Uber’s Xchange Leasing program, which allowed Uber drivers to lease new cars that they could pay off by picking up passengers, was heavily criticized for charging lease rates far in excess of what drivers could get elsewhere, but it wasn’t until Uber realized it was losing boatloads of money on the program that it was in jeopardy — and now it’s being put to bed forever.
Uber confirmed to Consumerist today that it will close its U.S. auto-leasing business that provided would-be drivers with vehicles if they either didn’t own one or had personal vehicles that didn’t meet the company’s standards.
“We have decided to stop operating Xchange Leasing and move towards a less capital-intensive approach,” a rep for the company told Consumerist.
Concerns With Xchange?
Uber launched its Xchange Leasing program in 2015, offering new and used cars directly to drivers who used the company’s ride-hailing platform. The hope was that it would allow people — particularly recent immigrants or lower-income Americans who have no or bad credit — access to vehicles they could use on the job.
While Uber contended that the program offered people who may otherwise be rejected by traditional lenders an option to obtain a vehicle and make a living, Xchange was met with criticism from consumer advocates and drivers who found themselves unable to afford the costs.
For instance, advocates and financial experts expressed concerns with the terms of the program, which saw the company charge rates far above the typical leasing prices for similar vehicles and automatically deduct the cost of the lease from drivers’ weekly checks.
Likewise, drivers complained that the high weekly leasing costs, coupled with Uber lowering the cost of some rides, made the vehicles unaffordable.
In one case, a driver who leased a 2016 Toyota Corolla paid $155 a week for the vehicle. Two months after starting the lease, the company slashed fare prices and he began having trouble keeping up with payments.
The decision to pull the plug on Xchange comes just a month after The Wall Street Journal reported claims that the company was losing a lot of money on Xchange Leasing — roughly “18 times what they thought” they would lose.
Sources told the WSJ that Uber never intended to make a profit on the leases, and that it had in fact been projecting acceptable losses of about $500 per vehicle. But in reality, per the Journal’s sources, Uber was losing around $9,000 per vehicle, or about half the MSRP of the average car.
Uber’s money troubles with the program reportedly stemmed from the company charging too much for the leased cars and being too generous with returns.
While the company was found to have charged significantly higher monthly payments for the vehicles — especially when their wear and tear is considered — it also allowed drivers to turn in their leased vehicles and end payments early without penalties.
Given the rapid turnover of drivers who either sour on the job or jump ship to the competition, this could have saddled Uber with cars that are now worth much less than when originally leased.