Borrowers Beware: Toyota, Uber Create Leasing Options That Let Drivers Pay With Their Uber Earnings

Toyota Motor Corp. has announced it is working with ride-hailing company Uber Technologies to let Toyota lessees make payments with money they earn as Uber drivers.

“The leasing period will be flexible and based on driver needs,” Toyota said in a statement Tuesday. “This initiative builds on Uber’s current vehicle solutions program,” it added, referring to Uber’s vehicle-leasing program, which is touted as a way for people with poor credit ratings to secure a vehicle financing deal.

Neither Toyota nor Uber disclosed details about the leasing arrangement, but some reports have suggested would-be Uber drivers would be well-advised to scrutinize their finances and credit scores before signing up. Uber deducts lease payments directly from drivers’ earnings, which can be hurt when Uber slashes the rates drivers can charge, as it did in February.

Uber has faced criticism for the practice of dictating what drivers can charge, for not offering a tipping option in its app, and for fighting efforts to label Uber drivers as company employees instead of contractors.

Uber offers financing to people who are considered so risky they can’t secure financing through auto dealerships. The current low-lending-rate environment in the auto industry suggests that aspiring Uber drivers who can’t find alternative financing deals need to plan carefully before signing up with Uber’s.

A report last year on NPR’s "Marketplace" found mixed reviews on Uber’s financing terms. It cited one driver who was referred to the journalist by the company as being satisfied adn able to keep up with payments as long as he kept driving people. Another Uber driver reported paying an annual interest rate of 22.75 percent; that’s above the average 19 percent reported at the time for the highest-risk borrowers, according to Edmunds.com.

Uber formerly partnered with Santandar Consumer USA under a pilot lending program. Santander faced U.S. Justice Department scrutiny on suspicion of hastily packaging loans without reviewing their quality. It was this kind of lending in the housing market that helped caused the 2008 housing crash.

No charges have been filed against the lender, and Uber is not implicated in that inquiry, but increasing scrutiny in subprime auto lending practices should give borrowers pause lest they wind up like some who have been unable to make their lease payments.

Correction: An original version of this story said Uber and Santandar Consumer USA are partners. The two companies had a pilot program, but they are no longer working together.