Uber’s subprime leases put drivers on road, but leave some shackled | Hacker News Reader

Uber’s subprime leases put drivers on road, but leave some shackled

seattletimes.com

98 pointsgoughjustin89 comments

> She drives about 25 hours a week. In one week in May, she earned $604 for 28 hours of work, she said — a slightly better-than-average week. Uber took $160 for the car directly out of her paycheck, leaving her with $444.

So, for 28 hours of work, the driver got a car (with maintenance covered) and a ~$16/hour salary on top. Without the car payment, it's a $21/hour salary. That's apparently a near-average week.

I seem to have missed something, because it looks to me like Uber leant her a car that enabled her to do a job that pays better than even the most ambitious minimum wage initiatives. It's pricy, but so were all of her other options with "terrible" credit. Where's the evil here?

I agree with most of this, but it should be noted that $16/hour as 1099 income is not at all the same thing as $16/hour as a regular W2 employee. A rough equivalent would be about $11/hour. I think that's high still, as there are costs other than maintenance...like gasoline.

Average city driving speed for LA is 26.8 MPH [0], which means she's driving around 750 miles per week.

She leased a 2015 Honda Civic, which has a rated fuel economy of 31 MPG.

Assuming she gets the rated gas mileage from her civic, she's buying 24 gallons of gasoline per week for 2.39 [1] per, costing her $57.

AAA gives an estimated 5.51 cents per mile for maintenance and tires [2], costing her $41.

So, take home pay after expenses is $604 - $160 - $57 - $41 = $346, or $12.3/hr.

IANAA, so I don't know which of these expenses qualify for deductions when she files. But an annual pay (after expenses) of $17,992 doesn't leave much wiggle room for paying for an accountant, assuming Uber indentured servitude is her only income generating activity.

0. http://infinitemonkeycorps.net/projects/cityspeed/

1. http://www.losangelesgasprices.com/

2. http://exchange.aaa.com/wp-content/uploads/2016/04/2016-YDC-...

This is mostly a good assessment, but the maintenance cost should be reduced - one part of Uber's lending program is covered routine maintenance. Gas at least should be deductible, I don't know whether the car payments can be counted in whole or in part.

The overall point is well taken, though. There are several hits to real income for Uber drivers that aren't shared by other types of low-wage worker, and while "set your own hours" offers more upside than a normal part-time job, it's limited by how many high-demand hours there are in a week. Rather than extra overtime pay, I imagine hours past her current 28 would give steadily diminishing returns.

I don't think it matters if the car payments can be counted or not.

But, according to [0] (I'm not sure how accurate/reputable it is; again, IANAA), the deductible portion of $60452=$31,408 is only $2,218.90.

Gas at $5752=$2,964 already extends past that cap.

Assuming her income is taxed before the lease payments are made, and hits her full deductible, she's paying total taxes of $4,437.81

So, net after-tax, after-expense income - I didn't realize that about routine maintenance - is $604-$160-($57 - ($2,218.90/52)) - ($4,437.81/52) = $344 / wk, or $13/hr.

Compared to working multiple inflexibly-houred minimum wage jobs, it's definitely better.

But in no way is it lucrative, or even lower middle class.

In most of the country $13/hr is indeed lower middle class.

In places where $13/hr is a viable lower middle class wage, Uber is also generally not available as a job.

We are specifically talking about Seattle here, though. All the other variables would also be different in different parts of the country.

> We are specifically talking about Seattle here, though.

The newspaper is from Seattle, but the driver featured in the article whose numbers were used for the calculations in this thread was actually in Los Angeles.

Ah, I stand corrected! But either way, things like car payments, insurance vary widely by geography, so it doesn't seem like applying this particular situation nationwide would prove much.

Tax deductibility doesn't matter much when you're making under $20k because your marginal rate is so low.

wow, thats quite a thorough calculation of expenses. But I'd assume a leased car probably has less maintanence costs, but certainly added costs for gas.

I'm not sure if you factored in commercial insurance for a leased vehicle which will be more expensive per month, compared to personal auto insurance for own car. Factoring the commercial/rideshare auto insurance in, will leave little wiggle room.

Great breakdown. Again, though, that's $12.30/hr as 1099 income, subject to self employment taxes,...and no sick days, paid holidays, vacation, unemployment coverage, insurance, etc.

> ...and no sick days, paid holidays, vacation

That's not really true - one of the big advantages of driving for Uber is you set your own hours, so you can take time off whenever you would like.

