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I am not sure to understand. The example 2014 Toyota Corolla at US$122 per week makes in a 130 weeks lease with Xchange some 122x130= 15,860 US$ and a 2.5 year

by jaclaz 9y ago

I am not sure to understand. The example 2014 Toyota Corolla at US$122 per week makes in a 130 weeks lease with Xchange some 122x130= 15,860 US$ and a 2.5 years (high mileage) old Corolla may still have some minimal residual value, let's say US$ 1,500. I.e. roughly total reimbursement of the list price of the car: http://toyotanews.pressroom.toyota.com/releases/2014+toyota+corolla+pricing.htm http://toyotanews.pressroom.toyota.com/releases/2014+toyota+... Assuming that cars in such a situation are bought "in bulk" and thus with a 10, maybe 15% discount, very roughly it should mean that in the US$ 15,860+1,500=17,360 of reimbursement some minimal costs for interests and expenses are included on an initial spent sum of around US$ 16,000/16,500. So, at least in theory it seems like a "side-business" that is going to make even or maybe loose a few hundred dollars each car (for interests on the loaned money), but this only if everyone keeps the car and pays the leases for the whole period. Now, you get one of those (and you get one of those because you have no money and no good credit record) and after 25 weeks/6 months you give it back. You pay US$3,300 (25*122+250). Xchange has in its hands a six month old car with (say) 20,000 miles on it.That still has a market value, but maybe since you sell it wholesale to some second hand dealer and you only get - say - US$8000/9000. So, 3,300+8500=11,800 So in this case Xchange seems like having lost - roughly - US$ 4,500 per car, half the US$ 9,000 stated. There must have been some large avoidance of repayment (and repossession of the cars, etc.) to make that number on average.

