June 12, 2016
By Steven Wishnia and Neal Tepel
San Francisco, CA – Trying to get more drivers into its cars, Uber last July began leasing them vehicles through a wholly owned Delaware-based subsidiary called Xchange Leasing, LLC.
The program, backed by a $1 billion line of credit from Goldman Sachs, offers drivers three-year leases for a nonrefundable $250 deposit, with payments automatically deducted from their Uber earnings. Drivers can break the lease more easily than they would a standard car lease, but if they want to buy the car when the three years are up, they have to pay a substantial amount extra—which means that the car can end up costing more than twice its book value. Shawn Hofstede, an Uber driver in the Dallas-Fort Worth area, said the program enabled him to keep working when his car was wrecked in a crash, but after the company cut fares last winter, he couldn’t make enough money to keep up with the payments. “I'd say the cost is greater than the benefit for your average driver,” Mark Williams, a lecturer at Boston University's business school, told Bloomberg News. “The terms, the way they're proposed, are predatory and are very much driven toward profiting off drivers rather than to facilitate an increase in drivers.” Read more