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Uber Financing Was a Bad Idea: Here’s What to Do Instead
With its innovative technology, user-friendly platform, and promise to save its users money, ride-sharing app Uber has quickly become a dominant disruptive force in the transportation-for-hire industry — one that was overwhelmingly in the grip of large taxi companies just five years ago. Where we once hailed cabs without a second thought, modern consumers now turn to their smartphones to hail a neighbor, college student, or local entrepreneur instead.
Because of Uber’s surge in popularity, its tribe of active drivers may be as high as 2 million according to a blog post on the website Medium from Uber chairman Garrett Camp. But Uber isn’t content with that number – at least not yet. In an effort to lure more drivers to its platform, Uber has tried an array of schemes to get more people behind the wheel. This includes their now defunct Uber financing program – a poorly executed program that paved the way for drivers with poor credit to qualify for a loan.
Was Uber Financing Really a Bad Deal?
But, was Uber financing really that bad of a deal? In short, yes. While the Uber financing program was sold as a way to help aspiring drivers get into cars that could help them earn a living, the details of the program helped reveal its true colors.
While the Uber website no longer lists Uber financing details online, NPR’s Marketplace once highlighted an Uber financing loan with impossible terms and a hefty price tag. According to the article, 58-year-old Richard Brunelle was struggling to cover the $1,000 monthly payment for his Kia Optima. The loan’s interest rate? An astonishing 22.75% APR.
With Uber financing, part of the risk was in in how payments were made. When someone in this program was working for Uber, car payments were automatically deducted from their monthly earnings. It’s easy to see how that could work well for some drivers – especially those with bad credit. Just like income taxes are taken out before most people see their paychecks, active Uber drivers who took advantage of Uber financing were paying for their cars all along – but without having to actually write the check.
But, what happens when you’re not driving for Uber? Just as one would expect, you still had to fork over those monthly payments, whether you were earning money driving or not. For those with poor or bad credit, paying off a car with an exorbitant interest rate is always an unlikely proposition – especially if they aren’t bringing in plenty of money.
Unfortunately, high interest rates and crazy-high payments offered via the Uber financing program made it harder for drivers to earn money using the ride-sharing app, which is why they needed a car in the first place. At one point, the Federal Trade Commission (FTC) even lodged a complaint against Uber, which pointed out the insanely high rates charged via subprime auto loans. The Wall Street Journal also reported that the Uber financing debacle ultimately led to 18 times more money lost per vehicle than previously thought. With those details in mind, it’s no wonder that Uber financing became a thing of the past in a hurry.
New Ways to Finance a Car to Drive for Uber
Of course, there are other ways Uber can help you get into a car if you need one. While traditional Uber financing is now dead, the ride-share app has rolled out at least one other program aimed at helping potential drivers reach their goals – its “Vehicle Solutions” program.
Uber’s Vehicle Solutions program offers “rentals and partnerships to help you get a car and start driving,” they note on their website. When you dive into the details, you’ll find that this program makes it possible to rent a car to drive for Uber by the hour or by the week.
The program also says you can:
- Get a car for an hour or longer with deposits as low as $200.
- Score free rental coverage that protects you when you’re on the road.
- Drive unlimited miles without any worry or added fees.
Uber says that rentals are available in the following cities, but that there are additional locations added all the time:
- Los Angeles
- Orange County
- New Orleans
- San Francisco
You do need to be at least 25 to rent a car through the program, and Uber says that “insurance is limited for off-app driving.” In other words, you’ll need to have your own auto insurance policy if you plan to drive the car for any personal travel, which is almost impossible to avoid.
But, how much does renting a car through Uber cost? It depends on where you live and the rental agreements available in your area. According to Hertz, which has its own web page dedicated to Uber rental deals, the weekly rate for a rental through their agency is $214 per week (not including taxes, fees, fuel, or additional charges). However, this rate only applies at Hertz locations approved for Uber rentals, and it cannot be combined with any other offers.
The Benefits of Renting a Car to Drive for Uber
At this point, you may be wondering why anyone would rent a car to drive for Uber. While it might sound absurd to rent a car to use for your side hustle, there are several reasons this can make a ton of sense.
For starters, if you don’t have a car – or if the car you have doesn’t meet requirements to drive for Uber – renting a car to use for ride-sharing can get you on the road when you couldn’t otherwise. Even though $214 per week (at least $856 per month) can be a steep price to pay over the long haul, it’s not that much higher than the average new car payment, which was $502 per month in Q3 of 2017 according to Experian. When you add in the fact you get ride-share insurance coverage while you drive and unlimited mileage without having to worry about depreciation, it’s not the worst deal in the world.
Speaking of depreciation, renting a car to drive for Uber would eliminate any fears you had about how driving for Uber or another ride-share app might cause the value of your vehicle to plummet. It’s not your car, so who cares? Last but not least, renting a car comes with a great privilege of not having to worry about maintenance or repairs. If the car you’re renting should break down or need components replaced, you could simply take it back and get a new one. Some rentals, including Uber rentals through Hertz, also come with 24-hour roadside assistance 365 days per year for even more protection.
Another Way to Get Behind the Wheel for Uber
Just because you want to make money driving for Uber doesn’t mean you have to rent a car if you don’t want to. If you need a newer or more reliable car to begin driving for money, you have plenty of other options to consider. If your credit score is in good shape, for example, it’s possible you could get approved for an auto loan that would help you score a car for ride-sharing and for personal use.
To find out if you may be eligible, the first thing you should do is find out your credit score. By signing up for a free service like Credit Karma or Credit Sesame, you gain access to a free copy of your FICO score and some of the details on your credit report. Remember, assuming you have bad credit and actually having bad credit are two entirely different things. Before you assume the worst, you should find out where you stand.
- Related: What is a Good Credit Score?
Once you have a good idea of how your credit looks, you can take the next step toward getting a car of your own. And, whether your credit is stellar or struggling, the key to finding the right loan is shopping around. In addition to searching for online auto loan options, set aside some time to stop in your local bank or credit union. If your relationship with them is already established, they might be willing to offer a loan with decent terms.
If your credit score is low enough you’d have to pay a high interest rate to borrow money on your own, another option you may want to consider is getting a co-signer. If you have a family member with good credit who is willing to back up your loan, you could secure a much better deal in the long run.
Your third option is considering some of the already established lenders who offer auto loans for people with bad credit. We already highlighted some of the top options for you in our post on the Best Bad Credit Auto Loans.