Uber weighs shutting down, downsizing Xchange car leasing program
By Marisa Kendall / August 9, two thousand seventeen at 8:21 AM
Uber is considering pulling the buttplug on its Xchange car leasing program – the program that promised to put drivers behind the wheel of a car for cheap, even if they had poor credit.
The startup and its board have determined the program needs a massive switch, and are weighing options to either shut it down, sell it or scale it back, a person familiar with the program told SiliconBeat.
Intended to address the ever-expanding ride-hailing behemoth’s constant need for drivers, it emerges the program turned out to be a money pit. Instead of anticipated losses of about $500 per car, Xchange actually incurred losses of closer to $9,000 per car, a person familiar with the matter told The Wall Street Journal.
Xchange advertised nimble leases with a security deposit as low as $250, according to the program’s website. Drivers could comeback the cars early – some were eligible to comeback the car as soon as thirty days after the very first payment due date, for a fee of $250.
Otherwise, the weekly payments were taken directly out of a driver’s earnings each week.
Shutting down Xchange is Uber’s latest cost-cutting budge, suggesting the company is attempting to stem its enormous losses as it prepares to eventually go public. Uber sold its Chinese business to rival Didi Chuxing last summer, and last month ceded control of the Russian market in a merger with rival Yandex.
Uber’s losses, while still massive, are declining. The company lost $708 million over the very first three months of this year, compared to $991 million the quarter before.
And like many aspects of Uber’s business model, its Xchange program is not without controversy. Critics have called it predatory, complaining that Uber lures drivers in with promises of low rates and plasticity, but keeps them on the hook for payments even if drivers can’t work for a week, or if the company lowers their wages.
Uber in January agreed to pay $20 million to lodge claims by the Federal Trade Commission that, in part, accused Uber’s leasing program of charging drivers above average rates. That complaint targeted Xchange’s predecessor – Uber’s Vehicle Solutions Program, which also gave vehicles to potential drivers without cars and automatically deducted the payments from the driver’s earnings. More than Five,000 drivers signed up for that program inbetween November two thousand thirteen and April 2015, according to the FTC complaint.
The FTC says Uber promised leases for as little as $17 per day or $119 per week, but drivers paid at least $1,000 for a down payment and another $1,000 as a security deposit, and then were charged median weekly payments of more than $200.
The FTC claims Uber also falsely promised the leases suggested unlimited mileage.
Investigators say Uber, which promised to work with drivers who had bad credit, had no oversight over the terms of those leases. Instead, they allegedly were arranged through third-party subprime auto companies.
Since the, Uber brought its leasing in-house under the Xchange program.
But some drivers still complain that after making their lease payments and paying for gas, vehicle maintenance and other expenses, they slightly have enough to get by.
Photo: SAN FRANCISCO, CA – The logo of the rail sharing service Uber is seen in front of its headquarters on August 26, two thousand sixteen in San Francisco, California. (Photo by Justin Sullivan/Getty Photos)