What is Uber and why is it causing such a stir?

What is Uber and why is it causing such a stir?

Uber is a new, techno-savvy taxi service raising more than a few Government eyebrows with its unconventional business concept.

The Californian-based company has set-up a ride-sharing concept, which uses a smartphone app and geo-locating technology to allow people in need of a ride to be matched to the nearest driver.

Said to offer lower costs than current taxi services, the driver requirements differ greatly from current Australians taxis. Uber drivers are ordinary Australian drivers who are required to hold a valid driver’s licence, be at least 24-years-old, have comprehensive insurance and drive a car made after 2005, with at least four doors.

But the latest ride-sharing concept is still trying to convince the Australian Government it’s a safe and viable alternative to the current accredited state taxis, with most regulators arguing driver standards aren’t strict enough.

In the meantime, Uber taxis have already been dubbed illegal in NSW, Queensland and South Australian.

Acting Transport Minister Tom Koutsantonis talked to ABC radio about the risks to passengers who decided to jump into an Uber taxi.

“It’s a very dangerous option to take an Uber service – you don’t know who’s driving the car,” Koutsantonis said.

“You don’t know if the car has been checked and, most importantly, we can’t know when you got into that car and where you got out of that car or where you were meant to go.”

Despite the threat of Government-issued fines, Uber taxis have still been operating in NSW, Victoria and now South Australia – with fines being issues in all three states.

The State Government is said to be monitoring the Uber closely to try and catch out Uber cars that are currently in operation.  

For drivers caught working for Uber, which are not a Government-approved taxi service, they could face fines from $315 to $8000.

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What is an operating lease?

An operating lease is an arrangement by which a company leases a car from a vehicle fleet supplier for a set period. It’s a bit like a long-term car rental in that the company gains access to the car but the supplier retains ownership. Companies like operating leases because they are tax-deductible and because they save the company from having to make a large upfront payment to buy a car.

What is comprehensive insurance?

Comprehensive insurance protects you in the event you’re responsible for a car accident. Policies vary from provider to provider, but comprehensive insurance generally covers you for damage to your car and property, as well as the other parties’ cars and property. A comprehensive insurance policy may also protect you from theft, vandalism and natural disasters.

What is the luxury car tax?

The federal government imposes a luxury car tax of 33 per cent on the value of a car above a threshold. As of the 2017-18 financial year, that threshold was $75,526 for fuel-efficient vehicles and $65,094 for other vehicles. So a fuel-efficient car worth $80,000 would be taxed only on the difference between the threshold and the value of the car ($4,474), rather than taxed on the entire $80,000. Similarly, an ordinary car worth $70,000 would be taxed on the $4,906 above the threshold, rather than the entire $70,000. The luxury car tax is paid by dealers that sell or import luxury cars, and also by individuals who import luxury cars.

What is dealer finance?

Dealer finance is a car loan organised through a car dealer – as opposed to car loans organised by a finance broker or directly by the lender.

What is trade-in value?

The trade-in value is the price you could realistically charge if you were to sell your car to a dealer while buying a replacement vehicle. Generally, a car’s trade-in value is less than its market value. That’s because the dealer has no interest in buying your car unless it can make a profit – which can only be done if the dealer has room to increase the price.

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Some lenders will charge you an establishment fee, or one-off upfront fee, to cover the cost of setting up your car loan.

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Before giving you a car loan, lenders will ask for proof of income – documentary evidence that you earn as much as you claim you earn. Lenders will typically want some combination of tax returns, pay slips and bank statements. The reason lenders want proof of income is because they want to be sure you have the means to repay the car loan.

What is an upfront fee?

An upfront fee is a one-off fee that many lenders charge when you take out a car loan.

What is salary packaging?

Salary packaging is an arrangement you can make with your employer that can allow you to buy a car from your pre-tax salary. The advantage of salary packaging is that it will redue your taxable income.

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A novated lease is a car lease that is ‘novated’, or transferred from one party to another. Novated leases are often used when companies provide a car as part of a salary package. The employer signs for the lease and makes the lease payments, but the employee assumes the responsibility of looking after the car. While most car leases involve two parties, novated leases involve three – employer, employee and financier.

What is an interest rate?

The interest rate is the price you have to pay for borrowing money. The interest rate is expressed as an annual percentage of however much of the loan remains to be paid. For example, if you took out a $10,000 car loan with an interest rate of 8.75 per cent, you would be charged 8.75 per cent of $10,000, or $875 of interest per year. But if you then reduced the outstanding loan to $9,000, your annual interest bill would be 8.75 per cent of $9,000, or $787.50.

What is a chattel mortgage?

A chattel mortgage is a mortgage on a movable item. In the case of a car loan, the chattel is the vehicle. The lender maintains a mortgage over the chattel/vehicle until the loan is fully repaid.

What is a green slip?

A green slip, also known as compulsory third-party insurance or CTP insurance, is compulsory if you want to register a vehicle in Australia. If you’re responsible for a car accident, your green slip will be used to pay any compensation due to anyone who might be injured or killed. However, a green slip doesn’t cover you for vehicle damage or theft.

How much is your car worth?

If you already own a car, you could potentially bring down the cost by selling your car in the process. Before that happens, though, you’ll need to find out how much your car is worth.

One of the first places to find this value is to research the value of your current car, giving you an idea of roughly how much it’s worth in its peak condition.

There are plenty of websites that offer a free online valuation, allowing you to enter your car’s make, model, year, badge and description, with results listing a price guide based on both selling your car privately and through a dealership.

Of course, dealerships will try to profit on your trade-in by buying it for less than they can sell it, making it highly unlikely that you’ll get the same price selling a car to a dealer as you would selling a car privately.

However, private car sales can be costly and can take months to sell, making car trading more convenient with a guaranteed return, even if you may not be able to realise the total value of your car’s worth.

Remember that everything is negotiable. If the dealership is offering you less for your trade than you wanted, try to negotiate elsewhere to gain that money back. Start by negotiating on the price of the trade and then ask them if they can give you a further discount on your new car.