Uber drivers can now lease cars through uber... But prices look insane!!

[Maverick74]

A guy with say a 2010 Ford Focus that's paid off may last longer than a guy with an Uber Xchange new Corolla running a similar shift in the same region, even if both take $4 piker fares while doing a few airport runs. Which driver is more likely to churn and quit?

The entire article resorts to the fact Uber is facing churn, especially now that ANYONE with a pulse, even if they have little or no credit, can drive for Uber. The article also states that Uber even shifted the burden of financial risk to the BANKS! Maybe we'll see another subprime credit crisis, this time in the car loan business, lol!

The Uber Xchange program is great for consumers, but not for drivers, unless they find a niche where they can maximize revenues from surge pricing or the bar shift. Besides, there's no requirement to keep the lease for the full 36 months term. Most people can build their credit back within two years of consistent employment. If an Uber driver managed to last that long with the Xchange, then he's better off returning the car and trying to qualify for a better lease. The data isn't out since the program is relatively new.

It will be interesting to hear the response from the drivers you talk with. My guess is if they had to resort to the $200/weekly hit off their paycheck, they probably would churn just as fast as the Xchange drivers.

I think one of the things you are missing here and it's one of the great things about trading as well, is the flexibility the job offers. It's really impossible to find a job where you can basically set your own hours and work anywhere you want and anytime you want without starting your own business. Just think about that for a minute. I mean theoretically as a trader you have that right except 95% of traders on ET make less money then the avg Uber driver. But isn't that one of the big pluses you hear on this forum for why guys trade, they can work when they want and where they want. Of course the downside to trading is well, it really requires a lot of capital and it's really hard. Uber on the other hand, requires no capital and it's actually really easy. But if I wanted to move to Fargo, ND tomorrow and drive for Uber I could. If I wanted to move to Beverly Hills tomorrow and drive for Uber I could. If I only wanted to work weekends or Wednesday nights, I could. There is a huge premium to having that kind of freedom which is why so many guys try to make trading work. I mean we could all try to go out and start a new business tomorrow but think of the risk that entails. And would you ever make any money? Statistics show show most people don't.

Uber is not a easy road to riches but when you compare it to trading, it suddenly doesn't look that bad. Of course most people on this forum will say but yeah, I'm going to make billions trading my moving average crossover system in FX and Uber has limited upside. It's great to dream isn't it....

 

[der_kommissar]

I think one of the things you are missing here and it's one of the great things about trading as well, is the flexibility the job offers. It's really impossible to find a job where you can basically set your own hours and work anywhere you want and anytime you want without starting your own business. Just think about that for a minute. I mean theoretically as a trader you have that right except 95% of traders on ET make less money then the avg Uber driver. But isn't that one of the big pluses you hear on this forum for why guys trade, they can work when they want and where they want. Of course the downside to trading is well, it really requires a lot of capital and it's really hard. Uber on the other hand, requires no capital and it's actually really easy. But if I wanted to move to Fargo, ND tomorrow and drive for Uber I could. If I wanted to move to Beverly Hills tomorrow and drive for Uber I could. If I only wanted to work weekends or Wednesday nights, I could. There is a huge premium to having that kind of freedom which is why so many guys try to make trading work. I mean we could all try to go out and start a new business tomorrow but think of the risk that entails. And would you ever make any money? Statistics show show most people don't.

Uber is not a easy road to riches but when you compare it to trading, it suddenly doesn't look that bad. Of course most people on this forum will say but yeah, I'm going to make billions trading my moving average crossover system in FX and Uber has limited upside. It's great to dream isn't it....

It also reflects the general trend in the economy..i.e small business start-up's are declining as fewer people are willing to take on the risk of a physical presence (rent, utilities, insurance, employees, etc, etc...) in such a divergent economy...It's similar to the food truck craze, whereby an entrepreneur can take on a limited risk (granted the mark-up's on food trucks are a symptom of that trend as well)...

 

[Maverick74]

It also reflects the general trend in the economy..i.e small business start-up's are declining as fewer people are willing to take on the risk of a physical presence (rent, utilities, insurance, employees, etc, etc...) in such a divergent economy...It's similar to the food truck craze, whereby an entrepreneur can take on a limited risk (granted the mark-up's on food trucks are a symptom of that trend as well)...

You make a good point about food trucks. It's all about dialing down risk. And yes, food trucks are very expensive on the margin but overall risk is much lower, very similar to Uber.

 

[SunTrader]

Sure. I'll ask them. I've already asked them that basically because most of them had to cough up big bucks to get a new car or semi new car because Uber has to approve your car before you can use it. You can't use a beat up piece of shit. So I have asked all of them, after having paid all that money for the car, is it still worth it. Their answer...yes. Why? Because they had no alternatives. None of these guys turned down jobs at Goldman to drive for Uber. It was either Uber or sit at home and wait for callbacks for months on end earning nothing.

Let me say this again Joe, in NY drivers pay over a million dollars for a medallion cab. Obviously they don't write a check for that amount so they finance it and guess what....it comes out to several thousand a month.....and they still do it. So yeah, I guess we have our answer. That's how markets work oddly enough.

Except you own the medallion once you've paid it off and can flip it again to someone else at some point. You own d!(k with Uber.

Also "thanks" to Uber medallions don't cost a million anymore.

But let's see how much longer Uber can continue to screw its drivers and sustain the model.

 

[Maverick74]

Except you own the medallion once you've paid it off and can flip it again to someone else at some point. You own d!(k with Uber.

Also "thanks" to Uber medallions don't cost a million anymore.

Let's see how much longer Uber can continue to screw its drivers and sustain the model.

Ugh.....how many Pakistani's do you think own their medallions free and in the clear? Don't bothering googling it....the answer is zero.