YCode 9y ago
According to the article that is indeed the case because they almost targeted with people who had subprime/no credit. And... Surprise! There was a reason they didn't have good credit ratings.
- jandrese 9y ago
  It's just like the housing bubble. Risky bets turn out to be risky. Putting a whole bunch of risky bets together doesn't reduce the risk, it just makes the problem bigger when it crashes. In some ways this could be seen a very charitable on Uber's part. They're giving these people who don't have the personal assets a chance to work for a living despite their past behavior. If you're willing to concede that the company is willing to take risk to help the most disadvantaged people, then the only thing I can fault them on is doing it at the wrong end of the equation. They should have had the people make conventional leases at the higher rates and then tack on a "lease premium" on the fares they collect (supplied by Uber, not the passengers) to help pay for the car. This would prevent them from going to work for Lyft (where they wouldn't get the bonus money) but still gain the advantage of a steady job and hopefully get their credit back in order in time.
devy 9y ago
Have you factored in the maintenance costs, oil changes, tires, wheel balance, windshield wipers, labors and other Xchange employee related costs? Those add up REAL QUICK. BMW used to run an industry leading (back then) warranty program the covers the wear&tear of regular maintenance (except tires and a few others) but they eventually decided to discontinue that warranty program since 2015 due to the huge loss on it.
- jaclaz 9y ago
  I thought it was a "plain" lease with maintenance (and tires, etc.) in charge of the user not a "full service" lease. If it was the latter, then yes, but it would be "suicide", not even the "perfect world" example where the driver pays every month for the full period can possibly work. EDIT: Found it, is just "basic maintenance": https://help.uber.com/h/ba3a48f4-07ae-4836-9d5a-6df170210d6f https://help.uber.com/h/ba3a48f4-07ae-4836-9d5a-6df170210d6f >- Oil change and tire rotation every 5,000 miles >- Cabin air filter replacement every 25,000 miles It doesn't add up to much anyway. (as a side note the usual "US madness" about changing oil every 5,000 miles applies here as well). I believe that when you buy a new Corolla, Toyota gives a 5,000 miles tire rotation and a 10,000 miles oil change included in first two years, BTW.
  - toast0 9y ago
    Taxi style use generally qualifies for shorter oil change intervals. Including that in the lease probably helps the vehicles stay maintained and resellable.
    - jaclaz 9y ago
      Naaah, that depends on quality of oil (and of course characteristics of the engine), as hinted it is a long standing dispute. A number of people (particularly in the US, but not only) change their oil every 3-5,000 miles for reasons like: - my father always changed oil every 3,000 (or 4,000 or 5,000) miles - a friend of mine who races changes it every 2,500 miles so changing it every double that is appropriate - the dealer (or the mechanic just around the corner) told me to change the oil every 5,000 miles or the engine will explode Of course the Toyota engineers (mind you the same ones that designed, produced and tested for a few zillions miles the thingy that you chose to buy, implying that you trust them overall) saying 10,000 miles are a bunch of incompetent morons, what do they know? http://toyota.custhelp.com/app/answers/detail/a_id/7604/related/1 http://toyota.custhelp.com/app/answers/detail/a_id/7604/rela... Seriously, the 10,000 miles for (partially) syntethic oil is on the very low of the expected range of duration of a modern oil on a modern engine, i.e. it is a conservative enough duration, 12,000 to 15,000 is common. And IF there is something that makes an oil or engine go bad is NOT "continued use" (like taxi use) but rather cold starts after long periods of inactivity (or racing, for other reasons). In this the other also mostly psychological "limit" of "oil must be changed every six months no matter how many miles" has some more background reasons. Still a (partially) synthetic oil is good for much more than that, usually 1 year at the very least. Fully synthetic oils (very expensive) can last much more (but you need to change filters ever 10-15,000 miles anyway).
JshWright 9y ago
> a 2.5 years (high mileage) old Corolla may still have some minimal residual value, let's say US$ 1,500. Even on the wholesale market, I'd wager it's several time that amount...
- jaclaz 9y ago
  I don't know, but I would expect 7,500 to 10,000 miles per year on a normal car, hence that would have in a 130 weeks/2.5 years some 25 thousands miles top. If (as it is reported here and there) an Uber driver needs to make 3,000 miles per month, the car after 30 months would be more likely to be in the 90,000 - 100,000 range, i.e. the same as a 10-12 years car, i.e. an "end of life" car. Even if only 2.5 years old, upholstery, seats, plasric accessories, etc will likley show the wear from use. Such a car can only be sold to "particular" customers. But if the value is bigger, then it is another reason why the 9,000 US$ lost per car are simply too much.
  - JshWright 9y ago
    A 2014 Corolla with 120k miles in "average" condition books at $5-7k "trade-in" value (which tends to map pretty well to wholesale value).
    - jaclaz 9y ago
      Good, then if we use the lower US$ 5,000 as a reference, the "complete cycle" turns to be actually advantageous for Xchange. 15,860+5,000=20,860 against a cost (adding the costs of "basic maintenance", assuming an intervention every 5,000 miles of 100 US$ each) of 16,500+20*100=18,500 That is 2,360 over 18,500 in 2.5 years, roughly 13% or 5%/year interest (excluding administrative/managing costs).
  - 0xffff2 9y ago
    >I don't know, but I would expect 7,500 to 10,000 miles per year on a normal car, hence that would have in a 130 weeks/2.5 years some 25 thousands miles top. I think that's way low. Over the course of several years and car insurance companies, the lowest any of them would let me estimate my annual mileage was 10,000 miles/year.
sharemywin 9y ago
how do you dump that many high millage cars on the market without it dragging down used car prices.
sharemywin 9y ago
or lets assume you say f* uber drive for lyft or just say thanks for the free car a*shole.... then you need to run around and find them and collect the car and you got $250 for the hassle. Hell, you might even find half your car's parts for sale on ebay. Not that all people with bad credit are bad people but some of them are.
ww520 9y ago
The drivers bought the cars in open market and the dealers steered them to higher end cars, the article said. Pick the car in the middle of the range from http://toyotanews.pressroom.toyota.com/releases/2014+toyota+corolla+pricing.htm http://toyotanews.pressroom.toyota.com/releases/2014+toyota+... the car costs about $19,000. The finance cost is $871, https://goo.gl/YozEwy https://goo.gl/YozEwy. Administrative cost: Uber has 500 employees running the lease program (TFA said 500 would be laid off if it ended). 500 employees X $60,000/employee-year X 2.5 years = 75 millions, to run the lease program for 30 months. Uber has 40,000 cars in the program, so 75M/40000 = $1,875 per car for admin cost. The car cost plus finance cost plus administrative cost: $19,000 + $871 + $1,875 = $21,746. With the figure you have ($11,800) for the money Uber gets, the loss is $11,800 - $21,746=-$9,946. It is near $9,000.
- jaclaz 9y ago
  >With the figure you have ($11,800) for the money Uber gets, the loss is $11,800 - $21,746=-$9,946. It is near $9,000. Good, but then almost every car was given back within the "shorter" term of six month. And the 122 dollar per week might actually been higher for a higher initial amount. With the new calculations (your higher cost but also the higher resell value JshWright suggested at the end) the full cycle would be (adding also the "basic maintenance" 20x100): 130x122=15,860+6,000+2000=23,860 The "normal" cycle is still short of US$ 2,114 per car, which means, that given that there are ONLY "full cycles" and "short cycles" 2014 Corolla's in the "fleet", that you need 7 "short cycles" every 1 "full cycle" to get a US$ 9,000 average. 7x9,946= 69,622 1x2,114= 2,114 69,622+2,114=71,136 / 8= 8,967 So if 7 out of 8 cars/financing went bad, then the theory that it is suicide to finance people with no or bad credit (or maybe that the income from Uber service had been grossly overestimated) seems like a valid one. Resell value=

