Why Uber Is In the Subprime Auto Loan Business

Uber can't find or keep drivers. The income is too paltry and the hours too long to make it anything other than a temp job. Loaning money to those too poor to have a car to buy or lease one is an answer.

This may be a solution to a 'temporary' problem as Uber has made it clear it believes self-driving vehicles are the future. But temporary could mean five or even ten years from now.

Subprime loans are notoriously disadvantageous to the borrower. Calculations of the economic advantages of the ride-hailing business may realistically have to be offset by impoverishment estimates  for some of those who avail themselves of such opportunities. JL

Chris Tomlinson reports in the Houston Chronicle:

Uber is having a hard time finding enough people with cars willing to work for them.To solve that problem, the company has raised $1 billion to start Xchange Leasing, a sub-prime lender with the sole purpose of getting poor people into new cars so they can drive for the ride-hailing service. Companies can throw around words like innovation all they want (but) old-fashioned exploitation of the desperate is at the heart of the enterprise.
Uber is having a hard time finding enough people with cars willing to work for them.
To solve that problem, the company has raised $1 billion to start Xchange Leasing, a sub-prime lender with the sole purpose of getting poor people into new cars so they can drive for the ride-hailing service.

If you've got a license and are willing to drive, Uber will hook you up with a new car, no matter how bad your credit. To make sure you make your payments, though, Uber will automatically deduct them weekly from what you earn as a driver. If you don't drive enough, or you fail to make your lease payment, Xchange has folks to take the car back.

As for the terms, well, here's what 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."
Uber, which is now valued at $62.5 billion, can only make money if tens of thousands of people sign up as drivers. That's because 50 percent of Uber drivers quit after just six months.
Xchange wants to address that by striking deals with automakers and Wall Street backers to lease 100,000 cars to new Uber drivers. Uber says they are providing a pathway for poor people to buy a new car.
Unfortunately, Xchange Leasing sounds more like a payday-loan racket built into a company store. The lease increases the company's control over the driver, who Uber still insists is nothing more than an "independent" contractor.How is someone independent when Uber controls access to customers, sets the billing rates, demands a minimum number of hours and owns the car and the predatory lease on it?
Some amoral, Ayn Rand-loving sociopaths in Silicon Valley will insist that drivers should know what they are doing when they sign up. After all, the terms of service are sufficiently explanatory.
But here's the truth about human beings: not all of us are equally-well educated, and not everyone understands lease terms. We know from exploitative lending practices throughout history that poor people are the most likely to be suckered, often because they are so desperate to escape poverty that they will try almost anything.
Uber initially claimed to be part of the "sharing" economy, a marketing term that masks the unsavory nature of these exploitative business plans. But as we learn more about what companies like Uber must do to enrich the venture capitalists who back them, it becomes clear that old-fashioned exploitation of the desperate is at the heart of the enterprise.
Companies can throw around words like innovation all they want, but if recruitment means taking advantage of the desperate, then there's something wrong. Sometimes people forget that not everything that is shiny and new is necessarily good.