10 ms·

Uber’s subprime leases put drivers on road, but leave some shackled

98 points by goughjustin 10y ago

goughjustin 10y ago
From the article..."As the video promoting the arrangement puts it: 'The best part: Payments are automatically deducted from your Uber earnings.' "
- NeutronBoy 10y ago
  For high income earners, this is a benefit - novated leasing of cars is a popular way to reduce your tax bill. For low income earners? I wouldn't call it a positive exactly...
- pdkl95 10y ago
  That's going to have the same problems as the "company store" scam where you are paid in scrip. This makes moving to another employer much harder, because of the debt to the current employer (and/or their business partners).
msoad 10y ago
Uber had better tools than usual credit companies to lend to riskier people. That's their advantage in money lending business.
ivankirigin 10y ago
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. So not only is this expanding credit options, it's expanding labor options.
calpaterson 10y ago
> Xchange, which caters to people who have been rejected by other lenders, isn’t intended to be a moneymaker, said an Uber spokesman. 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.
gleenn 10y ago
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. I could think of a lot worse things than a company giving someone a job and then offering them expensive tools to do it.
- Bartweiss 10y ago
  Honestly, the APR looks totally reasonable (by bad credit standards). They cite a $96 average weekly payment for all Americans, and compare it to a $130 weekly payment for Xchange. The article's tone implies that I'm supposed to go "30% markup, shocking!", but it's comparing all borrowers to bad-credit borrowers. Knowing how other loans are priced, that seems like a pretty standard adjustment (especially for the easy-use terms of the lease). I honestly had a lot of trouble finding the malice here. Yes, the cars are expensive, but it's like complaining about on the level payday loans as 'extortion' - the prices are set by a high default rate, not by some inexplicable market failure.
_9MOTHER9HORSE 10y ago
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. 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?
- rconti 10y ago
  Great comment. I went back and checked the article because I thought you were wrong and it said "within the first 30 days". But you're correct, any time AFTER 30 days, they can leave the program. No mileage penalties and no contractual obligation to the lease are huge benefits.
femto113 10y ago
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. 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. That works out to about $15/hour after the lease payment, even less if it's not including fuel costs.
- icebraining 10y ago
  But you can't ignore the value of the lease of the car; it's not like you can only use it to drive for Uber.
wjnc 10y ago
"“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. 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). 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.
- MisterBastahrd 10y ago
  You can do almost anything else at a W-2 job and make more money with less responsibility and risk. Your credit card rate comparison is absurd. You don't ever have to carry a balance with a credit card. You have no choice with a car.
  - aoeuasdf1 10y ago
    W2 jobs are not comparable. Driving for uber is flexible - you can drive whenever you want, for however long you want each week. Obviously that value will come at a lower price point for wages.
  - wjnc 10y ago
    I was trying to do ballpark-comparisons. CC-rates are generally thought of as high-but-not-prohibitive. So being in the range of een CC-rate on first guess would land you in high-but-not-prohibitive-land. Totally right that the duration of an average debt is massively different, although I expect there to be many people that constantly roll-forward their CC-debt.
xycodex 10y ago
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.
- TeMPOraL 10y ago
  > if you have bad credit, you shouldn't be buying a brand new car. Can you elaborate? I don't see how that follows.
  - bitJericho 10y ago
    A brand new car might cost your 400-600/mo whereas a used car might cost your 2000usd total (5 months at 400/mo of savings). Even if you buy a piece of garbage, you could replace anything wrong with it and still come out ahead. A new car is really a stupid buy for a person with little income.
    - dagw 10y ago
      But you cannot work as an Uber driver if you have "a piece of garbage", kind of defeating the whole point.
      - bitJericho 10y ago
        You can drive a 10 year old or older car for uber. In my area, prices are around 2000 dollars for 10 year old cars.
      - dsfyu404ed 10y ago
        You can find a lot of cars that are perfectly acceptable (no immediate work needed, no visible rust, does not need extensive interior cleaning) at $2k-$5k.
    - autotune 10y ago
      Parking, insurance, maintenance, gas, and getting your windows smashed in and belongings stolen every 2-3 months because you accidentally leave a packet of gum in there will set you back.
chinathrow 10y ago
Haha, even more like an employer...
19110121001 10y ago
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. 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. 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.
- jackgavigan 10y ago
  > ..by launching UberLavatory... May I suggest a rebrand to ÜberLü?
- kmfrk 10y ago
  I'm going to assume they'll have to have to create some kind of proxy for the unpiloted planes in order to escape liability for crashes.
wiseleo 10y ago
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. They just need to understand that the Uber lease should be treated as a short-term program. https://get.uber.com/cl/xchange/ https://get.uber.com/cl/xchange/ mentions pre-owned vehicles in addition to new ones. "Vehicles requirements for Xchange Leasing program: 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)" I would get the least expensive vehicle through Xchange, drive it to save about $3000, buy an Uber-qualified used vehicle, and enjoy life.
rbcgerard 10y ago
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. 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?
bko 10y ago
Subprime lending == bad Extending credit to lower-income borrowers == good 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. 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? [Edit] What I particularly don't like about these articles is the obfuscation of financial matters. For instance, > 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. 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). PV: 18,142 PMT: -160 N: 160 FV: -5000 I (weekly) -> 0.1942% (weekly) I (annual) -> 1.001942^52 - 1 ->10.615% 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.