by jaclaz 9y ago

YCode 9y ago

According to the article that is indeed the case because they almost targeted with people who had subprime/no credit. And... Surprise! There was a reason they didn't have good credit ratings.

jandrese 9y ago
It's just like the housing bubble. Risky bets turn out to be risky. Putting a whole bunch of risky bets together doesn't reduce the risk, it just makes the problem bigger when it crashes. In some ways this could be seen a very charitable on Uber's part. They're giving these people who don't have the personal assets a chance to work for a living despite their past behavior. If you're willing to concede that the company is willing to take risk to help the most disadvantaged people, then the only thing I can fault them on is doing it at the wrong end of the equation. They should have had the people make conventional leases at the higher rates and then tack on a "lease premium" on the fares they collect (supplied by Uber, not the passengers) to help pay for the car. This would prevent them from going to work for Lyft (where they wouldn't get the bonus money) but still gain the advantage of a steady job and hopefully get their credit back in order in time.

devy 9y ago

Have you factored in the maintenance costs, oil changes, tires, wheel balance, windshield wipers, labors and other Xchange employee related costs? Those add up REAL QUICK. BMW used to run an industry leading (back then) warranty program the covers the wear&tear of regular maintenance (except tires and a few others) but they eventually decided to discontinue that warranty program since 2015 due to the huge loss on it.

jaclaz 9y ago
I thought it was a "plain" lease with maintenance (and tires, etc.) in charge of the user not a "full service" lease. If it was the latter, then yes, but it would be "suicide", not even the "perfect world" example where the driver pays every month for the full period can possibly work. EDIT: Found it, is just "basic maintenance": https://help.uber.com/h/ba3a48f4-07ae-4836-9d5a-6df170210d6f https://help.uber.com/h/ba3a48f4-07ae-4836-9d5a-6df170210d6f >- Oil change and tire rotation every 5,000 miles >- Cabin air filter replacement every 25,000 miles It doesn't add up to much anyway. (as a side note the usual "US madness" about changing oil every 5,000 miles applies here as well). I believe that when you buy a new Corolla, Toyota gives a 5,000 miles tire rotation and a 10,000 miles oil change included in first two years, BTW.
- toast0 9y ago
  Taxi style use generally qualifies for shorter oil change intervals. Including that in the lease probably helps the vehicles stay maintained and resellable.
  - jaclaz 9y ago
    Naaah, that depends on quality of oil (and of course characteristics of the engine), as hinted it is a long standing dispute. A number of people (particularly in the US, but not only) change their oil every 3-5,000 miles for reasons like: - my father always changed oil every 3,000 (or 4,000 or 5,000) miles - a friend of mine who races changes it every 2,500 miles so changing it every double that is appropriate - the dealer (or the mechanic just around the corner) told me to change the oil every 5,000 miles or the engine will explode Of course the Toyota engineers (mind you the same ones that designed, produced and tested for a few zillions miles the thingy that you chose to buy, implying that you trust them overall) saying 10,000 miles are a bunch of incompetent morons, what do they know? http://toyota.custhelp.com/app/answers/detail/a_id/7604/related/1 http://toyota.custhelp.com/app/answers/detail/a_id/7604/rela... Seriously, the 10,000 miles for (partially) syntethic oil is on the very low of the expected range of duration of a modern oil on a modern engine, i.e. it is a conservative enough duration, 12,000 to 15,000 is common. And IF there is something that makes an oil or engine go bad is NOT "continued use" (like taxi use) but rather cold starts after long periods of inactivity (or racing, for other reasons). In this the other also mostly psychological "limit" of "oil must be changed every six months no matter how many miles" has some more background reasons. Still a (partially) synthetic oil is good for much more than that, usually 1 year at the very least. Fully synthetic oils (very expensive) can last much more (but you need to change filters ever 10-15,000 miles anyway).

