Driving for Uber with a Lease Agreement

Driving for Uber with a Lease Agreement

Having known a few persons who drive for private taxi service Uber, I was interested to know just what was some of the inside information on becoming an Uber driver with a lease agreement. I had, of course, seen all the YouTube videos by those who DO drive for Uber, and I had also heard the horror stories of surprise surge rates charged to unwitting passengers who happened to be calling for an Uber ride at the worst possible times, so I was intrigued to check this “opportunity” out for myself. Not being in a position to use my own car, and seriously, who wants to run up tons of milage on their own car while bringing down the net worth or re-sale value of the vehicle, just to provide a place for the inebriated to toss their cookies, I decided I would venture forward and discover what becoming an Uber driver with a lease agreement involved.

Uber chooses certain car dealerships to join in agreement over terms and such, as far as what they will and won’t allow in the agreements for drivers. They begin with a meeting they offer at the chosen dealership where they have a rather short display of what the offer is all about for those interested. It’s important to understand that not all dealerships are on the list of Uber dealers and if you call a dealership that has nothing to do with Uber, all on your own, they will ignore what you have to say in favor of making their own point to sell you something. So, about thirty to forty people were at the meeting I was involved in, and no one was allowed to ask questions until after the presentation, a wily move on Uber’s part, for you never know if you have some wise guy like me who is really a spy writing internet reviews.

The group is briefly told certain statistics such as, it’s possible to make about $1200.00 a week driving for Uber after all the costs are deducted. The lease will probably be around $118.00 A WEEK. ($472.00 a month) Gas may cost somewhere in the neighborhood of $180.00 a month and Uber only takes about 20% of each paycheck. There is also a phone ($40.00/month) which is provided for receiving calls for Uber service from those who set up the app on phone or computer. Milage on the car is estimated at around 40,000 a year, and this is an important statistic, especially for leases. It’s important because it is NOT ONLY an estimate of milage, it is also an un-crossable margin. More on this in a bit.

Given the nature of this business one would indeed expect a requirement of insurance coverage. Uber has it’s own coverage, which is a million dollar policy. It’s important to understand how this policy works. It only works as long as the app is turned on, once turned off, the insurance no longer covers the car. As a result, insurance must be gotten from a provider who carries comprehensive and collision. The companies I checked out offered this type of coverage for about $200-$300 a month, even in the case of commercial insurance. But this subject is a major sticking point. More on this in a bit.

I live about 15 miles from the chosen dealership where the meetings are held and I called for an Uber ride to get a first hand account. My ride out to the dealership cost me $75.00 dollars and my ride home cost me $50.00, simply because of the different times of day. This may seem rather equitable compared to a Taxi, but I could have done the whole thing for much, much less. I have a real problem with paying $125.00 dollars for a ride anywhere. The ride was nice, the cars were nice, and the Uber drivers where very knowledgeable about the company, but they both related that a person only makes about $500 dollars a week free and clear and for the trouble you go through it’s really only side line change, nothing you could make a living from. They both owned their own cars, so I didn’t mention the fact that they actually lost money on the value of their cars with every Uber driving day. That didn’t seem the right thing to say at the time.

Uber and the dealership require $1,000.00 down (security deposit but refundable if contract is rejected) to put together a contract for the leasing which they will show you AFTERWARDS. Not all cars that are offered will be available, and you may have to either wait a month or so for the one you want or take what they have then and there. Considering the milage on something like a Toyota Prius hybrid, which I am told gets about 400 miles to a tank of gas, then it would seem that gas costs will be totally handle-able, and the testimony of the Uber drivers I spoke with corroborate that idea. Of course, some kind of gas discount card always helps with these sorts of things. 

So let’s take a look at the agreement for leases, which is probably much more problematic than the one for car owners. Remember how I said earlier that the lease would probably be about $118.00 dollars a week ($472.00/month)? The lease I was shown was for a Toyota Prius which MSRP’ed at $23,000. The amount was $234.68/week ($938.72/month). That’s a 52 month lease which comes out to somewhere around  $49,000.00 dollars on a car which will have over 160,000 miles on it, not to mention wear and tear, tires, constant oil changes and a requirement to keep the car in spick and span shape for operation on both the inside and outside. You’ll be washing her weekly, if not more. Keep in mind, you have now put up $1,000.00 dollars to find this and up coming information which will force a struggle within you to accept or reject.

