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Car Loans for Uber Drivers
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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. Since taking an Uber can cost a fraction of what a typical taxi will cost, more and more commuters are downloading the app on their smartphones and taking advantage of the money they’re saving. Because of this new Uber boom, becoming a licensed Uber Driver has become a way for many Canadians to earn a living. The appeal of making a decent income and being able to work on their own schedules continues to motivate a steady stream of drivers to sell their old cars and finance newer models. Of course, many of them will require an auto loan to do so.
If you’re thinking of becoming part of the ever-expanding Uber Industry, the Loans Canada team has a few points for you to consider.
How to Become an Uber Driver
Unlike signing up to be an Uber client, starting a career as an Uber driver isn’t as simple as downloading an app and filling out an information sheet. In order to qualify, a potential Uber driver must go through a few different steps, including creating an online profile and finding an Uber Centre, where they’ll need to do a background screening for things like criminal activity. Prospective drivers must also be at least 21 years old and go through on-site training before they can actually start working. Some requirements will also vary from city to city, such as the classification of driver’s license that’s needed and the approval standards for cars that drivers are allowed to use (how old a car is and how much mileage it has).
For more information, consult the Uber Canada Website.
The Cost of Becoming an Uber Driver
There are many benefits that come with being an Uber Driver. You can work your own hours and choose where and when you want to take clients. You act as your own boss and can listen to your own music. On the contrary, the financial commitment associated with being an Uber Driver is what deters most people from signing up.
As we mentioned earlier, the qualifications for eligible cars will vary depending on what city/municipality you’re assigned to work within, and what type of Uber license you’ll be getting (UberX, UberXL, UberBlack, etc.). However, for the most part, your chosen vehicle must be less than 10 years old, needs to have 4 doors, no cosmetic damage and has never been rebuilt or modified in any way. Then, once you’ve bought or started leasing said vehicle, you’ll need to provide your Uber Centre with proof of inspection from a certified mechanic.
Uber drivers must also pay for any other costs associated with their car. This means the necessary expenses like gas, insurance, monthly payments and interest all come out of your pocket, not out of the company like a taxi depot. And, unlike taxi drivers, Uber encourages its customers not to tip their driver. So, for the majority of would-be Uber drivers, a car loan is the affordable way to deal with the bulk of those expenses.
While it’s likely that you’re prepared for extra expenses like gas and insurance, have you considered any of the following expenses that might not be so obvious.
- Repair and maintenance costs. The wear tear associated with using your car as an Uber driver means you’ll need to maintain your car on a regular basis and keep an eye out for any repairs or damages that need to be taken care of.
- Used vehicle inspection costs. If you plan on using a used vehicle as an Uber driver, in most Provinces it’s a legal requirement that you get your car inspected. For more information on used vehicle inspection requirements for Uber drivers, check out this article written by our friends at RepairMatch (P.s. If you live in the GTA, RepairMatch is currently offering our readers a 10% discount if you book a service through them, use the code LC10).
Getting an Auto Loan for Uber
Uber does have its own rent-a-car program as an option, partnering with various rental car companies, such as Enterprise. However, in this case, drivers will likely be paying well over $100 dollars for a single week. Since the clientele basis can go up and down, some weeks slow, some busy, getting a loan will likely be the more convenient and affordable option.
With Uber’s recent increase in popularity, the company has started up its very own form of lending, where drivers can finance a new vehicle through one of their third-party organizations. Uber will give special rates on higher quality vehicles and free gas for drivers who don’t have good credit or who wouldn’t qualify for a loan from a typical lender or dealership. The problem with Uber Financing is that anyone using the service is going to be charged a far higher interest rate than the average dealership simply because Uber is working with a third party to get the vehicle for you. The car payments will then automatically be subtracted from your paycheck on a monthly basis. This is where another downside to financing your car through Uber comes into play. Even if you’re paying for it, that car still technically belongs to the company. You’ll probably have access to it whenever you want, but clients or no clients, you’re still responsible for paying their rate however you can. Over the years, you could end up paying more than the car is worth, and it won’t even be yours.
