Uber builds its own company town by putting its drivers in vehicles they can’t afford

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Uber will eventually be a platform for the sharing of driverless cars. You’ll pay a flat fee every month, and a vehicle from their fleet (probably still owned by private individuals) will pick you up every time you press a button on your iPhone, and take you to wherever you need to go. Until then, though, Uber will keep taking advantage of the desperately underemployed meat bags who keep lining up to be cogs in their increasingly vile machine. As The Verge just today reported, the company’s most recent scheme to increase shareholder value goes beyond just paying their drivers less than minimum wage and pushing the libertarian envelope by cashing in on tragedy. Now, through their subsidiary, Xchange Leasing, they’re putting drivers who can’t purchase cars of their own in vehicles they can’t afford… essentially creating a pool of indentured Uber drivers who can’t afford to walk away from the ride-sharing behemoth. [Basically, they’ve decided to build what used to be known as a “company town.”] Following is a clip from The Verge.

Uber, which has recently been trying to appease its drivers, has secured a $1 billion loan in a deal led by Goldman Sachs to underwrite new car leases for drivers, Bloomberg reports.

The ride-sharing giant’s wholly owned subsidiary, Xchange Leasing, LLC, which received the massive loan, started in July 2015. Xchange offers subprime leases to people who have been cleared to drive for Uber, but have poor or nonexistent credit scores that prevent them from getting cars.

Xchange is part of Uber’s larger Vehicle Solutions program, which was developed after the company realized that many qualified drivers had cars that were too old, only had two doors, or didn’t meet standards in other ways, Uber told The Verge. In addition to Xchange, the program offers drivers discounts with certain automakers, traditional auto-financing, and weekly or daily rentals.

The big selling point of Xchange, according to Uber, is its flexibility. To get a lease, drivers put down a $250 deposit; then, weekly payments — which average $126 according to sample lease terms — are subtracted directly from their paychecks. Unlike traditional subprime leases, which often have strict terms, Xchange offers unlimited mileage and regular maintenance, including oil changes, tire rotations, and air filter replacement. Furthermore, unlike a traditional lease, drivers can return vehicles with two weeks’ notice at any point 30 days after their first payment. When the lease ends, either through early termination or at the end of the three-year terms, drivers owe a final $250. And unlike traditional leases, a customer’s credit score won’t be damaged by early termination; on the flipside, leases with Xchange do not help to build a person’s credit, even if payments are made in full and on time.

Despite the flexibility, critics note the high cost of these leases. If drivers keep cars for the full 36-month term, they will have spent thousands of dollars above the standard purchase price; to buy the car at that point will cost up to several thousand dollars more. One driver interviewed by Bloomberg noted that leasing his 2016 Chevy Cruze for three years, and buying it at the end of the lease, would have cost $37,200 total — more than double the Kelly Blue Book price for the car…

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14 Comments

  1. Frosted Flakes
    Posted June 6, 2016 at 8:00 am | Permalink

    If someone told me that a person with bad or no credit could essentially rent (you can terminate the lease after 30 days without penalty) a car (to be used as a work and personal vehicle) for less than 20 dollars a day, have basic maintenance covered, with unlimited miles I would think that was a good deal. Not as good a deal as owning your own car over the long term but still this deal might be a good short term option for some people….I think you are stretching a bit too far to make a pint on this one…I also can’t figure out a way to make sense of your calling Uber drivers “meat bags” either. I guess you were trying to say that Uber thinks of their drivers as meat bags? I don’t know.

  2. Frosted Flakes
    Posted June 6, 2016 at 8:25 am | Permalink

    You can terminate the lease after 30 days. What amounts to essentially renting a car (with unlimited miles allowed) for less than 20 dollars a day is not a bad deal for someone with little cash, bad, or no credit–especially if the person’s plan is to use the vehicle to make money. This lease deal is a bad route to take for some people but a good idea for others….

  3. anonymous
    Posted June 6, 2016 at 9:32 am | Permalink

    I just followed the link and read the story about how Uber raised rates at the scene of a disaster, saying that it was to encourage other drivers to come out and help people get to safety. I want to be outraged, but I’m wondering if they might have have a point.

  4. jcp2
    Posted June 6, 2016 at 10:38 am | Permalink

    Is it really such a bad deal? A current retail lease on a new Chevy Cruze is $179/m for 39 months with $500 down and a mileage limit of $0.25 per mile for every mile over 32,500. Our hypothetical driver would end up paying about $7500 over 3 years, plus maintenance. As cab drivers average 50,000 miles a year, his overage on mileage would be about 118,000 miles, or $29,500. Added to $7500, that is $37,000, and that is on the lease alone, without buying the car yet.

  5. kjc
    Posted June 6, 2016 at 10:44 am | Permalink

    so many bad deals in america. let’s move on to payday lending and how if your life sucks enough it’s actually good for you.

  6. Frosted Flakes
    Posted June 6, 2016 at 11:15 am | Permalink

    Oh KJC.

    You are a bright star in a cruel cruel world.

    You give us hope.

    Never stop twinkling.

    Can I borrow a hundred bucks?

  7. Lynne
    Posted June 6, 2016 at 11:35 am | Permalink

    Does Uber give drivers payment for mileage they use while driving for Uber? If so, and if a person drives enough, they may be able to pay for the car with that money. That would make it a better deal at least. i.e. if the driver can pay the lease and insurance entirely from the mileage allowance, it would be a good deal for the driver who would then be able to drive the car for personal use for free.

  8. Meta
    Posted June 6, 2016 at 12:59 pm | Permalink

    An interesting online exchange from a ride-sharing forum:

    QUESTION:

    Why is the vehicle leasing program for Uber drivers so expensive?