If you sign your lease, and for a myriad of reasons find yourself in default, it will cost you $600.00 dollars in penalties, all under contract. So let’s say you have an accident and you are injured and the car can’t run. The contract is suddenly voided, and you owe $600.00 to the lessor. Or how about this scenario: You have driven the car for ten months of the first year, you have gone over 40,000 miles, you now are in violation of the contract and your agreement is voided. $600.00 from you, all under contract. Or let’s say you have only driven 39,999 miles. You must stop for two months and can make no more money on the Uber driving business because if you do, then you void the contract. At this point you must pay for all the contractual costs of the lease some other way. Oh, yes, you will pay pay pay!

For federal Income tax purposes, you, the driver, cannot be considered the owner of the vehicle. The vehicle can only be used for Uber business, and any other use may constitute violation of the contract. So if you drove 39,999 miles in 10 months, then she must sit for two months. You the lessee have full control of the vehicle, but none of the rights to the vehicle. Rights of the vehicle belong to the lessor. The weekly payments may also include a contract management fee, which was waived on my own agreement. Who knows what that could be for someone else? There is also an early termination fee if you pay off the lease agreement ahead of time, which begins at $1,000 dollars for the first year and then drops $250.00 for each subsequent year.

Let’s go back to the aforementioned point of getting into an accident. Only the Lessor, the people you are paying for use of the car, can choose where and how the car will be repaired, YOU must pay for all repairs not covered by insurance, and if the app is not working when the accident happens, then you are not covered by Uber. Insurance is really the big problem here. The contract requires that you carry the comprehensive and collision insurance in conjunction with the Uber insurance. It also requires you to have the insurance company state that they understand that the vehicle will be used for livery service. 

The problem here is that NO ONE will insure Uber cars. At least not where I live they won’t. Some states DO have this coverage, but they are few and far between. If you are an Uber driver in a state where insurance companies will not cover Uber drivers, then you are in violation of the contract even if you have insurance because part of the contract is this notification of livery use. MANY of the drivers you may come across have NOT told their insurance company what the car is used for and therefore, they not only have NO insurance (which they are paying for anyway), but no contract as well. They also pay higher rates for the higher milage use of the car. Get into an accident and you will have no income, no way to pay for repairs, no contract which now hits you up for early termination fees and one big, big headache. Let’s not even talk about being sued if someone gets killed or severely injured. Sign a lease contract under this arrangement and buddy, you are living on borrowed time. (How about this one: if Uber’s insurance suddenly becomes invalid, then your insurance is also invalid.) And by the way, the agreement names the lease company as sole loss payee. Which means you get NOTHING.

In the event of a total loss of the car, and if the leasing company provides insurance in lieu of you matching the Uber insurance with your own, then at that point you owe them for everything for the remaining term of the lease minus the insurance coverage payments. Therefore, if their insurance, which they have provided for you won’t cover the cost of total loss AND the agreement: you pay for that.

As a lessee you waive all rights to: 1) Cancel the lease, yes, that’s right, once you sign the lease you can’t cancel for any reason. 2) Reject the vehicle you have received. The car they give you, is the car you’ll have to live with. 3) Revoke your acceptance of the car. This seems logical, but I suppose there are indeed some tricky people out there who have to be prepared for if you are writing up a lease agreement. 4) Recover any damages from the lease company if they don’t keep their part of the agreement. They can change their minds, but you can’t and it’s all under contract which protects them and gives you nothing. 5) Grant a security interest in the vehicle to a third party. Some Uber people who own their cars do this, and they take their own 20% out of your check along with the Uber 20%, but if they are leasing, they have voided the contract. 6) Deduction of lease payments from the damages incurred if “screwed” by the leasing company.

Are you still reading?

