Uber is playing both sides of the table which is ok if you are profitable overall. But not ok if you are losing money on both sides. Uber will go a full Groupon soon.
You mean "go a full Pets.com" like in millennium dotCom bubble.
Uber Gets Run Over by Its Own Subprime Auto Leases
81–90 of 127 posts
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#82Earlier quoted context omitted.
I agree that the entire enterprise might be a bad deal for buyers, BUT: - for those who returned the car after months, this is an option that just isn't available in an ordinary lease - in some cases, death is not enough to cancel a lease. These folks would have been left making all of the payments on the car for the rest of the term. Plus, ordinary leases have very low mileage caps. They may not have made much money…
Ahh, I see why we aren't on the same page. My reading was that the cars leased in this program were used cars, with values substantially less than $22k. https://www.uber.com/drive/vehicle-solutions/leasing/ "The majority of eligible vehicles will be pre-leased and/or pre-owned inventory"
Given Uber's pretty tight standards for cars, I would assume that these are late-model low-mileage pre-owned cars, which still hover i the $20k value range.
I think they also wanted to reserve the right to re-lease cars that came back as early returns under the leasing plan.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#83Earlier quoted context omitted.
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…
So apparently it's the passengers who benefited in the end? That is, if the drivers who put lots of miles on the cars didn't make much off it, this was an indirect way of subsidizing lower rates.
Yup. Most of the story of ridesharing (and the sharing economy in general) is a massive shift of profit out of the hands of monopoly rentiers (cabbies (or more accurately, medallion owners), hotel owners) and into the pockets of consumers.
We're all paying much less for car rides than we were a few years ago, but the basic underlying cost of providing those rides has not changed much at all.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#84I 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…
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.
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.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#85This is b.s. Uber is playing hollywood with it's money.
They are taking cars that are not particularly desirable, selling them to their own leasing company at full retail, collecting 4 times as much money per month than any same person would pay, earning money on every mile driven, and... I'm not sure about this one, but I _think_ they reduce the pay of the drivers who do the leases (I know Lyft does this).
Then they are "selling" the cars at a loss. But are they selling the cars at a loss to the wholesale market at large? i.e. putting them up for auction at Manheim/etc.? I doubt that is happening. More likely they are selling them to yet another subsidiary or affiliated company.
You don't lease a 15K car to someone at $800/month and lose money.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#86The author mentions "sub-prime" borrowers several times but I don't see any indication that borrower quality had anything at all to do with Uber's problem. I always thought sub-prime borrowers were unfairly blamed for the mortgage crisis. There were a lot of average & prime borrowers walking away from ridiculous "nothing down, 1%" mortgages.
A house would have to be staggeringly overpriced for a 1% fixed loan with no down and no points to not make sense. Especially if they qualified for a prime rate.
Hell, if I had that loan available I would totally take it and run with it.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#87Earlier quoted context omitted.
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?
No you could literally lease it from uber and work 20h a week at uber and 20h a week at lyft in it.
No, you can't. You can lease it from uber and drive 40h/week for uber and 60h/week from Lyft, but even that is a stretch. When you lease from a ridesharing company you are committing to that ridesharing company.
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#88Earlier quoted context omitted.
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 t…
That's the general accounting principle, but accounting is pretty hard. Leases get pretty complicated quicky. For example in a sale and leaseback under IAS17 even 'profits' you make at the outset (let's call them economic profits), you are only allowed to recognize proportionally to the time of the contrary. Here the precautionary nature beats the realisation principle.
Here's an example of how accounting is hard with differences between US GAAP and IFRS [1]. Uber loses half it's revenue under a new US GAAP principle...
[1] https://www.ft.com/content/74447ca2-6b0b-11e7-bfeb-33fe0c5b7...
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#89Earlier 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…
[deleted]
Re: Uber Gets Run Over by Its Own Subprime Auto Leases
#90I 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…
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+... the car costs about $19,000.
The finance cost is $871, 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.