Skift Take

This seems like a win-win for the ridesharing companies and the car companies working with them. What's debatable is whether drivers really benefit, too.

No car? No problem for ride sharing companies like Uber and Lyft.

These companies are offering rentals, leases and financing deals aimed at getting more drivers on the road. After all, the more drivers they sign up, the more rides are available and the more money they make. But critics say drivers are paying high and even predatory prices.

“The lease terms are awful, you could buy the car for what they are being leased for, or maybe even less,” said Greg McBride, chief financial analyst at Bankrate, of Uber’s Xchange leasing program.

The deals have also caught some regulators’ attention. The California Public Utilities Commission is probing whether some of these leasing and renting arrangements run afoul of its requirement that ride share drivers use a “personal vehicle.”

Uber and Lyft say these programs serve people who are eager to work for a ride sharing company but do not have a vehicle or don’t have one that qualifies. Requirements of many traditional leases, such as mileage limits or long-term contracts, don’t work well for their drivers.

Dee Taylor of Houston, who says she was unemployed when she stumbled on Uber’s Xchange, is among the satisfied customers.

The program offers would-be drivers a three-year lease on an Uber-approved car for a $250 fee plus weekly payments deducted from their pay. Xchange provides unlimited miles, maintenance and allows drivers to get out of the lease after 30 days, with two-week’s notice.

Taylor pays $160 a week for a slightly used Ford Escape. That’s well above what she would pay in a typical lease or loan, but Taylor says there’s no way she would have qualified because of her credit score and lack of income. And it got her back to work: she now brings home an average $700 a week with four days of work.

“All I have to do is work one day (a week) and this car is mine,” Taylor said. “It’s like a blessing and I don’t even go to church.”

Uber says it launched its vehicle solutions program because about 15 percent of the people who signed up to drive lacked a qualifying vehicle. It now offers weekly rentals, flexible leases, traditional leases and purchase discounts through certain automakers. At the end of 2015, more than 50,000 people had used one of those services and Uber expects that number to double this year.

Still, the program has had its issues. A leasing partnership with a U.S. arm of Banco Santander was criticized for its prices and practices. Uber ended the arrangement but not before it left some scars.

Ousmane Abdoulaye of Maryland had recently moved to the U.S. from Africa when he leased a car through the Santander program in 2014. He paid $1,000 upfront, plus faced monthly payments of $870. But after two weeks he was deactivated by Uber as a driver due to poor customer feedback.

With no job or way to make payments, Abdoulaye says he could not get anyone at Uber or the dealership to help him give the car back. Meanwhile, he began getting calls from a creditor for the payments due.

Ultimately, with help from the state Office of Consumer Protection, he returned the car and terminated the contract. He now works as a landscaper but recalling the incident still gets him mad. “I never want to hear about Uber ever again,” he said.

New programs to match drivers with cars continue to pop up.

Lyft’s Express Drive rental program, launched in March through a partnership with GM, now operates in four cities. It’s a weekly rental, available for up to eight weeks. It costs $99 a week, plus a fee for mileage. But if you drive enough, the mileage fee is waived and if you drive even more, you pay nothing.

Uber and Lyft declined to say how much money they earn from these deals. Uber said its focus is getting drivers on the road, while Lyft said its program was designed in a way that “makes sense” for Lyft, GM and the drivers.

Carlos Correa could have qualified for a traditional loan or lease but instead opted to sign up for Lyft’s Express Drive because he drove enough for costs to be waived. Other programs cost too much, he felt. Correa used to drive his own car for Lyft but decided he prefers to put the wear and tear of his work on another vehicle.

“I started kind of doing the numbers as far as what I would have to pay for down payment and monthly costs, lease versus purchase, maintenance and it started to add up, I was looking for an alternative,” he said.

Not only are traditional financing deals not designed for ride share drivers, purchasing a car has become less affordable: a new study by finds that a household earning the median income cannot afford the average-priced new car or light truck in any of the 50 largest cities in the U.S. And a purchase saddles the owner with maintenance costs while the car’s value shrinks. Part-time drivers may prefer rentals. Others may want to test out being a driver or need a solution while their car is in the shop.

“It’s expensive but it does suit a ride share driver well,” said Harry Campbell, a driver for Lyft and Uber who runs the popular website

Campbell points out that turnover is high among drivers and pay has shrunk recently. So potential drivers increasingly might not have the cash to qualify for traditional financing.

“It’s subprime rates, but it’s subprime candidates,” he said.

For consumers with good credit, auto loan rates have never been lower and financing terms are very attractive right now, said McBride of Bankrate. Experian data shows the average loan payment for a used car is between $334 and $385 a month. Dee Taylor pays about twice that to lease her used vehicle.

“It’s like saying ‘I’d love to be a pilot but I don’t have a plane,'” McBride said. “If you don’t have a car and you want to be in the ride sharing business, you are putting yourself at a real disadvantage.”


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Tags: lyft, uber

Photo credit: Carlos Correa is currently in Lyft's Express Drive rental program, a partnership with GM which allows a weekly rental, available for up to eight weeks. Tae-Gyun Kim / Associated Press

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