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Uber Gets Run Over by Its Own Subprime Auto Leases

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Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#31

Post by brudgers »

tyingq wrote: post #27
brudgers wrote: post #24

I saw -$9000/vehicle and 40,000 vehicles and thought, that's only $360 million of losses. At the scale of Uber, that's just a cost of doing business. It's half of what it paid for Otto, and probably less than 1% of the startup costs for producing self-driving vehicles. To put it another way, $360 million one way or the other is noise on Apple's bottom line. It is 0.05 of the variation in GOOG market cap over the past…

$360 million is, though, a substantial portion of their ~$3b/year of losses. If I were an investor, I might question how many of these types of decisions were driving losses. The model may depend on subsidizing rides, but there's no reason to bleed more than needed.

Concern over local losses at one company in an investment portfolio is what separates ordinary investors from the class of investors Uber allows to invest. The Saudi Sovereign Wealth Fund is not going to sweat this. The value of Uber is the distribution of possible outcomes weighted for probability. The worst outcome is $0 and that was accepted going in.

The reason companies like Uber stay private is to keep out ordinary investors and for the ability to ignore the traditional haymaking of Wall Street analysts. All those subprime leases let Uber gain market and refine its product. The widely published per ride loss numbers reflect those leases because they are baked into the overall losses.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#32

Post by bogomipz »

whatok wrote: post #26
bogomipz wrote: post #25

>"The Xchange Leasing division had been estimating modest losses of around $500 per auto on average, these people said. But managers recently informed Uber executives that the losses were actually about $9,000 per car — about half the sticker price of a typical leased vehicle." So their accounting was off by almost two orders of magnitude? My first thought was "how was this even allowed to happen?" But then I read: >…

> I think this is what happens when its all funny money. Uber loses hundreds of million of dollars a quarter and yet big banks have no problem writing them a check for another billion. I'm guessing none of the banks asked what the credit facility was for or even any details about the leasing plan it was intended to fund? Details were disclosed in this article. I'd imagine the banks underwriting the loan had those det…

That certainly would be par for the course. There's been much speculation that auto leasing might be a bubble. See:

http://www.zerohedge.com/news/2017-03-29/signs-auto-bubble-s...

and

http://usa.streetsblog.org/2017/05/01/what-comes-after-the-a...

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#33

Post by raverbashing »

FTA wrote: post #30
CamelCaseName wrote: post #5

The idea that one could lease a vehicle from Uber, at a significant loss to Uber, then turn around and use that vehicle to drive for Lyft, is absolutely hilarious.

Yet another example of VC ending up subsidizing America. We could just cut out the middleperson and go to basic income paid for by VCs.

Somebody needs to pay for the next Uber of Avocado Delivery

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#34

Post by aetherson »

bogomipz wrote: post #25

>"The Xchange Leasing division had been estimating modest losses of around $500 per auto on average, these people said. But managers recently informed Uber executives that the losses were actually about $9,000 per car — about half the sticker price of a typical leased vehicle." So their accounting was off by almost two orders of magnitude? My first thought was "how was this even allowed to happen?" But then I read: >…

In all fairness, 2 orders of magnitude over $500 is $50,000. They're a lot closer to 1 order of magnitude ($5,000) than two.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#35

Post by aetherson »

brudgers wrote: post #24

I saw -$9000/vehicle and 40,000 vehicles and thought, that's only $360 million of losses. At the scale of Uber, that's just a cost of doing business. It's half of what it paid for Otto, and probably less than 1% of the startup costs for producing self-driving vehicles. To put it another way, $360 million one way or the other is noise on Apple's bottom line. It is 0.05 of the variation in GOOG market cap over the past…

Uber had better hope that the startup costs of self-driving vehicles are a lot lower than $36B. They can't afford that.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#37

Post by toast0 »

jaclaz wrote: post #20
devy wrote: post #17

Earlier quoted context omitted.

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.

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 >- Oil change and tire rota…

Taxi style use generally qualifies for shorter oil change intervals. Including that in the lease probably helps the vehicles stay maintained and resellable.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#38

Post by jsjohnst »

tyingq wrote: post #21
ceejayoz wrote: post #18

> A 2014 Toyota Corolla was recently being offered for a term of 130 weeks at $122 a week, totaling roughly $500 a month, according to marketing materials distributed by Uber. Only Uber could lose money on a $500/month 2014 Corolla lease.

"drivers...will be able to return the car with only two weeks notice, and limited additional costs. The program allows for unlimited mileage...with routine maintenance also included." The core problem for Uber is that the terms made it more like a car rental than a lease. Uber pays the maintenance, unlimited miles, and there's almost no penalty for bailing on the lease. $500 a month (~$17/day) to rent a 2014 Corolla…

I'm currently renting a 2017 Corolla from Avis for just over $23/day all taxes and fees included.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#39

Post by fny »

FTA wrote: post #30
CamelCaseName wrote: post #5

The idea that one could lease a vehicle from Uber, at a significant loss to Uber, then turn around and use that vehicle to drive for Lyft, is absolutely hilarious.

Yet another example of VC ending up subsidizing America. We could just cut out the middleperson and go to basic income paid for by VCs.

And we could promise the VCs 100x returns in the afterlife.

Re: Uber Gets Run Over by Its Own Subprime Auto Leases

#40

Post by sharemywin »

jaclaz wrote: post #12

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+... Assuming that cars in such a situation a…

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