Should You Purchase or Lease a Car for Uber & Lyft?

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If you want to drive for Uber and Lyft, but you don’t have a car that meets their requirements, what is the best way to get one?  There are many options, from purchasing a car to renting or leasing one.  You can even borrow one from a friend or relative – as long as they’ll agree to put your name on the insurance.


Lyft’s Express Drive Program

First, let’s take a look at Lyft’s Express Drive Rental Car Program.  Lyft runs its Express Drive program through Hertz Rental Car.  Drivers must:

  • be at least 25 years old to qualify for the program
  • provide a refundable deposit of up to $250 to begin
  • apply at com/expressdrive
  • be able to pay a $2,500 deductible in the event of an accident. Hertz and Lyft provide the insurance for the car, but it comes with a $2,500 deductible.  So, in the event that you’re in any kind of accident you will be responsible for the first $2,500 in expenses associated with that accident
  • be able to complete at least 20 Lyft rides per week, per the rental agreement
  • rent the car for at least 7 days. There is a 7-day minimum

As long as you meet Lyft’s 20 rides per week requirement and make your payments, you can continuously renew the rental week after week.

Express Drive is available in the following cities:

Atlanta | Baltimore | Boston | Chicago | Dallas/Fort Worth | Denver | Las Vegas | Los Angeles | Miami | Nashville | New Orleans | Orange County | Orlando | Phoenix | Pittsburgh | Portland | Sacramento | Salt Lake City | San Diego | San Francisco | San Jose | Seattle | Tampa Bay | Washington, D.C.

If you are between the ages of 21 and 25, you can qualify for Lyft’s other program called “Flexdrive”.  However, that program is only available in:

Atlanta | Austin | Houston | Los Angeles | Philadelphia | San Francisco

Under the Flexdrive program, drivers must also be able to pay a $2,500 deductible in the case of accidents which occur while you are waiting for a request or while a ride is in progress.  However, unlike the Express Drive program which also has a $2,500 deductible if you’re involved in an incident while driving for yourself personally, Flexdrive’s deductible for personal driving is a mere $2,000.

Express Drive cars start at $209 per week, which comes to about $900 per month.

Uber’s Car Rental Options

Uber partners with several companies for car rentals.  They partner with Getaround, a San Francisco-based car sharing startup.  These cars are available to San Francisco drivers only.

Currently (as of June, 2018) they are charging $5 per hour and the first 14 consecutive hours are free.  $5 an hour sounds great!  But just remember, if you keep the car for 24 hours that comes to $120 a day.

So the hassle with Getaround would be a natural desire on the part of drivers to save money by returning it every day when they finish working for the day.  And then they have to figure out a way to get home… every day!

Also, you have to wonder if they’re charging just $5 an hour – why don’t passengers rent the cars instead of taking an Uber?  It would be a lot cheaper!  And in fact, passengers can rent the cars.  Anybody can rent them – not just rideshare drivers.

Uber, like Lyft, also works with Hertz.  Uber/Hertz is available in:

Atlanta | Boston |Chicago |Denver | Los Angeles | Orange County | Miami | New Orleans | San Francisco

So, Uber has a much smaller national footprint with Hertz than Lyft does.

Uber also partners with “fair”.  fair is available in:

Inland Empire (CA) | Los Angeles | Orange County | Philadelphia | San Diego | San Francisco |Sacramento | Seattle | Nashville | Chicago

The Cost Seems Really High

Yes, the cost of renting these cars is generally very high.  $900 a month for a very low-end Lyft vehicle.  But, the cost of owning a vehicle is very high as well.

However, you might be wondering, if you can finance a car for say, $300 a month and have insurance payments of around $200 a month, wouldn’t it be a lot cheaper to do that?  Well, not necessarily.  It’s actually about the same.

Here’s the difference.  When you rent a car, yes you will pay a lot more each and every month than you would pay if you bought and financed a car.  However, if you buy and finance a car, you’ll have a huge expense at the end of the deal when it’s time to trade it in for a new vehicle.  That expense is called “depreciation”.  And you won’t see it or feel it until it’s time for you to get a new car.