No, that would be "unpaid time off".

big difference between paid time off and just not working

There is no real difference between the two. If you were a robot working effectively 365 days a year you would be able to command a proportionally higher salary/wage. "Paid" time off is as much of a lie as "employer" payroll taxes.

Not in a minimum wage scenario.

> There is no real difference between the two.

There is when comparing hourly compensation in a role that provides no paid time off with hourly compensation in role that provides paid time off. For instance, a $10/hr that accrues 1 hour of paid sick leave for every 30 hours of work (the minimum for an accrual plan meeting California's paid sick leave mandate) is better paid than a $10/hr job that does not (the actual value is up to $10.33/hr, though restrictions on the use of paid sick leave may make it somewhat less but always greater than $10/hr.)

> "Paid" time off is as much of a lie as "employer" payroll taxes.

Employer-share payroll taxes are not a lie, either; they are both real taxes, and they really do not come out of your gross pay (they may reduce the gross pay the employer is willing to offer, but that doesn't make them "a lie", it just means they have other effects.)

The distinction probably was most critically important to people who had employment contracts in place that straddled the time when payroll taxes were first implemented, since the employee share was the part that the employee's reimbursement was reduced below the status quo ante, whereas the employer share was not.

Like paid time off, its important to keep the difference in mind when comparing employment that has employer-share payroll taxes (generally, W-2 employment) with employment that does not but instead pays the equivalent of both shares as self-employment taxes (1099), since the nominal pay of the two kinds of employments is not directly comparable without adjusting for the differences.

> they may reduce the gross pay the employer is willing to offer, but that doesn't make them "a lie", it just means they have other effects

The effect (minimum wage employees not withstanding) is the same as if the entire tax was employee-share. It is coming out of the worker's pocket. Therefore the 'employer' part is a lie and mostly an ingenious way to hide the tax from the voting base (because unlike other taxes, it does not show up on your pay stub or tax return).

That said it's true that you need to take both these things into account in order to make an apples-to-apples comparison between self-employment income and a given W2 job. But that goes both ways, a $10.33/h job with unpaid time off is the same thing as a $10/h job with 'paid' time off and you have no reason to prefer the latter.

You realize that the people that demographics of people who like to drive for Uber are those coming from minimum wage jobs, who have none of the above either. Most drivers I talk with love Uber because their pay almost instantly doubles and they have freedom to work as much as they want.

> > no sick days, paid holidays, vacation, unemployment coverage, insurance, etc.

> You realize that the people that demographics of people who like to drive for Uber are those coming from minimum wage jobs, who have none of the above either.

After deducting the portion of SE taxes equivalent to the employer share of payroll taxes (which isn't counted in employee wages), the wage is equivalent to $10.43/hr, which is only a hair above minimum wage in CA.

And, in CA, minimum wage earners are covered by mandates for unemployment coverage and, depending on employer, paid family leave and (since July 2015) paid sick leave.

Except that your original number is based on 28 hrs work not 40 hrs. And many people who make minimum wage, especially those that choose to be drivers, aren't full-time, and they don't receive any benefits.

> Except that your original number is based on 28 hrs work not 40 hrs.

IIRC, the paid sick leave benefit in CA is prorated in amount based on hours worked, but still available to part time employees for those employers covered; unemployment coverage applies to part time work (weekly benefits are based on weekly earnings, so part-time workers get less benefit than full-time workers with the same wage); California disability insurance and paid family leave (the two are linked) are not restricted to only full-time workers.

I'm not arguing an agenda. Just seeking to provide clarity...apples to apples comparisons.

You'd also need to subtract half of the self-employment taxes (equivalent to the employer share of payroll taxes) to get an employee-wage-equivalent figure. Assuming that the $12.3/hr is the net before SE taxes, SE taxes are about $1.74/hr and the employer-share-equivalent is $0.87/hr, leaving a wage-equivalent of $10.43/hr.

Which is just barely above California's minimum wage ($10.00) today, and not (as suggested upthread) better than the most generous minimum wage proposals.

>it should be noted that $16/hour as 1099 income is not at all the same thing as $16/hour as a regular W2 employee. A rough equivalent would be about $11/hour.

Not quite. You only take off some of the employment taxes, not the income taxes (which you would still have to pay as a regular W2 employee). It will likely only be about a dollar an hour or so.

