As 2017 draws to a close, Uber is closing its worst year and hopes to start the new one with only one way to go, up. Uber's financial losses, multiple legal actions and extremely bad name including a full change of its executive have left a large impression on public opinion. One of the leading issues that are being dealt with is Uber's questionable auto leasing operation Xchange Lease.
Dara Khosrowshahi, Uber's new CEO, replacing the problematic Travis Kalanick, has started to make a lot of corporate and cultural changes. The Xchange Lease failure is being sold to car lending start-up "Fair.com." This sale, still being kept under secrecy, coincides with Dara's philosophy to reduce loss-centers, preparing a leaner company for the IPO planned in 2019.
The reason Xchange Lease failed under Uber's leadership as due to the nature of its contract. Change lease was aimed at low credit drivers, individuals that could not find a loan or lease from conventional sources due to their credit rating. The Xchange lease contract offered an upfront $250 deposit only, which is considerably cheap when considering most leasing contracts require a double-figure percentage of the value of the car as an initial down payment. The monthly premiums would be deducted from the driver's monthly earnings. However, while the loan itself might have been lucrative to drivers that didn't overstep the model they bought, concentrating on an affordable vehicle. Uber was losing an average of $9,000 a car instead of their projected $500. This adds up to a whopping $300 million loss after leasing around 40,000 vehicles.
While Xchange lease has been closed for a few months and drivers were told to return their vehicles, the new "Fair" deal will include an Uber equity stake in Fair which will enable Uber drivers to access Fair's Xchange lease program once it has been redesigned.
According to Professor David Kass from the University of Maryland, Dara Khosrowshahi's main focus is on cutting out as much bad publicity as well as bad economics from Uber's structure. Through lean financial control, Dara will be able to prepare Uber for its massive IPO planned in 2019. While Uber will continue to lose money, losses can be reduced, and all of Uber's activities including UberEats and the Autonomous vehicle research program can be factored into an overall attractive package, just as long as all the bad activities are stopped and removed.
Fair offers a new digital alternative to a lease or loan. Fair.com allows you to drive your car for as long as you want, and you can return it anytime. According to the Fair.com site, for a loan, you must provide a down payment when you get your vehicle and monthly installments for 4-7 years. For a lease, you pay a drive off fee and pay monthly installments for a period ranging between 2-4 years. For a "Fair" deal, you will provide a start payment followed by low monthly installments that will enable you to keep your car for as long as you need. Fair.com also provides a rental alternative, that is calculated as a double Fair price for the same vehicle. The big difference with Fair.com is that the car is registered in the customer's name, and they offer pre-owned and certified pre-owned cars that are less than six years and have less than 70,000 miles.