JshWright 9y ago

> a 2.5 years (high mileage) old Corolla may still have some minimal residual value, let's say US$ 1,500. Even on the wholesale market, I'd wager it's several time that amount...

jaclaz 9y ago
I don't know, but I would expect 7,500 to 10,000 miles per year on a normal car, hence that would have in a 130 weeks/2.5 years some 25 thousands miles top. If (as it is reported here and there) an Uber driver needs to make 3,000 miles per month, the car after 30 months would be more likely to be in the 90,000 - 100,000 range, i.e. the same as a 10-12 years car, i.e. an "end of life" car. Even if only 2.5 years old, upholstery, seats, plasric accessories, etc will likley show the wear from use. Such a car can only be sold to "particular" customers. But if the value is bigger, then it is another reason why the 9,000 US$ lost per car are simply too much.
- JshWright 9y ago
  A 2014 Corolla with 120k miles in "average" condition books at $5-7k "trade-in" value (which tends to map pretty well to wholesale value).
  - jaclaz 9y ago
    Good, then if we use the lower US$ 5,000 as a reference, the "complete cycle" turns to be actually advantageous for Xchange. 15,860+5,000=20,860 against a cost (adding the costs of "basic maintenance", assuming an intervention every 5,000 miles of 100 US$ each) of 16,500+20*100=18,500 That is 2,360 over 18,500 in 2.5 years, roughly 13% or 5%/year interest (excluding administrative/managing costs).
- 0xffff2 9y ago
  >I don't know, but I would expect 7,500 to 10,000 miles per year on a normal car, hence that would have in a 130 weeks/2.5 years some 25 thousands miles top. I think that's way low. Over the course of several years and car insurance companies, the lowest any of them would let me estimate my annual mileage was 10,000 miles/year.

sharemywin 9y ago

how do you dump that many high millage cars on the market without it dragging down used car prices.

sharemywin 9y ago

or lets assume you say f* uber drive for lyft or just say thanks for the free car a*shole.... then you need to run around and find them and collect the car and you got $250 for the hassle. Hell, you might even find half your car's parts for sale on ebay. Not that all people with bad credit are bad people but some of them are.

ww520 9y ago

The drivers bought the cars in open market and the dealers steered them to higher end cars, the article said. Pick the car in the middle of the range from http://toyotanews.pressroom.toyota.com/releases/2014+toyota+corolla+pricing.htm http://toyotanews.pressroom.toyota.com/releases/2014+toyota+... the car costs about $19,000. The finance cost is $871, https://goo.gl/YozEwy https://goo.gl/YozEwy. Administrative cost: Uber has 500 employees running the lease program (TFA said 500 would be laid off if it ended). 500 employees X $60,000/employee-year X 2.5 years = 75 millions, to run the lease program for 30 months. Uber has 40,000 cars in the program, so 75M/40000 = $1,875 per car for admin cost. The car cost plus finance cost plus administrative cost: $19,000 + $871 + $1,875 = $21,746. With the figure you have ($11,800) for the money Uber gets, the loss is $11,800 - $21,746=-$9,946. It is near $9,000.

jaclaz 9y ago
>With the figure you have ($11,800) for the money Uber gets, the loss is $11,800 - $21,746=-$9,946. It is near $9,000. Good, but then almost every car was given back within the "shorter" term of six month. And the 122 dollar per week might actually been higher for a higher initial amount. With the new calculations (your higher cost but also the higher resell value JshWright suggested at the end) the full cycle would be (adding also the "basic maintenance" 20x100): 130x122=15,860+6,000+2000=23,860 The "normal" cycle is still short of US$ 2,114 per car, which means, that given that there are ONLY "full cycles" and "short cycles" 2014 Corolla's in the "fleet", that you need 7 "short cycles" every 1 "full cycle" to get a US$ 9,000 average. 7x9,946= 69,622 1x2,114= 2,114 69,622+2,114=71,136 / 8= 8,967 So if 7 out of 8 cars/financing went bad, then the theory that it is suicide to finance people with no or bad credit (or maybe that the income from Uber service had been grossly overestimated) seems like a valid one. Resell value=