Uber Gets Run Over by Its Own Subprime Auto Leases • Hacker News Board

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

#121

Post by Neliquat » Wed, Aug 09, 2017, 10:55 PM UTC

Spooky23 wrote: post #93

bogomipz wrote: post #32

Earlier quoted context omitted.

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...

Totally. Auto financing is really scary. One of my dopey co-workers bought a BMW 5-series with an 84 month loan at 2%. $600/mo for 7 years for a car that will be upside down from day one.

Why they would loan longer than the warranty always puzzled me. There is a chance it may be not worth repairing by then.

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

#122

Post by dec0dedab0de » Wed, Aug 09, 2017, 11:01 PM UTC

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.

one year ago today I had to take a long uber ride, and the driver was excited that it was enough to cover his lease, and he could switch back to Lyft.

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

#123

Post by TomMarius » Thu, Aug 10, 2017, 12:27 AM UTC

sroeu89rcs43sn wrote: post #114

jaclaz wrote: post #55

Earlier quoted context omitted.

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…

> A number of people (particularly in the US, but not only) change their oil every 3-5,000 miles for reasons like: There's an even bigger reason it worked like that for so long. Car companies ( American car companies) would print in their US manuals that you should change the oil every 3-5,000 miles, while printing in their European manuals - for the exact same car - that the oil change should be every 10,000 miles.…

In Europe for most cars it's recommended to change oil after 10,000 kilometers, not miles. I know you're saying it's not a conversion problem - but maybe they just had an outdated manual or didn't see many manuals.

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

#124

Post by lsc » Thu, Aug 10, 2017, 2:50 AM UTC

jandrese wrote: post #86

pbreit wrote: post #65

The 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.

I'm not weighing in on the moral judgement, but I do believe that you misunderstood the comment you are responding to.

I think previous commenter was saying that lots of people like you with reasonable credit did take and run with those sorts of loans on crazy favorable terms, then when the value of the house dropped to half what was owed, many of those people defaulted on the loan; "Mailed the keys to the bank"

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

#125

Post by tyingq » Thu, Aug 10, 2017, 6:04 AM UTC

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…

I get the difference between private and public. Private investors, though, aren't universally hands off. I'm sure there's some level of bad decision making that trigger the Saudi fund to start probing. Maybe not this level, but there's a line somewhere.

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

#126

Post by jaclaz » Thu, Aug 10, 2017, 9:16 AM UTC

toast0 wrote: post #104

jaclaz wrote: post #55

Earlier quoted context omitted.

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.…

Good find, the resource I found earlier: http://toyota.custhelp.com/app/answers/detail/a_id/7604/~/wh... did mention "extensive idling" as "Special Condition" but did not mention "and/or low speed driving" and associate it with Police or taxi service.

Of course I take back what said before, always do what the Toyota engineers recommend.

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

#127

Post by jaclaz » Thu, Aug 10, 2017, 11:14 AM UTC

ww520 wrote: post #90

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…

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 em…

>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. Good, but then almost every car was given back within the "shorter" term of six month.

And the 122 dollar per week might actually been higher for a higher initial amount.

With the new calculations (your higher cost but also the higher resell value JshWright suggested at the end) the full cycle would be (adding also the "basic maintenance" 20x100): 130x122=15,860+6,000+2000=23,860

The "normal" cycle is still short of US$ 2,114 per car, which means, that given that there are ONLY "full cycles" and "short cycles" 2014 Corolla's in the "fleet", that you need 7 "short cycles" every 1 "full cycle" to get a US$ 9,000 average.

7x9,946= 69,622

1x2,114= 2,114

69,622+2,114=71,136 / 8= 8,967

So if 7 out of 8 cars/financing went bad, then the theory that it is suicide to finance people with no or bad credit (or maybe that the income from Uber service had been grossly overestimated) seems like a valid one.

Resell value=