- Bartweiss 10y ago
  > 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? This seems to be a lot of people's answer. There's this weird claim that payday loans and bad car loans and similar are caused by "greed!" when the companies making them are operating at tiny profit margins. High default rates dictate high prices (which forms a vicious cycle, but that can only be broken from the outside). The most 'predatory' thing about most bad-credit loans is the fee/repossession system, which tends to be sloppy and abusive because the borrowers are too broke to fight it. Uber has sidestepped that almost completely with a no-consequence termination scheme. The push to ban or cripple access to low income loans can really only be justified in two ways. One is that these loans are somehow corrupt, but we're not talking about balloon mortgages here - these companies are dealing with principal-agent problems like the home lenders were, and they don't have profit margins to give up. The second is that low-income people are too dumb to make good decisions, so they take these loans. It's a patronizing stance that shouldn't pretend to be uncontroversial.
Bartweiss 10y ago
> 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. 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. 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?
- tyingq 10y ago
  I agree with most of this, but it should be noted that $16/hour as 1099 income is not at all the same thing as $16/hour as a regular W2 employee. A rough equivalent would be about $11/hour. I think that's high still, as there are costs other than maintenance...like gasoline.
  - warfangle 10y ago
    Average city driving speed for LA is 26.8 MPH [0], which means she's driving around 750 miles per week. She leased a 2015 Honda Civic, which has a rated fuel economy of 31 MPG. Assuming she gets the rated gas mileage from her civic, she's buying 24 gallons of gasoline per week for 2.39 [1] per, costing her $57. AAA gives an estimated 5.51 cents per mile for maintenance and tires [2], costing her $41. So, take home pay after expenses is $604 - $160 - $57 - $41 = $346, or $12.3/hr. IANAA, so I don't know which of these expenses qualify for deductions when she files. But an annual pay (after expenses) of $17,992 doesn't leave much wiggle room for paying for an accountant, assuming Uber indentured servitude is her only income generating activity. 0. http://infinitemonkeycorps.net/projects/cityspeed/ http://infinitemonkeycorps.net/projects/cityspeed/ 1. http://www.losangelesgasprices.com/ http://www.losangelesgasprices.com/ 2. http://exchange.aaa.com/wp-content/uploads/2016/04/2016-YDC-Brochure.pdf http://exchange.aaa.com/wp-content/uploads/2016/04/2016-YDC-...
    - 10y ago
wahsd 10y ago
It kind of rubs me wrong that Uber is defended with such vigor in so many different ways and situations. It's really a rather vile company started by rather vile people who now went begging to the muslims and their oil money just to keep it afloat. Uber is kind of like a classic latin american revolutionary guerrilla force in both their claimed cause, yet ever increasingly frequent diversion from its ostensible values while still enjoying a rather fervent support by fanatics who project externalities onto the group and who's capacity for ignorance and rationalization seems to flow from an endless well. I can assure you, as alluring as it seems due to Uber's brazen expressions, Uber is the last company you want dominating the consolidated means of transportation that will come from an autonomous vehicle evolution. They have no morals and zero concern with the impact of their actions or policies and they will not give any more concerns towards the millions of Uber drivers they currently are exploiting any more than they had zero concern for the Taxi drivers they were screwing and doing so by breaking laws.
zer00eyz 10y ago
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?
- rconti 10y ago
  I wonder if Uber allows multiple drivers to use the same vehicle? I'm sure the lease company wouldn't like it...
MrFoof 10y ago
>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. 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. My sister learned similarly many years ago. She ended up paying $26K for a $15K car, simply because she didn't do the math. 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.
- dsfyu404ed 10y ago
  Congratulations on figuring out how a BHPH dealer works. Buy cheap economy cars that aren't upscale enough for a "real" used car dealer to have on the lot. Have your mechanic fix anything imminently wrong and put a GPS tracker in it. Require huge down payment (usually close to enough to break even) and/or absurd monthly payments. Hopefully you screw the customer out of a few months of payments before they can't pay, at which point you repo the car immediately and put it back on the lot for the next sucker.
  - MrFoof 10y ago
    >Congratulations on figuring out how a BHPH dealer works. In the case of my sister it was a franchised Toyota dealer selling new inventory. Not BHPH. She signed a 3-year lease on a Toyota Corolla with a ridiculous money factor component because they got her to simply focus on the monthly payment, then financed it for 6 years afterwards (again, by getting her to focus on the monthly payment) at a ridiculous interest rate despite a FICO over 720 by simply not shopping around (she agreed to 9.5% when 3% was easily available from many retail banks and CUs). When I showed her what she could've paid instead if she had any patience and simply run the numbers, she was incredibly upset. Not with the dealer, but with herself for not doing the due diligence. That's ignoring the fact that she could've just bought a 5-year old one, because a Corolla is literally a dime a dozen (350-400K units sold per year in the US at the time). This is my point. If you simple appear ignorant and lazy (not in a bad situation), there are plenty of businesses that will use that to their advantage. If you are in a bad situation, it's just more potential leverage for them. Yes, some franchised dealers do this with new inventory, even to people with good credit. If they think they can make an easy buck off of you on account of your ignorance, some will take the short-sighted approach (not trying to earn a repeat customer) and try to do it. If you throw up your hands they'll come back around and try to close the sale on amenable terms and offer it however they do, to make the sale.
serge2k 10y ago
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.
mywittyname 10y ago
Do these drivers still need to get expensive commercial insurance or commit fraud?

