Auto loans for Uber drivers
Taking an Uber instead of taking a taxi or public transit is becoming more and more popular for traveling back and forth to many of Canada’s major metropolitan cities. Since taking an Uber costs a fraction of the price of a taxi, more and more users download the application on their smartphone and take advantage of the money they save. Because of this new boom, becoming a licensed Uber driver is a way to make a living for many Canadians. The attraction of having a decent income and being able to work at their own pace motivates a stream of drivers to sell their old cars and get financed for a new model. Of course, many of them will need a car loan to do it.
If you’re thinking about being part of the growing Uber industry, the Prêts Québec team has some tips for you.
How to become an Uber driver
Unlike registering as an Uber customer, starting a career as an Uber driver is not as easy as simply downloading an application and filling out an information sheet. In order to qualify, an Uber driver must go through a few steps, including creating an online profile and searching for an Uber Center, where a criminal background analysis will be done. Potential drivers must also be at least 21 years old and undergo in-person training before they can actually start working. Some requirements also vary from city to cities, such as the required driving license classification and approval standards for cars allowed to be used (car age and how much mileage).
The costs of becoming an Uber driver
There are many benefits to being an Uber driver. You can work according to your own hours and choose where and when you want to take customers. You act as your own boss and can listen to your own music. On the other hand, the financial commitment is what dissuades most people to register.
As mentioned above, the qualifications for eligible cars vary from the city in which you are assigned and the type of Uber license you will get (UberX, UberXL, UberBlack etc.).
However, most of the time, the chosen vehicle must be less than 10 years old, have 4 doors, no aesthetic damage or have been rebuilt or modified in one way or another. Then, once you have purchased or started renting the vehicle, you will need to provide proof of inspection from a certified mechanic to your Uber center.
Uber drivers must also pay for all other costs associated with the car. This means that the necessary expenses like gasoline, insurance, monthly payments, and interest are paid out of pocket, not by the company as for the deposit with taxis. And, unlike taxi drivers, Uber encourages its customers not to tip their drivers. So, for the majority of potential Uber drivers, a car loan is the most affordable way to cope with the bulk of its expenses.
You may be willing to pay for additional expenses such as gas and insurance, but have you thought of any of the following expenses that might not be so obvious?
The costs of repair and maintenance. The wear and tear associated with using your car as an Uber driver mean that you will 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 to use a used vehicle as an Uber driver, in most provinces it is mandatory to have your vehicle inspected.
Get a car loan for Uber
Uber has its own optional car rental program, in partnership with various car rental companies, such as Enterprise. However, in this case, drivers will probably pay more than $ 100 for a single week. Since customers can go up and down from week to week, getting a loan is probably the most convenient and affordable option.
With the recent popularity of Uber, the company has launched its own form of a loan, where drivers can finance a new vehicle through any of their third-party companies. Uber will offer special rates for better quality vehicles and free fuel for drivers who do not have good credit or who would not qualify for a loan from a typical lender or dealer.
The problem with Uber Financing is that anyone using the service is going to be charged a much higher interest rate than the average dealership simply because Uber is working with a third party to get the vehicle for you. Car payments will then automatically be subtracted from your salary on a monthly basis. This is where another drawback for financing your car through Uber comes in. Even if you pay for the service, this car still belongs to the company. You will probably have access to this one whenever you want, but customers or not, you always responsible for paying the Uber rate. Over time, you could end up paying more than the total value of the car, and it will not even belong to you.
So, getting a regular car loan to finance your own car can cost you less in the long run, especially if most of your income does not come from being an Uber driver. Not to mention that the car will be yours and you can use it as you please. Make sure to consider all the costs associated with the car before applying for a loan.
How to be approved for a car loan
Once you have taken into account all the potential costs associated with starting a career as an Uber driver, it’s time to start thinking about getting a loan to cover some of those costs.
Check your credit
One of the first steps you should take before making a major financial decision is to check your credit report and credit rating. These are great ways to confirm how much of a loan you will be able to afford. Dealers and lenders do not all require a high credit rating before approving your application, but you will probably find it easier to get your car loan if you have financial stability.
Compare the prices
It is better to do advanced research and shop around different dealers. This will not only be a good way to get the best interest rates and financing options but also to find a car that suits both your financial needs and Uber’s qualifications. For example, the Toyota Prius is a favorite with Uber drivers because of its fuel economy. However, UberXL drivers need a larger vehicle that can accommodate at least 6 passengers. A larger vehicle means more expensive, but more passengers also mean you will be paid more.
Certified Pre-Owned Vehicles
Uber actually has certain standards with regard to the type of vehicle that its drivers are allowed to use, you should check what is certified used vehicles. Not only will the car have to be less than 10 years old with low mileage, but depending on the dealership you are dealing with, it must be accompanied by a certificate of inspection.
Rental or financing
Think about which payment method will work best for your financial situation. Rental can often be the most attractive option for those looking to drive a newer or more expensive model, as dealers usually expect lower monthly payments.
However, some people are turning to buy a car because they can usually get a better interest rate and have the opportunity to use the car as capital.
Pay off your other debts and close useless credit accounts
Not only will this help you to gradually improve your credit, but it is also a good way to determine if you are able to pay a future debt that comes with a car loan. The fact is that not all Uber drivers make big profits in the first year. It can sometimes take a few months to get a good rating from your customers. Then you will have to consider all other expenses. So, pay off all your other debts, close all your useless accounts and save a bit before applying for a car loan. This is the most effective way to improve your creditworthiness and cope with Uber industry downtime.
Think about financial risks
Many members of the Uber community swear they can make a five-figure salary as full-time drivers, but it’s important to think about the financial risks associated with a car loan. Cars are a big financial responsibility, especially newer ones with higher interest rates and monthly payments. Since the value of a new or used car will start to depreciate, you will need to be very confident in your ability to succeed as a full-time Uber driver before applying for a car loan.
Remember that driving for a living and difficult for your car and your finances. Your vehicle will be worn at a faster than average speed, you will be spending more fuel and the value of your vehicle will drop quickly, making it harder to sell in the future. For all these reasons, it’s probably best not to drop everything or leave your current job with the sole prospect of becoming a full-time Uber driver.
In fact, if you are considering getting a loan for a new car and trying to become an Uber driver, it might be wiser to keep your current source of income and then work part-time in the evening and end of the year. week. Since you can also make your own hours, driving Uber might just be a good way to make some extra money and get a new car. If you find that you make enough money after making your payments for your new car, you can slowly make the transition to a career as a professional Uber driver.
Get the loan you need
If you are looking for a car loan that fits your income and your specific needs, we can help you. One of our loan specialists can work with you and find the right lender who will offer you the best deals according to your financial situation.