Last summer, Uber launched a car leasing program that aimed to remedy the one big obstacle for anyone who wanted to sign up as a driver and hit the road, and you don't have a car thenyou've got nowhere to put passengers. Nearly a year after Xchange Leasing began connecting would-be drivers with new vehicles, many experts say the program may not be all it's cracked up to be for already financially vulnerable drivers.
Xchange Leasing, a wholly owned subsidiary of Uber that offers short-term leases to drivers by partnering with dealerships, recently received a $1 million credit from Goldman Sachs that aims to expand the program to more drivers, Bloomberg reports. When the program launched last year, there were few details available aside from the fact that it would involve multi-year leases with the option for drivers to return their vehicles without penalty after 30 days.
While UBER contends that the program offers people who may otherwise be rejected by traditional lenders an option to obtain a vehicle and make a living, consumers advocates and financial experts express concerns that Xchange may be causing more harm to drivers than it is providing an outlet for them to make money. Bloomberg spoke with several advocates, advisors, and drivers to glean a bit more understanding about the risks and benefits of Xchagne.
We at Orlando Kia West reached out to Uber and also the Xchange company to find out more details about the program and they refused to provide it. The reason for that may become more clear after looking over this article.
Here are five things we learned from the report.
#1. The Terms - Leasing a vehicle can be a more expensive option for any consumer looking for a new set of wheels. Under an Xchange lease, which features 28 pages of terms and conditions, drivers pay a $250 upfront deposit and weekly payments to Uber over a three-year period.
The weekly payments are automatically deducted from the driver's Uber earnings. If the driver wants to keep the vehicle after the three-year term is up, they must pay the residual value. (See example below)
2016 Toyota Corolla L Base
$250-$400 Security Deposit
$161 weekly payment for 156 weeks (39 months) = $25,116
- Plus the residual at the end of term if you choose to keep it.
Total $25,366 or more for 39 months
For a car that you can buy for $17,113
That is Crazy right? I used that example becasue that is wheat the used in there own example.(see at the end)
#2. Returning The Car - After 30 days, an Uber driver taking part in the leasing program can return the vehicle to Uber with two weeks notice. The return doesn't incur an additional fee but the driver is on the hook for the remaining payments.
#3. All-In-One Program - In addition to partnering with dealerships, Xchange handles advertisements to drivers, manages risks, and pays repo men to collect vehicles when drivers stop making payments.
In the case of Xchange, where payments are automatically deducted from Uber driver's take-home pay, the lessee has stopped driving for the company.
#4. A Predatory Program? - Auto experts say that while Uber contends the leasing program offers flexibility and option that otherwise wouldn't be available, the costs are significantly higher than other leasing programs.
For example, Experian estimates the average weekly payment for a new car lease is $96, while a 2013 vehicle through Xchange costs $130 a week, that is $563 a month!
#5. The High Costs - One driver has been quoted saying that the high weekly cost, coupled with Uber lowering the cost of rides simply make his lease unaffordable.
The driver, who leased a 2016 Toyota Corolla, paid $161 a week for the vehicle. Two months after starting the lease, the company slashed prices and he began having trouble keeping up with payments.
"It got to the point that I would drive just to meet my payment," he said. "If you were short on your payment for a week it would roll onto the payment for next week. It starts adding up."
In the end, he stopped driving for Uber and asked Xchange to come get the car. However, he says it stayed in the parking lot for several months, until one morning it was gone.
Orlando Kia West does not participate in the Uber Xchange leasing program, but can still help those who drive for UBER still and save them real money. On this page you will see a button labeled "Available Rebates for Uber Drivers". These are incentives that Kia gives us as a cash rebate towards the purchase of a new car.