At that time, your car that would have still been worth, say, $20,000, after all the additional miles you’ve put on it driving for Uber and Lyft, it might now only be worth $10,000 to $12,000.  And that’s when you’ll pay those extra costs.  You will lose an additional $8,000 to $10,000 in value on your car when it comes time to trade it in.

It’s a very intangible cost, but what it means, in essence is, that your next car will cost a lot more than it normally would have.  In this scenario, it would cost $8,000 to $10,000 more!  And that’s when you’ll feel the depreciation cost.  You’ll fee it during the entire loan term you have on your next car.  Your car payments on your next car, instead of being $300 a month, might now go to $500 or $600 a month because your old car wasn’t worth enough trade-in value to help offset the cost of the new car.

So by renting, yes you will pay more now, but you won’t have any additional costs when you’re done renting.  You can wash your hands of the whole thing the minute you return the car.  If you purchase a car, you’re basically financing your present with your future.  Your future car costs will be higher in order to pay for the income you’re making now with Uber and Lyft.  You may need that income now to pay bills, but just remember, you’ll end up paying for that in the future by the value your car loses from driving so many additional miles.

In the end, renting and owning cost just about the same.  With renting, you’ll pay the full expense of the car each week.  With owning, you won’t pay the bulk of the expense until it’s time to get rid of the car.

A Word of Caution

Before you go out and buy a car solely for the purpose of driving for Uber or Lyft, think about it long and hard.  Because these two companies have a terrible habit of lowering prices and bringing on way too many drivers.  Every year it gets harder and harder to make money with them.

The best way to get a car is to already have a car for other purposes.  And then you use it in your spare time for Uber and Lyft.  But if you’re getting a car for the sole purpose of rideshare driving, you have to be very careful.

First, we would never recommend buying a new car, if this is your sole purpose for having a car.  You must buy a used car.  You want to get one that’s relatively new – like two to three years old.  That way a lot of the cost will be knocked off but it will still be new enough to have a lot of life left in it.

There are a lot of drivers who bought cars early on thinking they were going to make a ton of money.  And they would have, if Uber and Lyft hadn’t drastically lowered rates and brought on more drivers than they needed at the same time.  A lot of these guys lost their shirts.

The best way to determine whether you should buy a car is to find out how much you can really make.  And the best way to do that is to take Uber or Lyft up on their rental programs and rent a car for a week or two and just see how well you do.

But we still would like to discourage you from buying a new car if you’re only purpose in owning a car is to earn a living driving for Uber and Lyft.  It will be very difficult to do so these days with the expense of a new car hanging around your neck.

Even though the monthly cost of renting a car is higher, in the end, it’s probably the best option in the long run.  Not to mention, you can turn the car in for a week or two at a time, whenever you’re not going to drive.  And you can totally eliminate the car expense from your life during those times when you won’t be using it to earn money.

For a more in-depth look at this question, check out our article, “Should I rent, Lease or Buy a Car for Uber and Lyft?


Resources


Video Transcription:

In this video, we’re going to explore two things—should you buy a car if you don’t have one that fits the requirements, and should you lease or rent a car? Okay? So with Uber, you have an option to lease or rent a car, and with Lyft you can only rent a car. Now, there’s a handful of things. I’m going to use this NerdWallet. NerdWallet is a really great resource. Five ways to get a car to drive for Uber or Lyft. I’m going to use this as a template and show you a couple of things. So let’s look at Lyft first.

Lyft has something called the Express Drive Rental Program. Now, you can sign up with this, and they kinda bring you in, “Don’t own a car? No problem.” You can use the Express Drive Program, and you can rent a car through them, and they have partnerships with different ones. However, something to keep in mind is Express Drive is only available in these following cities.

Okay? So my market, Minneapolis, St. Paul is not in this. So I can’t do that, nor would I. The only reason why I think…and let me just cut to the chase.