98 points by goughjustin 10y ago

From the article..."As the video promoting the arrangement puts it: 'The best part: Payments are automatically deducted from your Uber earnings.' "

NeutronBoy 10y ago
For high income earners, this is a benefit - novated leasing of cars is a popular way to reduce your tax bill. For low income earners? I wouldn't call it a positive exactly...
pdkl95 10y ago
That's going to have the same problems as the "company store" scam where you are paid in scrip. This makes moving to another employer much harder, because of the debt to the current employer (and/or their business partners).

msoad 10y ago

Uber had better tools than usual credit companies to lend to riskier people. That's their advantage in money lending business.

ivankirigin 10y ago

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. So not only is this expanding credit options, it's expanding labor options.

calpaterson 10y ago

> Xchange, which caters to people who have been rejected by other lenders, isn’t intended to be a moneymaker, said an Uber spokesman. 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.

gleenn 10y ago

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. I could think of a lot worse things than a company giving someone a job and then offering them expensive tools to do it.

Bartweiss 10y ago
Honestly, the APR looks totally reasonable (by bad credit standards). They cite a $96 average weekly payment for all Americans, and compare it to a $130 weekly payment for Xchange. The article's tone implies that I'm supposed to go "30% markup, shocking!", but it's comparing all borrowers to bad-credit borrowers. Knowing how other loans are priced, that seems like a pretty standard adjustment (especially for the easy-use terms of the lease). I honestly had a lot of trouble finding the malice here. Yes, the cars are expensive, but it's like complaining about on the level payday loans as 'extortion' - the prices are set by a high default rate, not by some inexplicable market failure.

_9MOTHER9HORSE 10y ago

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. 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?

rconti 10y ago
Great comment. I went back and checked the article because I thought you were wrong and it said "within the first 30 days". But you're correct, any time AFTER 30 days, they can leave the program. No mileage penalties and no contractual obligation to the lease are huge benefits.

femto113 10y ago

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. 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. That works out to about $15/hour after the lease payment, even less if it's not including fuel costs.

icebraining 10y ago
But you can't ignore the value of the lease of the car; it's not like you can only use it to drive for Uber.

wjnc 10y ago

"“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. 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). 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.

