> She drives about 25 hours a week. In one week in May, she earned $604 for 28 hours of work, she said — a slightly better-than-average week. Uber took $160 for the car directly out of her paycheck, leaving her with $444.<p>So, for 28 hours of work, the driver got a car (with maintenance covered) and a ~$16/hour salary on top. Without the car payment, it's a $21/hour salary. That's apparently a near-average week.<p>I seem to have missed something, because it looks to me like Uber leant her a car that enabled her to do a job that pays better than even the most ambitious minimum wage initiatives. It's pricy, but so were all of her other options with "terrible" credit. Where's the evil here?
Subprime lending == bad<p>Extending credit to lower-income borrowers == good<p>Are we just talking about price (interest) here? You may not like the price, but prices exist for a reason and cannot be changed by diktat. Who gets prime vs a subprime lease isn't determined by some ethnicity or the religious sect someone belongs in. It's determined by the risk and size of the loan. Smaller loans have relatively higher fixed costs, driving up the up front fees or interest rate. They are also harder to recover and may have a lower residual value, all factors that go into determining the risk. People with little or bad credit history are also more likely to default. This isn't controversial.<p>What's the alternative? Stop extending credit to risky borrowers? Force lenders to lend to risky borrowers at subsidized rates funded by tax dollars or through coercion?<p>[Edit]
What I particularly don't like about these articles is the obfuscation of financial matters. For instance,<p>> After dropping $250 up front for her lease of a 2015 Honda Civic, she pays $160 a week to Xchange. If she keeps the car for the full three-year term, she’ll end up paying Uber $25,210. The Kelley Blue Book fair purchase price for a new 2015 Honda Civic SE in Los Angeles is $18,142.<p>> Schmitt said she’ll need to pay Uber $5,000 or so more to buy the car if she wants to keep it at the end of her lease.<p>So basically, she's getting a $18,142 (PV) car paying $160 (PMT) a week for 156 weeks (N) and have to pay 5,000 at the end to keep the car (-FV).<p>PV: 18,142<p>PMT: -160<p>N: 160<p>FV: -5000<p>I (weekly) -> 0.1942% (weekly)<p>I (annual) -> 1.001942^52 - 1 ->10.615%<p>So basically she got a loan at 10%. Also, you have to factor in that she has an option to purchase which she can choose to exercise. I don't know why they don't just say as much.
The headline claim that drivers are left "shackled" doesn't seem to be supported by the article, which states drivers can leave their lease agreements at any time after the first 30 days, with only two weeks notice, and without harming their credit score.<p>If you think uber are overcharging for the vehicles, given the terms of the agreement, the risk they are bearing, etc. why not start your own offering which charges less?
If drivers can walk away from the lease after 30 days (well, 44 to be precise), I see no problem with this offer. These drivers represent an extreme risk.<p>They just need to understand that the Uber lease should be treated as a short-term program.<p><a href="https://get.uber.com/cl/xchange/" rel="nofollow">https://get.uber.com/cl/xchange/</a> mentions pre-owned vehicles in addition to new ones.<p>"Vehicles requirements for Xchange Leasing program:<p>2009 or newer
75,000 or less miles
no salvage, rebuilt or flood vehicle titles
4 full-sized doors
minimum of 5 seatbelts (driver and 4 passengers)
maximum amount financed $20,000 (subject to change)"<p>I would get the least expensive vehicle through Xchange, drive it to save about $3000, buy an Uber-qualified used vehicle, and enjoy life.
I might give Uber a hard time about some things but I'm failing to see the evil in this. Yes, the leases might seem predatory, but if the target is high risk buyers and the apr is not off by an order of magnitude, seems like they are just enabling their work force.<p>I could think of a lot worse things than a company giving someone a job and then offering them expensive tools to do it.
