Uber to Stop Leasing Cars in the U.S.
It has just become much harder to drive for Uber in the United States. The ride-hailing service is shuttering its car leasing arm, as its new management looks to cut down their losses from its lending venture.
The company'snew CEO Dara Khosrowshahi looks to be moving forward with profitability in mind, which means that the costly car-leasing subsidiary of Uber is the first to go, as CNBC notes. The writing has been on the wall for some time now since the Xchange Leasing service has been bleeding the company with every car they subsidize.
"We have decided to stop operating Xchange Leasing and move towards a less capital-intensive approach," a company representative said. Xchange, the lending arm of Uber, leased cars like the Ford Focus and Nissan Altima to prospective Uber drivers who don't have their own set of wheels.
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In the process, Xchange Leasing was losing about $9,000 for every vehicle the lent. Uber executives estimate this loss to be about 18 times what they initially expected, when they were counting on a $500 loss per vehicle when they started the venture, according to a report by the Wall Street Journal.
XChange Leasing was started in 2015 to help build up Uber's driver population by offering to buy cars for drivers with poor credit ratings. This may just have worsened the issue for some of the drivers, though, as Engadget notes.
A bad or non-existent credit rating for a driver meant a higher risk of lending to them, which leads to higher leasing rates. To pay these fees, the drivers must then work overtime, eventually wearing their new cars down to a fraction of their initial value.
One of Khosrowshahi's promises, when he took over the company, is a plan to make Uber able to "pay the bills," and eventually move on to a sustainable Initial Public Offering (IPO). Meanwhile, the exit of XChange Leasing, while it may stop Uber from continuing to bleed money, might impact the number of its drivers in the future.