MisterBastahrd 10y ago
You can do almost anything else at a W-2 job and make more money with less responsibility and risk. Your credit card rate comparison is absurd. You don't ever have to carry a balance with a credit card. You have no choice with a car.
- aoeuasdf1 10y ago
  W2 jobs are not comparable. Driving for uber is flexible - you can drive whenever you want, for however long you want each week. Obviously that value will come at a lower price point for wages.
- wjnc 10y ago
  I was trying to do ballpark-comparisons. CC-rates are generally thought of as high-but-not-prohibitive. So being in the range of een CC-rate on first guess would land you in high-but-not-prohibitive-land. Totally right that the duration of an average debt is massively different, although I expect there to be many people that constantly roll-forward their CC-debt.

xycodex 10y ago

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.

TeMPOraL 10y ago
> if you have bad credit, you shouldn't be buying a brand new car. Can you elaborate? I don't see how that follows.
- bitJericho 10y ago
  A brand new car might cost your 400-600/mo whereas a used car might cost your 2000usd total (5 months at 400/mo of savings). Even if you buy a piece of garbage, you could replace anything wrong with it and still come out ahead. A new car is really a stupid buy for a person with little income.
  - dagw 10y ago
    But you cannot work as an Uber driver if you have "a piece of garbage", kind of defeating the whole point.
    - bitJericho 10y ago
      You can drive a 10 year old or older car for uber. In my area, prices are around 2000 dollars for 10 year old cars.
    - dsfyu404ed 10y ago
      You can find a lot of cars that are perfectly acceptable (no immediate work needed, no visible rust, does not need extensive interior cleaning) at $2k-$5k.
  - autotune 10y ago
    Parking, insurance, maintenance, gas, and getting your windows smashed in and belongings stolen every 2-3 months because you accidentally leave a packet of gum in there will set you back.

chinathrow 10y ago

Haha, even more like an employer...

19110121001 10y ago

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. 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. 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.

jackgavigan 10y ago
> ..by launching UberLavatory... May I suggest a rebrand to ÜberLü?
kmfrk 10y ago
I'm going to assume they'll have to have to create some kind of proxy for the unpiloted planes in order to escape liability for crashes.

wiseleo 10y ago

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. They just need to understand that the Uber lease should be treated as a short-term program. https://get.uber.com/cl/xchange/ https://get.uber.com/cl/xchange/ mentions pre-owned vehicles in addition to new ones. "Vehicles requirements for Xchange Leasing program: 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)" I would get the least expensive vehicle through Xchange, drive it to save about $3000, buy an Uber-qualified used vehicle, and enjoy life.

rbcgerard 10y ago

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. 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?

bko 10y ago

Subprime lending == bad Extending credit to lower-income borrowers == good 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. 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? [Edit] What I particularly don't like about these articles is the obfuscation of financial matters. For instance, > 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. 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). PV: 18,142 PMT: -160 N: 160 FV: -5000 I (weekly) -> 0.1942% (weekly) I (annual) -> 1.001942^52 - 1 ->10.615% 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.

Bartweiss 10y ago
> 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? This seems to be a lot of people's answer. There's this weird claim that payday loans and bad car loans and similar are caused by "greed!" when the companies making them are operating at tiny profit margins. High default rates dictate high prices (which forms a vicious cycle, but that can only be broken from the outside). The most 'predatory' thing about most bad-credit loans is the fee/repossession system, which tends to be sloppy and abusive because the borrowers are too broke to fight it. Uber has sidestepped that almost completely with a no-consequence termination scheme. The push to ban or cripple access to low income loans can really only be justified in two ways. One is that these loans are somehow corrupt, but we're not talking about balloon mortgages here - these companies are dealing with principal-agent problems like the home lenders were, and they don't have profit margins to give up. The second is that low-income people are too dumb to make good decisions, so they take these loans. It's a patronizing stance that shouldn't pretend to be uncontroversial.