However the advantage of being self-employed is that you can deduct expenses such as fuel. (Which brings up another point...fuel will need to be considered when calculating net income).

> However the advantage of being self-employed is that you can deduct expenses such as fuel.

No, its not. If those expenses aren't reimbursed by your employer (which often they are), you can deduct them as a W-2 employee, as well, so there is no benefit on that point to being a 1099 contractor vs. a W-2 employee.

You can only deduct those expenses as a W-2 employee if you itemize vs taking the standard deduction. Most people don't itemize.

>Not quite. You only take off some of the employment taxes, not the income taxes

My quick+dirty calculation accounted for just the net added self-employment taxes, plus other differences like state unemployment, employer's share of health insurance, sick days, etc.

How did you get $16/hour? How much is gas in that calculation?

No gas, it's just hourly after the car lease. Another commenter arrives at ~$12/hour after expenses, but depending on how good the routine maintenance coverage Uber offers is something like $13-14/hour looks about right (pending assorted tax complexities).

What about gas? What about fees from traffic infractions? What about accidents? While accidents may be low probability, they present a very high expected cost and the areas in which ride-sharing is popular probably have higher rates of accidents.

I'm just saying that this is probably not the full arithmetic for arriving at an ~$16/hr wage.

It's not, and the rest of this thread dives into it a bunch.

Gas and tire wear implies a ~$2/hour hit, roughly.

Tickets are presumably negligible for long-term drivers? Most people get <1 ticket per year, even with long commutes, and I assume that if you're getting ticketed very often with passengers Uber will drop you as a driver, the cutoff is low for that.

Accidents are hard to call - their 'cost' is basically whatever you pay in insurance (plus some adjustment for future insurance hikes if you file a claim). I don't know how the Uber-insurance thing shook out, so I can't speak to that at all.

The $16/hour wage is now at something like $12/hour (very roughly), but that's neglecting the benefits of having a car (I'm assuming most drivers with Xchange wouldn't have cars if they worked elsewhere, otherwise raise the effective wage by $5/hour).

But of course, that's part-time work. It's voluntarily part-time, but you can't scale up Uber driving arbitrarily - presumably you're already working the highest cash-flow hours and will see decreased hourly wages as you add less-profitable driving time.

So I'll stand by a claim that the money is pretty good, at least in <$10/hour minimum wage markets, but it's locked into a no-benefits, part-time status that prevents it from being an especially good living.

I get the sense that Uber drivers are often incentivized to do things that increase their chances of getting a ticket. Then a full time driver spends a lot more time driving than your average person.

I agree that they are. If you're about to miss your exit with a passenger, you might take a risky swerve across a lane to avoid getting a bad rating. Having said that, I still don't think there are lots of Uber drivers racking up tickets, because that gets you fired from your job. So it's a problem for employment, but not a salary factor - by luck or skill, any given Uber driver will still have ~0 tickets.

I'd also posit that the majority of Uber drivers do not work in <$10/hour minimum wage markets (NYC, LA, SF, Boston, DC, Portland, Seattle) - or rather, the cost of living that they work in would not allow for that to be a sustainable wage.

> So I'll stand by a claim that the money is pretty good, at least in <$10/hour minimum wage markets

But the whole calculation of the money was based on the earnings of one driver in LA, which isn't a < $10/hour minimum wage market (California has a $10/hr minimum wage).

(And, after taking the employer-equivalent share of self-employment taxes into account, the pay is barely above the equivalent of a $10/hour employee wage.)

> In one week in May, she earned $604 for 28 hours of work

I wonder if they count "hours of work" as hours with a passenger or as total hours driven. If the latter then she actually "worked" longer hours.

From the text of the article, I believe its hours driven. The whole thing was a bit fast and loose with definitions, but I don't think that one is wrong.

So this is an actual hourly wage, but that doesn't mean that a move up to full time at the same wage is possible.

> I wonder if they count "hours of work" as hours with a passenger or as total hours driven. If the latter then she actually "worked" longer hours.

Even if its "hours with a passenger" its still too short; it really should be "hours in which other activities were foregone so that she could be logged in and ready to accept passengers".

$160 for a week of using a car is insane especially when Uber is already making money off the work she is doing with the car.

$16/hr with no insurance, no benefits, no nothing is NOT good pay. Yeah it's more than minimum wage but so what? Need I remind you she's driving, literally putting her life at risk at this job?

You really believe $16/hr for driving people around is good/reasonable/generous pay? Even $21/hr? Give me a break.

