Uber is pulling the plug on its Xchange car leasing program — the program that promised to put drivers behind the wheel of a car for cheap, even if they had poor credit.
Intended to address the ever-expanding ride-hailing behemoth’s constant need for drivers, it appears the program turned out to be a money pit. Instead of anticipated losses of about $500 per car, Xchange actually incurred losses of closer to $9,000 per car, a person familiar with the matter told The Wall Street Journal.
Xchange advertised flexible leases with a security deposit as low as $250, according to the program’s website. Drivers could return the cars early — some were eligible to return the car as soon as 30 days after the first payment due date, for a fee of $250.
Otherwise, the weekly payments were taken directly out of a driver’s earnings each week.
Shutting down Xchange is Uber’s latest cost-cutting move, suggesting the company is trying to stem its enormous losses as it prepares to eventually go public. Uber sold its Chinese business to rival Didi Chuxing last summer, and last month ceded control of the Russian market in a merger with rival Yandex.
Uber’s losses, while still massive, are declining. The company lost $708 million over the first three months of this year, compared to $991 million the quarter before.
And like many aspects of Uber’s business model, its Xchange program is not without controversy. Critics have called it predatory, complaining that Uber lures drivers in with promises of low rates and flexibility, but keeps them on the hook for payments even if drivers can’t work for a week, or if the company lowers their wages.
Uber in January agreed to pay $20 million to settle claims by the Federal Trade Commission that, in part, accused Uber’s leasing program of charging drivers above average rates. That complaint targeted Xchange’s predecessor — Uber’s Vehicle Solutions Program, which also gave vehicles to potential drivers without cars and automatically deducted the payments from the driver’s earnings. More than 5,000 drivers signed up for that program between November 2013 and April 2015, according to the FTC complaint.
The FTC says Uber promised leases for as little as $17 per day or $119 per week, but drivers paid at least $1,000 for a down payment and another $1,000 as a security deposit, and then were charged median weekly payments of more than $200.
The FTC claims Uber also falsely promised the leases offered unlimited mileage.
Investigators say Uber, which promised to work with drivers who had bad credit, had no oversight over the terms of those leases. Instead, they allegedly were arranged through third-party subprime auto companies.
Since the, Uber brought its leasing in-house under the Xchange program.
But some drivers still complain that after making their lease payments and paying for gas, vehicle maintenance and other expenses, they barely have enough to get by.
Photo: SAN FRANCISCO, CA – The logo of the ride sharing service Uber is seen in front of its headquarters on August 26, 2016 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)