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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

#101

Post by bsder »

JshWright wrote: post #29
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…

> a 2.5 years (high mileage) old Corolla may still have some minimal residual value, let's say US$ 1,500. Even on the wholesale market, I'd wager it's several time that amount...

Yeah, I want to see you buy a 2.5 year old car on the open market for less than $3,000 even with high mileage.

I had to total out a 1997 Honda Civic due to a collision (which I got fixed, thanks), and the insurance reduced my payout by almost $2,000 because that's what they could get sight-unseen for a totalled car.

Yeah, I was more than a little pissed.

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

#102

Post by aetherson »

brudgers wrote: post #78
aetherson wrote: post #49

Earlier quoted context omitted.

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 thou…

Cars that are produced in the 1000's or 10,000's tend to run in the $100,000's [1] even when the costs are amortized over the total production of an established manufacturer where startup costs like site acquisition and robots and hiring are already sunk costs. To better explain, the difference between one and five billion is significant when its my money. But it is not a quantum difference in terms of ordinary autom…

Uber doesn't have to manufacture cars from the ground up, and has given no sign that I'm aware of that they're interested in doing so. They'll use after-market additions of their self-driving technology, and most of the manufacturing will be done by third parties, for a long time yet.

If they get to the point where they're even thinking about creating automobiles from the ground up, it'll be past a bunch of hurdles. Even then, they'd still almost certainly partner with an existing auto-maker.

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

#103

Post by KirinDave »

Steeeve wrote: post #85

This 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…

You'd think it would work, but the drivers aren't stupid. Reading the article suggests to me the loss point here is drivers realizing they can burn these cars.

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

#104

Post by toast0 »

jaclaz wrote: post #55
toast0 wrote: post #37

Earlier quoted context omitted.

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

Naaah, that depends on quality of oil (and of course characteristics of the engine), as hinted it is a long standing dispute. A number of people (particularly in the US, but not only) change their oil every 3-5,000 miles for reasons like: - my father always changed oil every 3,000 (or 4,000 or 5,000) miles - a friend of mine who races changes it every 2,500 miles so changing it every double that is appropriate - the…

Taxi use is specifically called out as a special operating condition in the manual. The owner's warranty and maintenance guide for the 2017 corolla [1] says on page 38, for the 5,000 mile/6 month interval:

"Extensive idling and/or low speed driving for a long distance such as police, taxi or door-to-door delivery use: Replace engine oil and oil filter"

[1] https://www.toyota.com/t3Portal/document/omms-s/T-MMS-17Coro...

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

#105

Post by riku_iki »

jklein11 wrote: post #100
riku_iki wrote: post #77

Earlier quoted context omitted.

But Fed is not just giving money for free. VCs will need to return them eventually.

The Fed isn't giving money directly to the VCs (atlest that I know of). The fed is keeping interest rates low on Treasury Bonds low. The rationale for this is: if investors get a small return on a riskless investment, they will be willing to take bigger risks for less rewards. Theoretically this should increase the investment in Venture Capital firms.

Sure, plus there is another money flow: low long term borrowing costs, with borrowers looking for a way to invest with higher return.

But in both cases these people (investors, borrowers) will want to get their money back eventually..

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

#106

Post by calpaterson »

Steeeve wrote: post #85

This 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…

> You don't lease a 15K car to someone at $800/month and lose money.

It seems easy to imagine how you can: the driver rents the $15k car for 6 months, paying $4.8k in total before they stop making payments and Uber repossesses the vehicle. Uber hope to make themselves whole by selling it for $10.2k...except...they can't sell it for $10.2k because cars depreciate fast and anyway this one has 30,000 more miles on the clock than it did at $15k.

Only the cars initally cost $20k instead of $15k, Uber had to pay ~4% interest on the money they used to buy the car, the driver paid closer to $400 than $800, not all the cars are in fully working order and there are 40,000 cars.

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

#107

Post by sqeaky »

dragonwriter wrote: post #94
beambot wrote: post #59

Earlier quoted context omitted.

Now, as a thought exercise: who do you think subsidizes VCs? (I.e. who are the biggest LPs) For people who don't want to look it up... Some of the biggest are pension funds! It's not just high net worth individuals or companies, it's also mom & pop retirement funds. https://www.quora.com/Who-are-the-biggest-investors-limited-...

> Now, as a thought exercise: who do you think subsidizes VCs? Everyone who pays taxes on non-capital income.

How does the money get from taxes to VCs?

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

#108

Post by thephyber »

dragonwriter wrote: post #74
aphextron wrote: post #70

Earlier quoted context omitted.

>Now, as a thought exercise: who do you think subsidizes VCs? (I.e. who are the biggest LPs) The Fed, with their policy of Quantitative Easing over the past 5 years.

The Fed QE policy was over about 5 years (late 2009 to late 2014), but not “the past 5 years”.

Which doesn't disprove the gp. The Fed still has $4.5 trillion in assets on their books, when they had The Fed has paid US banks to hold onto currency reserves that were injected into them, effectively subsidizing more risky investments throughout the economy. This includes equity growth, equity distributions, low bond yields, kept the capitalization rate (ignoring Fed injections into banks) low, etc. Without keeping QE on the books, these other current market investments wouldn't have been possible.

QE has allowed risky debt to continue to float around the entire financial system without market forces quickly drowning the riskiest. Effectively the Fed is subsidizing the risk and the average person will pay when inflation finally picks up. Just because we still don't fully understand the new "laws of finance" while we are in this QE bubble doesn't mean the old laws of finance won't still apply when QE dissolves.

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

#109

Post by snotrockets »

jaclaz wrote: post #55
toast0 wrote: post #37

Earlier quoted context omitted.

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

Naaah, that depends on quality of oil (and of course characteristics of the engine), as hinted it is a long standing dispute. A number of people (particularly in the US, but not only) change their oil every 3-5,000 miles for reasons like: - my father always changed oil every 3,000 (or 4,000 or 5,000) miles - a friend of mine who races changes it every 2,500 miles so changing it every double that is appropriate - the…

True, with one caveat: the engine manufacturer optimized for miles covered under warranty. Some even spec longer intervals between oil changes as a selling point.

Some engines are known to be more finicky to dirt (VW infamous chain tensioner comes to mind), and thus it makes sense, if you plan to keep the engine after the warranty expires, to reduce the oil change interval, as oil tends to be much cheaper than an engine rebuild.

There's a service where you'd send your spent oil to be analyzed for cleanliness, so you could determine the best change interval for your engine and usage. But that cost of that service wasn't much cheaper than just changing the oil a bit more often…

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

#110

Post by compiler-guy »

sqeaky wrote: post #107
dragonwriter wrote: post #94

Earlier quoted context omitted.

> Now, as a thought exercise: who do you think subsidizes VCs? Everyone who pays taxes on non-capital income.

How does the money get from taxes to VCs?

The point is that money _doesn't_ get from VCs to taxes. At least not in the same percentages as normal income.
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