Bartweiss 10y ago

> 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. 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. 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?

tyingq 10y ago
I agree with most of this, but it should be noted that $16/hour as 1099 income is not at all the same thing as $16/hour as a regular W2 employee. A rough equivalent would be about $11/hour. I think that's high still, as there are costs other than maintenance...like gasoline.
- warfangle 10y ago
  Average city driving speed for LA is 26.8 MPH [0], which means she's driving around 750 miles per week. She leased a 2015 Honda Civic, which has a rated fuel economy of 31 MPG. Assuming she gets the rated gas mileage from her civic, she's buying 24 gallons of gasoline per week for 2.39 [1] per, costing her $57. AAA gives an estimated 5.51 cents per mile for maintenance and tires [2], costing her $41. So, take home pay after expenses is $604 - $160 - $57 - $41 = $346, or $12.3/hr. IANAA, so I don't know which of these expenses qualify for deductions when she files. But an annual pay (after expenses) of $17,992 doesn't leave much wiggle room for paying for an accountant, assuming Uber indentured servitude is her only income generating activity. 0. http://infinitemonkeycorps.net/projects/cityspeed/ http://infinitemonkeycorps.net/projects/cityspeed/ 1. http://www.losangelesgasprices.com/ http://www.losangelesgasprices.com/ 2. http://exchange.aaa.com/wp-content/uploads/2016/04/2016-YDC-Brochure.pdf http://exchange.aaa.com/wp-content/uploads/2016/04/2016-YDC-...
  - 10y ago

wahsd 10y ago

It kind of rubs me wrong that Uber is defended with such vigor in so many different ways and situations. It's really a rather vile company started by rather vile people who now went begging to the muslims and their oil money just to keep it afloat. Uber is kind of like a classic latin american revolutionary guerrilla force in both their claimed cause, yet ever increasingly frequent diversion from its ostensible values while still enjoying a rather fervent support by fanatics who project externalities onto the group and who's capacity for ignorance and rationalization seems to flow from an endless well. I can assure you, as alluring as it seems due to Uber's brazen expressions, Uber is the last company you want dominating the consolidated means of transportation that will come from an autonomous vehicle evolution. They have no morals and zero concern with the impact of their actions or policies and they will not give any more concerns towards the millions of Uber drivers they currently are exploiting any more than they had zero concern for the Taxi drivers they were screwing and doing so by breaking laws.

zer00eyz 10y ago

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?

rconti 10y ago
I wonder if Uber allows multiple drivers to use the same vehicle? I'm sure the lease company wouldn't like it...

MrFoof 10y ago

>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. 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. My sister learned similarly many years ago. She ended up paying $26K for a $15K car, simply because she didn't do the math. 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.

dsfyu404ed 10y ago
Congratulations on figuring out how a BHPH dealer works. Buy cheap economy cars that aren't upscale enough for a "real" used car dealer to have on the lot. Have your mechanic fix anything imminently wrong and put a GPS tracker in it. Require huge down payment (usually close to enough to break even) and/or absurd monthly payments. Hopefully you screw the customer out of a few months of payments before they can't pay, at which point you repo the car immediately and put it back on the lot for the next sucker.
- MrFoof 10y ago
  >Congratulations on figuring out how a BHPH dealer works. In the case of my sister it was a franchised Toyota dealer selling new inventory. Not BHPH. She signed a 3-year lease on a Toyota Corolla with a ridiculous money factor component because they got her to simply focus on the monthly payment, then financed it for 6 years afterwards (again, by getting her to focus on the monthly payment) at a ridiculous interest rate despite a FICO over 720 by simply not shopping around (she agreed to 9.5% when 3% was easily available from many retail banks and CUs). When I showed her what she could've paid instead if she had any patience and simply run the numbers, she was incredibly upset. Not with the dealer, but with herself for not doing the due diligence. That's ignoring the fact that she could've just bought a 5-year old one, because a Corolla is literally a dime a dozen (350-400K units sold per year in the US at the time). This is my point. If you simple appear ignorant and lazy (not in a bad situation), there are plenty of businesses that will use that to their advantage. If you are in a bad situation, it's just more potential leverage for them. Yes, some franchised dealers do this with new inventory, even to people with good credit. If they think they can make an easy buck off of you on account of your ignorance, some will take the short-sighted approach (not trying to earn a repeat customer) and try to do it. If you throw up your hands they'll come back around and try to close the sale on amenable terms and offer it however they do, to make the sale.

serge2k 10y ago

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.

mywittyname 10y ago

Do these drivers still need to get expensive commercial insurance or commit fraud?