 

[ScalperJoe]

I think one of the things you are missing here and it's one of the great things about trading as well, is the flexibility the job offers.

I never denied the flexibility of Uber. In fact, I even mentioned that Uber allows the driver to return the car with 2 weeks notice if it didn't work out. Of course you'd have the freedom to drive in Fargo, or Beverly Hills, or wherever. Just as you can take your laptop and trade from a hotel room in Paris, etc.

The article cited some facts on the Uber Xchange program, and cited whether or not the lease terms are predatory. As you know, with any business there are fixed costs and variable costs. Uber Xchange is charging a hefty fixed cost for the lease.

Neither of the articles mentions the tax implications of using the standard mileage deduction for business use vs. actual costs. Even if drivers used the standard mileage allowance of .54/cents a mile, they can't use the lease payments as a write off. It's either/or, so the guy who has the 2010 Ford that's paid off has more flexibility as the guy who is in the Uber Xchange paying up to $800/month. Even if they both drive the same routes and log the same miles, the Uber Xchange driver may not sustain long enough and will soon realize he's in a raw deal. Simply stated, his fixed costs are just too high to sustain the lease, and that's what the article suggested as well.

That's why Uber relies on churn, and knows that there's a high probability the driver will return the lease, which will then be reassigned to the next driver, etc.

Again, it's a great deal for the consumer, because they will have broader access to Uber and as more drivers compete for the riders where the Xchange has presence of dealers.

I'm still curious as to the reaction you'll get when you ask the next few Uber drivers you meet on whether or not they would still think the flexibility is worth the money if Uber Xchange deducted $200/week from the paycheck.

 

[Maverick74]

I never denied the flexibility of Uber. In fact, I even mentioned that Uber allows the driver to return the car with 2 weeks notice if it didn't work out. Of course you'd have the freedom to drive in Fargo, or Beverly Hills, or wherever. Just as you can take your laptop and trade from a hotel room in Paris, etc.

The article cited some facts on the Uber Xchange program, and cited whether or not the lease terms are predatory. As you know, with any business there are fixed costs and variable costs. Uber Xchange is charging a hefty fixed cost for the lease.

Neither of the articles mentions the tax implications of using the standard mileage deduction for business use vs. actual costs. Even if drivers used the standard mileage allowance of .54/cents a mile, they can't use the lease payments as a write off. It's either/or, so the guy who has the 2010 Ford that's paid off has more flexibility as the guy who is in the Uber Xchange paying up to $800/month. Even if they both drive the same routes and log the same miles, the Uber Xchange driver may not sustain long enough and will soon realize he's in a raw deal. Simply stated, his fixed costs are just too high to sustain the lease, and that's what the article suggested as well.

That's why Uber relies on churn, and knows that there's a high probability the driver will return the lease, which will then be reassigned to the next driver, etc.

Again, it's a great deal for the consumer, because they will have broader access to Uber and as more drivers compete for the riders where the Xchange has presence of dealers.

I'm still curious as to the reaction you'll get when you ask the next few Uber drivers you meet on whether or not they would still think the flexibility is worth the money if Uber Xchange deducted $200/week from the paycheck.

I'll ask, I promise. The last guy I talked to shelled out big bucks for a new car a year ago and it already has 30k miles on it. He figures if he owns the car for two years, he'll take a 10k hit on the car when he sells it because he wants to move back to NY where he doesn't need to own a car. That's a big hit. But he said he was lucky vs other drivers since he had the credit and savings to buy the new car, most uber drivers don't.

 

[ScalperJoe]

But let's see how much longer Uber can continue to screw its drivers and sustain the model.

Given that Uber has shifted the financial risk to the BANKS (according to the article), I think they will sustain the model as long as there are drivers with limited credit looking for a way to generate any type of revenue stream that beats working at a fast food joint. Since the barrier to entry is low (just the mere $250 deposit), the driver can start earning money almost immediately.

Here's what can happen: Uber drivers who share ideas on the Uber blogs will eventually figure out the leases don't last very long as former drivers return them. A driver who goes in with limited credit can still get the reassigned lease, perhaps at more favorable terms, since the retail value of the car is now diminished given the depreciation.

 

[ScalperJoe]

...shelled out big bucks for a new car a year ago and it already has 30k miles on it. He figures if he owns the car for two years, he'll take a 10k hit on the car when he sells it because he wants to move back to NY where he doesn't need to own a car. That's a big hit.

Yes, it's a big hit. Let's say he does the same 30k the second year. So that's 60k miles on a 2 year old car, so he'll get crushed on depreciation. If his sole purpose to buy it was to drive for Uber, then he has to factor in the $10k hit as a cost of his Uber business.

If he uses the standard mileage deduction for 2016, then at least he can write off $16,200 against his 1099 from Uber.

 

[ironchef]

Since you always "chat the driver up" regarding pay, the next time you're in an Uber in several US cities, just ask the driver the following question:

"If you had to pay Uber $140 to $200 from your weekly check to drive this car, would you still say the pay is OK?"

I took Uber 5 times and here are what the drivers told me:

Drive #1 & #2 were both retired software engineers. Drove Uber because they retired and bought new cars. So, driving for Uber paid for their new car and only pick up local fares if they were convenient and not venture too far away from home. Both specialized in odd hours like very early in the morning (4-5am) driving locals to the airport.

Driver #3 was a young engineer, only drove on weekends and used Uber to get pocket money for spending and car payment.

Driver #4 was in between jobs and used Uber temporarily until he could land another job. Said it did not interfere with job search at all.

Driver #5 drove a Lexus LS460, worked for a 5-star hotel as a Director of Customer Relationship, he drove for fun and only when he had time, was going some place, like taking wife to shop and waiting for her and had some spare time to do local trips.

Those might be Uber's secret army giving Uber their flexibility.