While I don't think the actual number is $16/hr per the calculations in the rest of this thread, I do feel strongly that $16-21 / hr for a largely unskilled labor force is perfectly reasonable. (Not for SF, but SF isn't the majority of the country.)

Add in the flexibility of the hours (most drivers I query list that as their #1 thing they like most), and the lifestyle provided seems very reasonable.

It's worth remembering that a lot of these folks are generally service workers. In their other work, they get paid shit (usually close to min. wage), they get treated like shit, and they are at the mercy of the schedule maker. That last point cannot be underemphasized: little fiefs of power bestowed upon the scheduler make for really ugly fast food office politics.

Subprime lending == bad

Extending credit to lower-income borrowers == good

Are we just talking about price (interest) here? You may not like the price, but prices exist for a reason and cannot be changed by diktat. Who gets prime vs a subprime lease isn't determined by some ethnicity or the religious sect someone belongs in. It's determined by the risk and size of the loan. Smaller loans have relatively higher fixed costs, driving up the up front fees or interest rate. They are also harder to recover and may have a lower residual value, all factors that go into determining the risk. People with little or bad credit history are also more likely to default. This isn't controversial.

What's the alternative? Stop extending credit to risky borrowers? Force lenders to lend to risky borrowers at subsidized rates funded by tax dollars or through coercion?

[Edit] What I particularly don't like about these articles is the obfuscation of financial matters. For instance,

> After dropping $250 up front for her lease of a 2015 Honda Civic, she pays $160 a week to Xchange. If she keeps the car for the full three-year term, she’ll end up paying Uber $25,210. The Kelley Blue Book fair purchase price for a new 2015 Honda Civic SE in Los Angeles is $18,142.

> Schmitt said she’ll need to pay Uber $5,000 or so more to buy the car if she wants to keep it at the end of her lease.

So basically, she's getting a $18,142 (PV) car paying $160 (PMT) a week for 156 weeks (N) and have to pay 5,000 at the end to keep the car (-FV).

PV: 18,142

PMT: -160

N: 160

FV: -5000

I (weekly) -> 0.1942% (weekly)

I (annual) -> 1.001942^52 - 1 ->10.615%

So basically she got a loan at 10%. Also, you have to factor in that she has an option to purchase which she can choose to exercise. I don't know why they don't just say as much.

> What's the alternative? Stop extending credit to risky borrowers? Force lenders to lend to risky borrowers at subsidized rates funded by tax dollars or through coercion?

This seems to be a lot of people's answer. There's this weird claim that payday loans and bad car loans and similar are caused by "greed!" when the companies making them are operating at tiny profit margins. High default rates dictate high prices (which forms a vicious cycle, but that can only be broken from the outside).

The most 'predatory' thing about most bad-credit loans is the fee/repossession system, which tends to be sloppy and abusive because the borrowers are too broke to fight it. Uber has sidestepped that almost completely with a no-consequence termination scheme.

The push to ban or cripple access to low income loans can really only be justified in two ways. One is that these loans are somehow corrupt, but we're not talking about balloon mortgages here - these companies are dealing with principal-agent problems like the home lenders were, and they don't have profit margins to give up. The second is that low-income people are too dumb to make good decisions, so they take these loans. It's a patronizing stance that shouldn't pretend to be uncontroversial.

Actually new subprime auto loans install a device that allows the lender to disable and locate the car remotely (obviously not while in use). So repossession is a lot easier (and presumably less sloppy) compared to the alternative and is part of the reason subprime auto rates have fell over the years. Lenders don't want to repossess as they are in the business of charging interest, not in selling pre-owned cars. They only repossess at last resort. Going after missed payments is also very expensive, especially given the small amounts.

> There's this weird claim that payday loans and bad car loans and similar are caused by "greed!" when the companies making them are operating at tiny profit margins. High default rates dictate high prices (which forms a vicious cycle, but that can only be broken from the outside).

You don't need payday loans when your government provides proper social safety nets, and labor regulations that allow you to earn a living wage.

Payday loans are simply a symptom of the problem.

> So basically she got a loan at 10%. Also, you have to factor in that she has an option to purchase which she can choose to exercise. I don't know why they don't just say as much.

That's the weirdest part of me. People who drive for a living can and will put on 30k+ miles a year on a car. If they used this car for Uber work for the full three years as a driver, you probably wouldn't want the car anyway! It would make more sense to lease a new one to continue working for Uber or if you move on from Uber trigger the two week end lease policy and buy a new car. Or trigger the two week end policy and move into a car you financed under your own power.

