Should Rideshare Drivers Buy or Lease a Car? Which Option Is Best for Uber Drivers?
What’s better for Uber Drivers? Buying or leasing a vehicle?
If you’re an Uber driver, you’ll want to purchase a car that’s as reliable & cost-effective as possible.
One of the most common options is a Toyota Prius — an all-around solid vehicle with the in-built advantage of being all-electric car (a feature which saves rideshare drivers an extensive amount of money in operating costs).
Many prospective rideshare drivers contemplate a common question — should they lease or buy a car? Which option makes the most sense financially?
We consider the scenario using a Toyota Prius as a ‘stand-in’ vehicle, and take a look at the various upsides & downsides of Buying versus Leasing a car as an Uber or Rideshare driver.
Obviously, if you’re buying a car, it’s a big expense — and generally, you’ll have to put down a significant chunk of initial money, regardless of whether you’re paying for your car in installments; paying everything upfront; or buying a used, or new, vehicle.
Drivers can generally purchase a used Toyota Prius for around $4500-$5500 (a new Prius can total over $20,000).
Purchasing a vehicle makes sense in some respects — for instance:
- There are no rental fees.
- You get to keep ALL of your incoming revenue.
- There are no lease agreements.
- There are no ‘predatory’ rental terms (an ongoing problem, reported by many rideshare renters report).
At the same time — there are some notable downsides to buying a pre-owned vehicle — for instance — a pre-owned Prius may have:
- mechanical issues
- high mileage
- interior ‘wear-and-tear’
- and lower resale value
Leasing a Prius has some advantage — specifically, renting a car means not having to commit to buying a new or used vehicle (i.e., less cash-up-front).
Moreover, if rideshare drivers secure favorable rental terms on a leased Prius, it may mean less overall risk and an ability to terminate a lease quickly (whereas selling a private vehicle outright can sometimes take 1-4 months).
On the other hand — leasing has its obvious downsides. Most notably, rental terms can often be unfavorable or even ‘predatory’ — meaning, some rideshare operators often feel trapped in ‘fine-print’ lease agreements (which are very difficult to escape).
Similarly, leasing can sometimes mean spending extra money in the long-run — if drivers decide not to purchase a vehicle, it means they must constantly meet their lease-payment requirements every month. And, if they ultimately decide to stop ridesharing, leasing a vehicle means there is no asset to liquidate — because they never owned a vehicle outright.
In order to start driving for Uber, you will need to:
- Use a car you already own.
- or; Purchase a car
- or; Lease a car through Uber
- or; Lease a car through one of Uber’s partners/third-party operator.
The car requirements for Uber include:
- Cars for UberX must be four-door vehicles
- In most cities, vehicles must be 2006 year model (or newer)
- Vehicles must be in good cosmetic shape
- All vehicles must pass a rigorous mechanical inspection
Pros and Cons — Should You Buy or Lease a Car?
There is a wide range of factors involved when trying to determine what’s best for you. Although you will eventually own the actual vehicle, buying isn’t always the best option — the same is true for leasing. At the end of the day, you need to ask yourself — what will a car cost me per mile?
Although it offers only be a rough estimate, this calculator will allow you to visualize some key metrics which might be useful to prospective (and active) Uber drivers.
If you’re planning on becoming an Uber driver (or if you’re planning to switch or upgrade to a new vehicle), it’s critically important to be aware of how your choices today will ultimately affect your ridesharing ‘stats’ in the future.
You need to take a variety of factors into account: specifically, new tires, insurance, maintenance, and vehicle value depreciation.
Uber and Lyft offer company-specific ‘in-house’ leasing options (such as Uber Xchange Leasing), which aim to lease cars to drivers using their respective platforms.
On the surface, these kind of rideshare car-leasing programs seem convenient. However, it’s always important that drivers fully understand a leasing deal before agreeing to a lease program.
In the past (before Uber Driver rates were lowered in certain cities), many Uber drivers signed up for leasing programs — however, if their incomes took a hit, they often found themselves struggling to afford monthly payments.
In many cases, prospective Uber Drivers looking to lease vehicles need to be careful. When financing is available to those with bad or no credit, this generally means that the terms are poor and interest rates are high. It can be a dangerous deal — leaving a driver in a potentially sticky situation. Uber offers leasing programs — Xchange Leasing and Uber Enterprise Leasing — but some outside parties strongly question their financial viability (for Uber drivers).
How does Xchange Leasing Work?
Uber and Lyft offer different leasing programs, and they are all different (Uber Enterprise offers different lease-terms than Xchange Leasing, for instance)
However, Xchange Leasing is Uber’s dominant program, and its basic process essentially works as follows:
- Uber drivers choose between a few plans — specifically, between: a 2013 Toyota Corolla, a 2013 Toyota Camry; a 20112 Nisan Altima, or a 2016 Toyota Corolla).
- After 30 days, drivers are able to opt out of Xchange Leasing — as long as they provide two weeks notice.
- Also, basic maintenance is included — such as oil changes and cabin air filter replacements. Car payments can be taken out of your weekly earnings, ensuring that all payments are made on time.
Leasing through Xchange may be beneficial, insofar as drivers know their ‘set costs’ each month. For example: if you have to pay $300 every month for an Xchange Vehicle— this may be ideal for a part-time Uber driver (instead of having to pay $500 towards a car loan). Once the leasing terms are up, you can essentially trade up for the latest model once again.
Buying a car
In some cases, buying your own car can be more cost-effective. There are fewer terms and restrictions in comparison to leasing. Of course, the payments you make will be going towards an investment — you will own the vehicle at the end of your payment terms.
Drivers who purchase a vehicle may need to pay for a car longer when buying, but monthly payments can actually be much lower than leasing. Just be aware of Uber’s vehicle requirements before you make a purchase and if Uber isn’t very lucrative in your area, you may want to crunch some numbers before you commit to car payments of any kind.
Here are some good vehicle options for new Uber or Lyft drivers.
Do Your Research & Calculate Some Basic Costs
At the end of the day, buying a car exclusively for Uber is a large investment — and it may not necessarily pay off in the long run. Do your research before you begin driving, asking other drivers in your area for advice or checking out one of the online rideshare forums.
If you just want to try Uber out and see if it’s a profitable option for you, leasing is ideal — as long as you’re able to give back the car without any penalties. This is a great way to test the local market. If you find that you’re busy and receive enough ride requests, you can then look into the option of buying your own vehicle.