Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Uber Gets Run Over by Its Own Subprime Auto Leases

wolfstreet.com

Post reply on HN
Print view View original

41–50 of 127 posts

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

#41

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…

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.

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

#42

Post by brudgers »

aetherson wrote: post #35
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.

Uber spent $680 million on the Otto. GM spent $1000 million on Cruise Automation. Neither of these came with tooling and supply chains or production engineering. In the automotive industry, a billion gets some talent and potentially promising intellectual property, not vehicles on the road.

Yes, I think the Otto purchase was a bigger waste of money than the subprime leases. On the other hand, it didn't wreck lives by treating people disposabley.

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

#43

Post by glogla »

raverbashing wrote: post #33
FTA wrote: post #30

Earlier quoted context omitted.

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

I'm sure you actually meant Avocado Toast.

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

#44

Post by URSpider94 »

tyingq wrote: post #10
brianwawok wrote: post #8

Earlier quoted context omitted.

No you could literally lease it from uber and work 20h a week at uber and 20h a week at lyft in it.

Oh. The lease terms are crappy for the buyer as well. So, yes, funny in that Lyft would benefit in that scenario. The driver certainly doesn't though.

Actually, clearly the driver DOES benefit, if Uber is losing $9,000 per car. That's money that the lessee should have paid in an economically fair transaction.

In all fairness, a bunch of people are paying a little too much, while a small minority are getting most of the benefit, e.g. people who default on their loan, or who drive the car into the ground in three months and then return it. But, that in a nutshell is why sub-prime leases are really expensive on the open, non-VC-subsidized market to begin with.

The fact is, the vehicle portion of a hack business is a non-negligible portion of the cost. Most professional drivers replace their car every 2-3 years, after driving the old one to near-zero value by putting 150k+ miles on it. UberX's pricing is pretty much predicated on the fact that people aren't sophisticated enough to amortize their vehicle cost into their profit calculation. Works fine, until you kill your first car and it's time to buy a new one to keep driving ...

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

#45

Post by charlesdm »

brudgers wrote: post #31
tyingq wrote: post #27

Earlier quoted context omitted.

$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 ordi…

Are there any metrics on how well these sovereign wealth funds are actually doing?

I often see them making big bets, with some definitely paying off (e.g. Kingdom Holding and Twitter), but I wonder how well they do across the board.

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

#46

Post by URSpider94 »

tyingq wrote: post #6
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.

Well, you have to give the car back (early) to trigger the loss. Or do you mean the driver somehow finding the car on the secondary market afterwards and buying it?

Technically, Uber has the loss even before the car is returned, since the asset value has already declined. Businesses are supposed to report losses and profits when they occur, not when cash changed hands. Companies are supposed to "mark to market" assets that are on the books at an inflated rate. But, most companies resist doing this until an auditor or government agency forces them to do it. This was the crux of the financial meltdown, banks were reporting mortgages on their balance sheets that were effectively worthless, given risk of non-repayment and depreciation of the collateral, as full-value assets. Thus, they were not seen as being insolvent.

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

#47

Post by tyingq »

jsjohnst wrote: post #38
tyingq wrote: post #21

Earlier quoted context omitted.

"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.

There are great deals for certain locations.

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

#48

Post by tyingq »

URSpider94 wrote: post #44
tyingq wrote: post #10

Earlier quoted context omitted.

Oh. The lease terms are crappy for the buyer as well. So, yes, funny in that Lyft would benefit in that scenario. The driver certainly doesn't though.

Actually, clearly the driver DOES benefit, if Uber is losing $9,000 per car. That's money that the lessee should have paid in an economically fair transaction. In all fairness, a bunch of people are paying a little too much, while a small minority are getting most of the benefit, e.g. people who default on their loan, or who drive the car into the ground in three months and then return it. But, that in a nutshell is…

>Actually, clearly the driver DOES benefit, if Uber is losing $9,000 per car.

The drivers that exit the lease early benefit in that they are able to without huge penalty. They didn't net much out of the whole relationship though. How much do they make a day after subtracting $17/day just for the vehicle, plus whatever fuel costs are, self employment tax, commercial insurance, etc?

For drivers that keep the car for a long time, the subprime terms eat into an already paltry income. That was the portion of drivers I meant weren't benefiting.

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

#49

Post by aetherson »

brudgers wrote: post #42
aetherson wrote: post #35

Earlier quoted context omitted.

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

Uber spent $680 million on the Otto. GM spent $1000 million on Cruise Automation. Neither of these came with tooling and supply chains or production engineering. In the automotive industry, a billion gets some talent and potentially promising intellectual property, not vehicles on the road. Yes, I think the Otto purchase was a bigger waste of money than the subprime leases. On the other hand, it didn't wreck lives by…

I mean, sure, but on the other hand $1B is 36 times lower than $36B.

Maybe we're just talking in cross purposes. Obviously if you buy a million cars, you'll be spending tens of billions of dollars. I didn't mean that Uber was hoping to be able to roll out a massive worldwide fleet of driverless vehicles for under $36B. I meant that Uber has to demonstrate a mature technology and business model involving lets say thousands or tens of thousands of vehicles that people are actually paying for and that have unique advantages over their many competitors, for much less than $36B. If they can do that, they won't have any difficulty securing the financing to scale their fleet of vehicles up significantly.

If they can't do that, and they can't do that for much, much, much less than tens of billions of dollars, then they're in a lot of trouble.

I do think that we tend to get sloppy about large numbers. It feels like people hardly see any difference between $1B and $5B.

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

#50

Post by URSpider94 »

charlesdm wrote: post #45
brudgers wrote: post #31

Earlier quoted context omitted.

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 ordi…

Are there any metrics on how well these sovereign wealth funds are actually doing? I often see them making big bets, with some definitely paying off (e.g. Kingdom Holding and Twitter), but I wonder how well they do across the board.

Not that they are doing badly, but to some degree they don't have to perform well to be successful. Their primary goal is to transform a currently-limitless stream of oil money into a sustainable source of wealth and income when the spigot turns off in a generation or two.

Same for China overseas investments, it's a way to turn RMB-denominated cash into hard assets in democratic countries with stable political environments. Value-for-money comes second.

Post reply on HN