You capture my feelings, too.

I don't think all rates should be the same; the risks of default should be priced in to the finance or lease rate.

I agree "predatory == bad", so perhaps we could devise a system to (try to) ensure that the hit that subprime borrowers are taking is commensurate with the risk the lenders take. But arguably this is already done through competition (in lending in general, not specifically with this one-lease-company-only arrangement via Uber).

Maybe you can say we as a society should 'protect' subprime borrowers by banning lease/finance rates that are more than x% more than the best rate, and you tell sub-prime borrowers who don't meet the criteria, "too bad". But then lenders would game it by not lending to the best credit folks in order to extend down to the truly sub-prime.

Or it might flatten the rate spread between prime and subprime. Maybe this isn't an entirely bad thing; well-qualified buyers take a slight hit in order to subsidize those who are down on their luck. But then another lender comes along with better prime rates, and everyone who can swing it goes there.

Personally, I'm not really a fan of telling people they can't make their own financial decisions because "it's bad for you". Isn't this the opposite of what basic income proponents say? That we should let people be free to make their own decisions? We hear over and over that poor people make bad financial decisions (with the anecdata to support it... and some ACTUAL data and scientific research).. but there's also lots of data showing that people are best left to make their own decisions rather than some 'helpful' government scheme/program/regulation.

A few disconnected thoughts:

It is worth noting that without the current low interest rate environment, subprime loans would be a lot more expensive or just wouldn't not exist.

There certainly is a balance of responsibilities both among the borrower and the lender. Presumably the lender is the most educated of the two parties, especially in a sub prime situation where the borrower may not even be at a high school math level.

Lenders should not expect to be able to give extend unlimited amounts of capital and use a taxpayer funded legal system to recover it. Bankruptcy on the borrowers side is definitely a very important tool to keeping things somewhat fair. Most young people now see what a catastrophe that can cause in the case of student loans, a whole generation or two facing a very grim financial future short of massive inflation or winning the lottery.

Nothing is perfect and I imagine solutions will introduce their own downsides. Future car use probably won't even be a loan or a lease but rather a license to use a vehicle at a given time. That system could apply to a lot more than vehicles 10 years from now.

"Most young people now see what a catastrophe that can cause in the case of student loans, a whole generation or two facing a very grim financial future short of massive inflation or winning the lottery."

The problem with student loans is that you can't bankruptcy them out of existence.

> The problem with student loans is that you can't bankruptcy them out of existence.

This is a pervasive myth, but, while they are harder to discharge than most other unsecured debt, they can be discharged in bankruptcy.

The headline claim that drivers are left "shackled" doesn't seem to be supported by the article, which states drivers can leave their lease agreements at any time after the first 30 days, with only two weeks notice, and without harming their credit score.

If you think uber are overcharging for the vehicles, given the terms of the agreement, the risk they are bearing, etc. why not start your own offering which charges less?

Great comment. I went back and checked the article because I thought you were wrong and it said "within the first 30 days". But you're correct, any time AFTER 30 days, they can leave the program.

No mileage penalties and no contractual obligation to the lease are huge benefits.

If drivers can walk away from the lease after 30 days (well, 44 to be precise), I see no problem with this offer. These drivers represent an extreme risk.

They just need to understand that the Uber lease should be treated as a short-term program.

https://get.uber.com/cl/xchange/ mentions pre-owned vehicles in addition to new ones.

"Vehicles requirements for Xchange Leasing program:

2009 or newer 75,000 or less miles no salvage, rebuilt or flood vehicle titles 4 full-sized doors minimum of 5 seatbelts (driver and 4 passengers) maximum amount financed $20,000 (subject to change)"

I would get the least expensive vehicle through Xchange, drive it to save about $3000, buy an Uber-qualified used vehicle, and enjoy life.

I might give Uber a hard time about some things but I'm failing to see the evil in this. Yes, the leases might seem predatory, but if the target is high risk buyers and the apr is not off by an order of magnitude, seems like they are just enabling their work force.

I could think of a lot worse things than a company giving someone a job and then offering them expensive tools to do it.

Honestly, the APR looks totally reasonable (by bad credit standards).