So, getting a regular car loan to finance your own vehicle can cost you less in the long run, especially if the bulk of your income doesn’t come from being an Uber driver. Not to mention the car will be yours and you can do with it as you please. Just make sure to factor in all the costs associated with the car before applying for a loan.
Ways to Get Approved for the Auto Loan You Need
Once you’ve factored in all the potential costs that come with starting up a career as an Uber driver, it’s time to start thinking about getting approved for the loan you’ll need to help cover some of those costs.
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. These are great ways to confirm how much of a car loan you can realistically afford. While not all lenders or dealerships will require a high credit score before approving your application, you’ll likely have an easier time getting an auto loan if your lender can be assured of your financial stability.
It’s best to do some advanced research and look around at different dealerships. This is not only a good way to obtain the best interest rates and financing options, but also to find a car that will suit both your financial needs and Uber’s driving qualifications. For example, the Toyota Prius is a favorite among Uber Drivers because of its fuel economy. On the contrary, UberXL Drivers need a larger vehicle that seats at least 6 passengers. While a larger vehicle sometimes means a more expensive one, more passengers also mean you’ll be paid more.
Certified Pre-Owned Vehicles
While Uber does indeed have certain standards for what kind of cars its drivers are allowed to use, it’s always a good idea to take a look at certified pre-owned vehicles. Not only will the car usually be less than 10 years old and have low mileage, but depending on the dealership you’re buying the car with, C.P.O.s will likely come with a certificate of inspection.
Leasing or Financing?
Consider which payment method will work better for your financial situation. Leasing can often be the more attractive option for those looking to drive a newer or more expensive model since dealerships will generally arrange lower monthly payments. However, some people lean toward buying a car because they can usually get a better interest rate and have the option of using the car as equity.
Click here for the Pros and Cons of Leasing and Buying Cars.
Pay Off Other Debts and Close Unnecessary Credit Accounts
Not only will doing this gradually improve your credit, but it’s another good way of determining whether you’ll be able to afford the subsequent debt that comes with any auto loan. The fact is, not all Uber drivers will make a large profit within their first year of driving. Actually, it can sometimes take months to build up a good rating with the various clients that you chauffeur around your area. Then you’ll need to factor in all the other car expenses. So, paying off all your other debts, closing all unnecessary accounts, then saving up a bit of extra money before applying for a car loan is a more efficient way of improving your creditworthiness and dealing with the slow times in the Uber driving industry.
For more information about Car Loans in Canada, read this.
Consider the Financial Risks
While many members of the Uber community will swear by the idea that they can make a solid five-figure salary as full-time drivers, it’s important to consider all the financial risks associated with any auto loan. Cars are a big financial responsibility, especially newer ones with higher interest rates and monthly payments. In fact, since the value of a car, new or used, will start depreciating rapidly as soon as you drive it off the lot, you’ll have to be very confident in your ability to succeed as a full-time Uber driver before you apply for an auto loan.
Remember, driving for a living is hard on both your car and your finances. Your vehicle will experience more wear and tear and at a faster than average rate, you’ll spend more on gas, and your vehicle’s value will drop faster, making it harder to sell in the future. For all those reasons, it’s probably best not to drop everything and quit your current job with the sole prospect of becoming a full-time Uber driver.
Actually, if you’re considering getting a loan for a new car so that you can at least try your hand at being an Uber driver, it might be better to keep your current source of income, then work part-time driving on nights and weekends. Being that you can also make your own hours, Uber driving might simply be a good way of making a bit of extra money and getting a new car in the process. If you find that you’re making a decent return for the money you’ve spent on your new car, and can realistically afford your monthly car loan payments, you can slowly transition towards a career as a professional Uber driver.
Get the Car Loan You Need
Looking for a car loan that fits your specific income and needs? We can help. One of our loan specialists can work with you to find the right lender who offers the best deals for your unique financial situation.
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