    The cost to lease a new Prius through this Uber/Santander “deal” is about $46,000 over 4 years, with weekly payments about equal to what a MONTHLY lease payment on this vehicle would be for a regular consumer. Supposedly this is a “discount” program for Uber drivers–where is the discount? As an Uber driver, I am appalled at the pricing.

    ANSWER:

    I don’t think anyone else can be more experience then me to answer this question. Well I was one of the beginners who leased the Santander vehicle. Well due to some reason I had to return the car to Chrysler capital and guess what I get a $51,000 bill in mail and I get a call asking how I would like to pay that amount. Say for example on an average driver if work seven days a week 10 hours a day he would make up to $1200. After Uber’s cut of 20% it’s $960. I paid Santander $240 every week. So I was left that $720. Since I was driving a hybrid hundred dollar for the week for gas. So that leaves me at $620.

    So after working 70 hours and ironing $1200 I take home $620. If my rent is $1000, so every week I have to put away $250 for that. Now I’m left with 370 bucks. And all other expenses bills utilities food everything in that $370.

    Such a shame the drivers are used as your trash. Only because we let them use us as a trash.

  9. Meta
    Posted June 6, 2016 at 1:06 pm | Permalink

    There seems to be some confusion between the new Uber Xchange program and their old program, which was called Santander. There also seems to be some confusion when it comes to payments, which are sometimes noted as being weekly, and sometimes monthly.

    The following is from Reddit:

    The rates are predatory. Your net income BEFORE taxes will be somewhere around $6-15/hour, so anywhere between less than you’re making now and double what you’re making now. But now you have a $250/WEEKLY car payment to make. So on top of what you’re earning, your first ~15-40 hours each week will go to your car payment. And you still haven’t even paid taxes on that income yet. If you want to work normal daytime hours, depending on your market, you’ll likely trend toward the $6/hour range. If you want to make $15/hour or very rarely more, then you have to work late night and early morning hours.

    https://www.reddit.com/r/uberdrivers/comments/3kqeq7/should_i_do_the_uber_xchange_leasing_program_a/

  10. Meta
    Posted June 6, 2016 at 1:13 pm | Permalink

    This comes from a KQED report on the previous program.

    Richard Brunelle says he feels trapped. He says he has to drive for Uber.

    The San Leandro man needs to make money for car payments. His 48-month loan is costing him $1,000 a month and has a 22.75 percent interest rate. He says he got into this mess through a vehicle financing program Uber created for drivers with poor or nonexistent credit.

    Since November 2013, Uber has been signing up drivers without cars or the credit to get one. The ride-service company connects drivers with car dealerships and a variety of lenders, some of which specialize in subprime auto loans. It promises to get them a car in less than a week.

    The promotional video for the program says: “Everyone deserves to have a success story. Let Uber be part of yours.”

    Uber says it created the financing program after hearing from potential drivers that they couldn’t get cars. It has not released data on exactly how many drivers have used the program, but Uber says thousands have signed up.

    Here’s Uber’s pitch for why banks should give loans to people with no credit: Its drivers are a safe bet regardless of their credit scores because they have a steady source of income — the money they make driving. Economist William Black says that’s faulty logic.

    Black is a former bank regulator who researches and writes on subprime auto loans. He says it’s risky to give these loans to people with poor credit. In the case of Uber drivers, Black says, all kinds of things could go wrong and prevent them from making the high-interest car payments.

    For instance, driver income could change overnight if Uber decides to cut its rates, which it has done repeatedly. Drivers could get sick or injured. If they don’t have savings, which many people with poor credit do not, drivers won’t be able to make the payments and the car could get repossessed.

    The “bottom line is, you need to underwrite these individuals,” Black says. In other words, the drivers should have co-signers for the loans. And they don’t.

    Instead, Uber is working with lenders such as Santander Consumer USA, the American consumer finance unit of a Spanish banking group. The subsidiary has a history of regulatory problems. These lenders make subprime auto loans, charging high interest rates to people with no credit or bad credit.

    Read more:
    http://ww2.kqed.org/news/2015/04/24/one-uber-drivers-story-how-he-was-trapped-by-auto-loan-program

  11. kjc
    Posted June 6, 2016 at 1:15 pm | Permalink

    Oh FF, it’s not a cruel world. We can dream, like you, of milquetoast and instrumental reason.

  12. Posted June 6, 2016 at 1:26 pm | Permalink

    I hope this brings some light to the whole leasing thing. Fresh out of law school, I leased my first car (that my family didn’t buy for me). My first job, was working in this stanky ass firm that did collections and, as it turned out, handled some of the Gold Key Lease (the leasing arm of Chrysler) accounts. The reps we talked to had nothing good to say about leases–never put money “down” (you aren’t buying anything), never believe a dealer who says s/he will “roll over” the overmileage into the new lease (you will pay a higher payment, but the over mileage money will likely never get to the finance company so you will be sued by people like the 26-year-old me), and never buy the car at the end of the lease because you will end up paying a shit-ton more than you should.

    Needless to say, I have purchased every car since then. Someone upthread said you could cancel the lease with 30 days notice. That is not the usual way this works. You might cancel it and return the car, but then they will sue you for the balance on the lease.

  13. stupid hick
    Posted June 6, 2016 at 9:56 pm | Permalink

    Just curious, how and why did lawyer Patti become teacher Patti?

  14. iRobert
    Posted June 10, 2016 at 2:53 pm | Permalink

    Are there any Uber drivers who would like to post here a breakdown of all their expenses?

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