They cite a $96 average weekly payment for all Americans, and compare it to a $130 weekly payment for Xchange. The article's tone implies that I'm supposed to go "30% markup, shocking!", but it's comparing all borrowers to bad-credit borrowers. Knowing how other loans are priced, that seems like a pretty standard adjustment (especially for the easy-use terms of the lease).

I honestly had a lot of trouble finding the malice here. Yes, the cars are expensive, but it's like complaining about on the level payday loans as 'extortion' - the prices are set by a high default rate, not by some inexplicable market failure.

The difference between Uber and other subprime lenders, like mortgage companies, is that the recipients can actively become lower credit risks. They can just drive the car. At the rates Uber pays, probably around a full day a month.

So not only is this expanding credit options, it's expanding labor options.

"“I’d say the cost is greater than the benefit for your average driver,” - Isn't that the point of this scheme, that they target non-average drivers, ie those with low credit scores that would be unable to drive otherwise.

With regards to the figures at the end of the article. If Uber pays for insurance and repairs, it seems not a too prohibitive deal. If not the interest rates are well above 20%. Seems pretty sweet (for Uber).

But then again, a market rate of 20% for those without credit score isn't much worse that a credit card rate. And the LA-example comes through well above minimum wage.

You can do almost anything else at a W-2 job and make more money with less responsibility and risk. Your credit card rate comparison is absurd. You don't ever have to carry a balance with a credit card. You have no choice with a car.

W2 jobs are not comparable. Driving for uber is flexible - you can drive whenever you want, for however long you want each week. Obviously that value will come at a lower price point for wages.

I was trying to do ballpark-comparisons. CC-rates are generally thought of as high-but-not-prohibitive. So being in the range of een CC-rate on first guess would land you in high-but-not-prohibitive-land. Totally right that the duration of an average debt is massively different, although I expect there to be many people that constantly roll-forward their CC-debt.

articles like this drive me crazy, one might even be led to believe that the reporters for this story don't actually understand how a lease works.

If you walked into a car dealership and told them that you wanted to be able to break your lease with a couple of weeks notice and have unlimited mileage (with them understanding that you would be driving quite a bit) how much more do you think they would charge for that lease?

From the article..."As the video promoting the arrangement puts it: 'The best part: Payments are automatically deducted from your Uber earnings.' "

For high income earners, this is a benefit - novated leasing of cars is a popular way to reduce your tax bill.

For low income earners? I wouldn't call it a positive exactly...

That's going to have the same problems as the "company store" scam where you are paid in scrip. This makes moving to another employer much harder, because of the debt to the current employer (and/or their business partners).

Here is a new startup idea, UberAir: We don't do tedious things like owning planes and hedging fuel costs. On the contrary, we are all about connecting enthusiastic pilots with awesome passengers.

The pilots get a lease offer for the planes so they'll own one after 50 years. The estimated pilot salary after deducting lease payments will be $1245 per month.

We're also working on pilot-less planes. Once these are done, we'll take care of the remaining contractors by launching UberLavatory, which will lease public toilets to enthusiastic Toilet Managers.

> ..by launching UberLavatory...

May I suggest a rebrand to ÜberLü?

I'm going to assume they'll have to have to create some kind of proxy for the unpiloted planes in order to escape liability for crashes.

>After dropping $250 up front for her lease of a 2015 Honda Civic, she pays $160 a week to Xchange. If she keeps the car for the full three-year term, she’ll end up paying Uber $25,210. The Kelley Blue Book fair purchase price for a new 2015 Honda Civic SE in Los Angeles is $18,142. Schmitt said she’ll need to pay Uber $5,000 or so more to buy the car if she wants to keep it at the end of her lease.

This is kind of par for the course for some chunk of car dealers. They have no qualms in getting someone to ultimately pay $30,000 for an $18,000 car of which the margins are normally extremely tight (2-3%) with profit being a very long tail of maintenance work orders. This one Civic, if she ran it to term and then bought it out, brought in as much profit as DOZENS of Civics.

My sister learned similarly many years ago. She ended up paying $26K for a $15K car, simply because she didn't do the math.

Although we'd like businesses to not engage in these kinds of deals, but unfortunately many businesses rely on these deals. I think the only decision more costly that people getting unwillingly put over a barrel for a car is people making poor retirement planning decisions and paying through the nose in fees (or buying what a "financial advisor" that is really a salesman at a bank is peddling) when there are far lower cost alternatives. It sucks, but it's true.

Congratulations on figuring out how a BHPH dealer works.