Okay then. No one else can drive the car when driving on a lease for Uber. Contract violation. In fact, unauthorized use can be reported to the police by the leasing company. (This includes non-Uber use by the lessee. Of course, this is standard even for rental cars.) You can’t transport any kind of controlled substance, which means you may have to leave the medicine at home or: contract violation. If someone else drives your car, and the leasing company finds out, they can repo the vehicle and you pay the costs of re-posession, plus termination fees and so on. You waive the right to any hearing you may have a right cause for, surrender is non-conditional. (Milage charges at this point, or any point may apply). All costs of license and registration are on you and must be taken care of immediately or: contract violation. You don’t own the car, but you must pay for everything as though you do. Do you really want to pay almost $50,000 dollars for a $23,000 dollar car with about 200,000 miles on it after four and a half years? But wait!!!! Uber will let you buy the car for a dollar! How nice of them. 

Now let’s talk taxes. Let’s say the government approaches the leasing company about paying for taxes on the car they own but YOU operate. The lease agreement requires YOU to re-imburse the leasing company for anything they may be charged with. This includes: levies, imposts, duties, charges, assessments, fees, withholdings or PENALTIES (yes, if the government penalizes them for something they messed up on..... YOU pay for that.) Titling, registration, documentation, leasing fees and taxes, sales tax, use tax, personal property tax, valorem tax, state, county, municipal, excise taxes and any and all other kinds of taxes and or penalties levied by the government to the leasing company. YOU pay for that. Sign up now!!! They don’t have any responsibilities to set the legal record straight as far as making sure all requirements are covered, even though they own the car you drive. If you don’t take care of their business properly: contract violation. The definition of whether or not you have sufficiently met all requirements belongs to them. You pay for that.

They also have the right to take money directly from your paycheck to pay for anything they deem necessary because the lease gives them full power of attorney to decide when and what you will pay for in the course of driving for Uber with their property. That sounds kind of logical, but it is also completely at their soul discretion to manipulate at any time your income. Literally, you can’t plan on any consistent level of pay as it may change regularly due to their legal influence.

You also agree to hold them harmless as a result of any problems they cause you by incompetence or under directive of satisfying their own position. You can’t sue them if they make you go broke by charging you for anything and everything. They can make you pay for more than the original estimation of costs, and if you can’t drive the car, say because you reached your yearly milage limit, and can’t make any more money until the next contractual year, it doesn’t matter. Pay up or go into default. You have no legal recourse. Even bankruptcy will not relieve you of paying for the default costs, in fact if you do file for bankruptcy, that constitutes a default.

There’s NOOoooooooo EEEsssccaaaaaaappppeeeeeee!!!!!!

The indemnity clause continues to cement the undeniable intractability of the agreement. Not only is the lessor held harmless and “un-sueable” for any and all costs of  a breech in the contract, but the obligation survives the termination of the lease. When a contract shifts liability to the lessee for any and all problems arising from direct or indirect involvement of the lessee and away from the lessor, this could include ANYTHING that arises. When one is driving around in traffic on a daily basis, the list of possibilities is endless. 

Let’s take a look at what we have so far. 

What we were told by UBER:        What actually happens:

$1,200.00 a week. ($4800.00)                                $500.00 a week ($2,000)/mo

$180.00  a week for gas. ($720.00)                        $180.00 a week  ($720.00)/mo

$118.00 a week for the lease ($472.00)                  $235.00 a week  ($940.00)/mo

$10.00 a week for phone ($40.00)                         $10.00 a week ($40.00)/mo

$129.00 a month for insurance                               $129.00 a month for insurance 

Profit

$3439.00 w/o other costs                                      $171.00 w/o other costs

Figures for the second column come from my interviews with actual Uber drivers. Those figures are estimates, not actual proofs. But realistically, the amount of money to be made is much less than what is promoted and whatever your actual figures, you may find that the amount of liability you sign your life away for is simply not worth the cost. When I look at the lease agreement I can only consider that the people who wrote it up are so painfully aware of the extreme high risk of the situation that they structured the agreement like a predator loan. 

Who would sign this? People in the high income brackets who have an established income? Nope. People who are just looking to learn the city and meet new people? Nope. Only those in need of extra income, and perhaps living on the financial edge would even consider this kind of agreement. Think about it. Not even the insurance companies want to join their own coverage to UBER. Only someone not in their right mind would go for this deal knowing all this information. 

Which is one of the reasons I felt compelled to write the column today. Driving for Uber with a Lease Agreement is a high wire act with no net below it. You want to do it, you’ll need your own car to run up mileage and use on the automobile, or else go for this insane lease agreement. But, if you do, just remember: slavery was abolished a long time ago.