The only reason why I think Express Drive or leasing a car or buying a car is good for Uber or Lyft is if you are going to drive full-time. Okay? If you’re going to drive part-time, the money that you’re gonna make is probably not enough to outset it. However, if you’re very good, you may be able to pull it off. If you only drive events and maybe on the weekends and you do quite well, you could pay it off. However, some of these payments can be pretty hefty. Let me show you.

So if you rented with Hertz or Enterprise, you could have things as low as 165 a week. So think about that. If you’re working part-time on the weekends, and you’re doing maybe $400 in a weekend or $500 in a weekend, that can be worth it. And then, the rest of the week, you have a car.

And the cool thing about renting or leasing is that you have that car. All the maintenance of that car is taken care of by these different companies. So you can rent, or you can do Uber’s Xchange program, which is something that they are phasing out. So at the time of you listening to this, watching this video, they may no longer have this. But the very cool situation is that you can just drive that car to the ground. There are no limitations on most of the programs. And so if you’re doing full-time and you want to just go on a binge of driving, this could be a great program. However, they are phasing it out. But I’m sure there’s going to be some other thing that you can get to do that. Also, HyreCar is one that’s not in a lot of markets.

I’m going to keep this link in the notes. But it really comes down to this, if you are not able to drive full-time, I wouldn’t recommend it. And when it comes to just buying a car, you have to consider a lot of things. What I would encourage is a car that’s a few years old, because, number one, the greatest amount of depreciation happens in the first few years. And so, if you start driving rideshare right when you get a car brand new, you’re going to just destroy your value very quickly. So rather, buy a car, save some money that has already depreciated the primary amount, and then drive it to the ground. And another reason why you want to buy a car that’s relatively new is that you’re going to put a lot of work into the car. It’s going to cause a lot of wear and tear, which would cause more maintenance. And if you have a car that is gonna need a lot of maintenance right off the bat, you’re gonna just be spending lots of money in the shop.

So overall, for 2% of people, maybe 2% to 5%, I don’t know, I’m just starting out a random number, it’s a good idea to buy, rent, or lease. But for most of us, not a good idea. However, the only times I would say it’s good is if you have a really good market, really, really, busy, you’re going to work full-time. Or if you’re part-time, you’re going to be very profitable and good. And so maybe a way to dip your toe into it is to rent. Do this Express Drive Rental Program or work with Uber to do one of their renting…Uber has their own renting platform through Hertz, and Enterprise, and, I think, some other companies. Dip your toes and see how good you are and get a feel for it. Use the course and get as good as you can. And if you’re pretty confident about it, go for it.

But here’s my last thing that I want to say, a warning. There’s a lot of drivers back in the heyday when Uber and Lyft first come on to the scene, their rates were a lot higher, and so it was very easy money. Even bad drivers were making good money. And what people did is they got really excited, got their friends in it, and they started leasing or buying these huge cars. So they wanted to do the SUV Black and all these higher-end cars that had really, really, really high rates, and what happened is Uber and Lyft started cutting their rates. And eventually, people started to lose, and they went bankrupt, and some of them are sleeping in their cars now. I mean, this is the tragic, dark side of Uber and Lyft. And the sad thing is Uber and Lyft, you know, cut these rates, and they had every right to. However, these people, they were depending on it. So that was the really sad part. People could push back and say, “Man, this is a new industry. These people shouldn’t have foolishly gone forward and done that.” So there are both sides of the argument.

However, this could happen. They can continue to cut rates. They probably won’t cut rates anymore, because at this point, studies have shown that people are happy to pay at these rates, and the reality is they can’t sustain this model, because they are losing money on every ride. So I would overall say that the rates are going to be in the vicinity that is now or they’ll raise them. And they probably will have to raise them in order to stay alive. So I think you’re safe on that end.

So, hopefully, this was a helpful video, and you kinda have a good idea of if you should do it or not.



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