Buy cheap economy cars that aren't upscale enough for a "real" used car dealer to have on the lot. Have your mechanic fix anything imminently wrong and put a GPS tracker in it. Require huge down payment (usually close to enough to break even) and/or absurd monthly payments. Hopefully you screw the customer out of a few months of payments before they can't pay, at which point you repo the car immediately and put it back on the lot for the next sucker.

>Congratulations on figuring out how a BHPH dealer works.

In the case of my sister it was a franchised Toyota dealer selling new inventory. Not BHPH. She signed a 3-year lease on a Toyota Corolla with a ridiculous money factor component because they got her to simply focus on the monthly payment, then financed it for 6 years afterwards (again, by getting her to focus on the monthly payment) at a ridiculous interest rate despite a FICO over 720 by simply not shopping around (she agreed to 9.5% when 3% was easily available from many retail banks and CUs).

When I showed her what she could've paid instead if she had any patience and simply run the numbers, she was incredibly upset. Not with the dealer, but with herself for not doing the due diligence. That's ignoring the fact that she could've just bought a 5-year old one, because a Corolla is literally a dime a dozen (350-400K units sold per year in the US at the time).

This is my point. If you simple appear ignorant and lazy (not in a bad situation), there are plenty of businesses that will use that to their advantage. If you are in a bad situation, it's just more potential leverage for them.

Yes, some franchised dealers do this with new inventory, even to people with good credit. If they think they can make an easy buck off of you on account of your ignorance, some will take the short-sighted approach (not trying to earn a repeat customer) and try to do it. If you throw up your hands they'll come back around and try to close the sale on amenable terms and offer it however they do, to make the sale.

Uber may not be making a profit directly on the leases, but it's clearly a way to get more drivers at a lower effective wage.

    In one week in May, Schmitt earned $604 for 28 hours of
    work, she said — a slightly better-than-average week.
    Uber took $160 for the car directly out of her paycheck,
    leaving her with $444.

That works out to about $15/hour after the lease payment, even less if it's not including fuel costs.

But you can't ignore the value of the lease of the car; it's not like you can only use it to drive for Uber.

Hmm, sounds like a great idea, except that they should do this with cheaper, used cars. if you have bad credit, you shouldn't be buying a brand new car.

> if you have bad credit, you shouldn't be buying a brand new car.

Can you elaborate? I don't see how that follows.

A brand new car might cost your 400-600/mo whereas a used car might cost your 2000usd total (5 months at 400/mo of savings). Even if you buy a piece of garbage, you could replace anything wrong with it and still come out ahead. A new car is really a stupid buy for a person with little income.

But you cannot work as an Uber driver if you have "a piece of garbage", kind of defeating the whole point.

You can drive a 10 year old or older car for uber. In my area, prices are around 2000 dollars for 10 year old cars.

You can find a lot of cars that are perfectly acceptable (no immediate work needed, no visible rust, does not need extensive interior cleaning) at $2k-$5k.

Parking, insurance, maintenance, gas, and getting your windows smashed in and belongings stolen every 2-3 months because you accidentally leave a packet of gum in there will set you back.

You can, though it's got a 6 year age limit [1]. They only finance up to $20,000 which rules out a large number of completely new cars anyway.

Vehicles requirements for Xchange Leasing program:

    2009 or newer
    75,000 or less miles
    no salvage, rebuilt or flood vehicle titles
    4 full-sized doors
    minimum of 5 seatbelts (driver and 4 passengers)
    maximum amount financed $20,000 (subject to change)

1 - https://get.uber.com/cl/xchange/

> Xchange, which caters to people who have been rejected by other lenders, isn’t intended to be a moneymaker, said an Uber spokesman.

I'll be interested to see if that can continue in the long term. Consumer finance is an industry with an incredibly high profit margin, probably a lot better than Uber's core business will ever be.

Southwest airlines, and taxi companies know one thing: an idle vehicle is an un-funded cost. Will uber add in functionality to support a "hot seat" model, one driver owns the car and another contributes to it by "using" it?

I wonder if Uber allows multiple drivers to use the same vehicle? I'm sure the lease company wouldn't like it...

How can they take a deduction from your paycheque for loan they helped setup for a car that is intended to be used to work for them... but your are just a contractor.

Uber had better tools than usual credit companies to lend to riskier people. That's their advantage in money lending business.

Do these drivers still need to get expensive commercial insurance or commit fraud?

Haha, even more like an employer...

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