loan provides you with a lump sum of money that you repay over a set term via installment payments, much like a regular car loan. The difference is that you can use the money for any purpose, and not strictly to buy a car. With the funds in hand, you can essentially shop like a cash buyer, which is especially helpful if you buy from a private seller.
Leasing
Leasing is essentially the process of renting a car for a short period of time, typically two to three years. Once the lease term ends, you can hand the car back to the dealer or buy it at an agreed-upon price. Leasing usually comes with lower monthly payments compared to financing because you’re only paying for the depreciation of the vehicle.
However, there are several restrictions that come with leasing, including mileage limits and keeping the car in a certain condition. You’ll need to consider these factors, especially if you plan to do a lot of Uber driving and take on many clients per day.
Learn more: Can You Lease A Car If You’re An Uber Driver?
Uber Rental Program
You may qualify for Uber’s rental car program, which allows you to rent your car through a Hertz and Uber partnership. For $285 per week, you can rent your car rather than purchase or finance your own. There are no long-term commitments, and renewing is easy if you want to continue renting.
This program is available to drivers in Toronto, Montreal, and Vancouver. It comes with limited damage waiver and liability coverage, basic maintenance, and unlimited miles. A $265 refundable security deposit is required.
The Cost of Becoming an Uber Driver
While being an Uber driver allows you to create your own schedule and work as much or as little as you like, there is a financial commitment to consider. Before becoming an Uber driver, consider the following costs:
Uber Service Fee: Uber drivers are required to pay Uber a service fee. This amount varies from trip to trip. You’ll receive a weekly statement which will detail the service fee amount you pay based on your work for that week.
Operating Costs: Factor in expenses such as fuel, maintenance, repairs, insurance, and car detailing, which can significantly affect your net earnings.
Financing Costs: Your monthly car loan payments should be manageable and should make financial sense based on your potential earnings. Be sure to factor in interest costs and lender fees in addition to the loan amount you’d need to take out to finance a vehicle purchase.
Uber Vehicle Requirements
If you’re thinking of becoming an Uber driver, you may need to consider additional factors that you may overlook if you’re buying a car solely for your own personal use. In fact, Uber specifically lists criteria that vehicles must meet, including the following:
- Vehicle Age: Uber requires vehicles to be no more than 10 years old.
- Condition: Your car must be in good shape with no cosmetic defects. It will need to pass a vehicle inspection by a licensed mechanic.
- History Of Repairs: Your vehicle cannot be rebuilt or salvaged.
- Branding: There cannot be any commercial or Uber branding anywhere on the vehicle.
- Capacity: The vehicle must have 4 doors. Depending on the type of service, your vehicle may need to be able to comfortably accommodate a certain number of occupants.
- Features: Depending on the type of service, some vehicles may need to have luxury features, such as leather seating and innovative entertainment systems.
How To Get Approved For The Auto Loan You Need
If you choose to take out a loan to finance your car purchase, you’ll want to do all you can to increase your odds of approval and secure the lowest possible rate. To do that, consider the following actions.
Review Your Credit
One of the first steps you should take before making any large financial decision is reviewing your credit report and pulling your credit score. This will give you an idea of your creditworthiness and likelihood of getting a loan. You can quickly and easily get your credit score for free using Loans Canada’s CompareHub tool.
If your score is a little on the lower end, consider taking steps to improve it, such as making all bill payments on time, and keep your credit card expenditures well below your credit limit.
Shop Around
It’s best to do some advanced research and look around at different dealerships to find a car that will suit both your financial needs and Uber’s driving qualifications. Ideally, you’ll want to pay the lowest price without sacrificing needs. You may also want to look for something that’s good on gas and cheaper to insure to keep all operating costs as low as possible.
The lower the car’s price, the less you’ll have to borrow, which could make it easier to get a loan.
Pay Off Debts
Paying down your debts will help improve your credit, free up your income, and reduce your debt-to-income (DTI) ratio, which are factors your lender will look at before deciding whether to approve your loan application.
How To Use Tax Deductions As An Uber Driver
Since you’re earning an income as an Uber driver, you’ll need to report your earnings when you file your taxes every year. However, there may be ways to cut back on how much you pay in income taxes through tax deductions.
Costs that are eligible for tax deductions include the following:
- App fees, including booking fees, service fees, etc.
- Repairs
- Maintenance, including routine oil changes, brake fluid, antifreeze, etc.
- Car washes and detailing
- Tires
- Lease payments
- Business supplies, such as pens and paper
- A percentage of your mobile phone expenses
- Capital cost allowance (CCA) on your car
Learn more: How To Claim Capital Cost Allowance On Your Vehicle?
Final Thoughts
Getting financing for a vehicle is often a requirement for those looking to take up Uber driving as either a side hustle or a full-time gig. Whether you’re buying new or used, there are several financing options to explore to determine which one suits you best. Just be sure to weigh the pros and cons of each, and ensure that the option you choose fits in comfortably with your budget.