The difference between Uber and other subprime lenders, like mortgage companies, is that the recipients can actively become lower credit risks. They can just drive the car. At the rates Uber pays, probably around a full day a month.<p>So not only is this expanding credit options, it's expanding labor options.
"“I’d say the cost is greater than the benefit for your average driver,” - Isn't that the point of this scheme, that they target non-average drivers, ie those with low credit scores that would be unable to drive otherwise.<p>With regards to the figures at the end of the article. If Uber pays for insurance and repairs, it seems not a too prohibitive deal. If not the interest rates are well above 20%. Seems pretty sweet (for Uber).<p>But then again, a market rate of 20% for those without credit score isn't much worse that a credit card rate. And the LA-example comes through well above minimum wage.
articles like this drive me crazy, one might even be led to believe that the reporters for this story don't actually understand how a lease works.<p>If you walked into a car dealership and told them that you wanted to be able to break your lease with a couple of weeks notice and have unlimited mileage (with them understanding that you would be driving quite a bit) how much more do you think they would charge for that lease?
From the article..."As the video promoting the arrangement puts it: 'The best part: Payments are automatically deducted from your Uber earnings.' "
Here is a new startup idea, UberAir: We don't do tedious things like owning planes and hedging fuel costs. On the contrary, we are all about connecting enthusiastic pilots with awesome passengers.<p>The pilots get a lease offer for the planes so they'll own one after 50 years. The estimated pilot salary after deducting lease payments will be $1245 per month.<p>We're also working on pilot-less planes. Once these are done, we'll take care of the remaining contractors by launching UberLavatory, which will lease public toilets to enthusiastic Toilet Managers.
<i>>After dropping $250 up front for her lease of a 2015 Honda Civic, she pays $160 a week to Xchange. If she keeps the car for the full three-year term, she’ll end up paying Uber $25,210. The Kelley Blue Book fair purchase price for a new 2015 Honda Civic SE in Los Angeles is $18,142. Schmitt said she’ll need to pay Uber $5,000 or so more to buy the car if she wants to keep it at the end of her lease.</i><p>This is kind of par for the course for some chunk of car dealers. They have no qualms in getting someone to ultimately pay $30,000 for an $18,000 car of which the margins are normally extremely tight (2-3%) with profit being a very long tail of maintenance work orders. This one Civic, if she ran it to term and then bought it out, brought in as much profit as DOZENS of Civics.<p>My sister learned similarly many years ago. She ended up paying $26K for a $15K car, simply because she didn't do the math.<p>Although we'd like businesses to not engage in these kinds of deals, but unfortunately many businesses rely on these deals. I think the only decision more costly that people getting unwillingly put over a barrel for a car is people making poor retirement planning decisions and paying through the nose in fees (or buying what a "financial advisor" that is really a salesman at a bank is peddling) when there are far lower cost alternatives. It sucks, but it's true.
Uber may not be making a profit directly on the leases, but it's clearly a way to get more drivers at a lower effective wage.<p><pre><code> In one week in May, Schmitt earned $604 for 28 hours of
work, she said — a slightly better-than-average week.
Uber took $160 for the car directly out of her paycheck,
leaving her with $444.
</code></pre>
That works out to about $15/hour after the lease payment, even less if it's not including fuel costs.
Hmm, sounds like a great idea, except that they should do this with cheaper, used cars. if you have bad credit, you shouldn't be buying a brand new car.
> Xchange, which caters to people who have been rejected by other lenders, isn’t intended to be a moneymaker, said an Uber spokesman.<p>I'll be interested to see if that can continue in the long term. Consumer finance is an industry with an incredibly high profit margin, probably a lot better than Uber's core business will ever be.
Southwest airlines, and taxi companies know one thing: an idle vehicle is an un-funded cost. Will uber add in functionality to support a "hot seat" model, one driver owns the car and another contributes to it by "using" it?
How can they take a deduction from your paycheque for loan they helped setup for a car that is intended to be used to work for them... but your are just a contractor.