Uber Launches Its Own Car Leasing Subsidiary

Uber has now launched its own auto leasing subsidiary in an attempt to sign up more drivers, thereby placing the quickly-growing ride services company directly into the financial services sector for the first time. Uber announced the move as a pilot project but didn’t provide many financial details, although the company did indicate that it would offer both new and used cars.

This announcement follows the end of Uber’s partnership with Banco Santander’s U.S. lending unit earlier this year. In November 2013, Uber started a program to arrange manufacturer discounts and lenders for prospective drivers who lacked cars in the hope that it would increase the number of people that were driving for the company. At that time, Uber said that it hoped to finance 100,000 drivers, and the company says that 20,000 drivers have participated in the program so far.

Santander Consumer USA Holdings declined to comment on why the Uber leasing deal ended, and Uber continues to partner with other lenders for car purchases.

According to Andrew Chapin, Uber’s head of Vehicle Solutions, drivers must sign up with the Uber platform in order to be eligible for the program. If a driver wants to lease a car, Uber refers them to its subsidiary, Xchange Leasing, which then connects them with a car dealership. Drivers pay a security deposit of $250, and unlike traditional auto leases, they are not locked into multiyear contracts. If a driver decides to terminate the lease early, they only forfeit the $250 deposit, with no additional penalties. The program also includes unlimited mileage and routine maintenance.

The LA Times reported that an Uber representative said that a driver leasing a 2013 Toyota Camry with a sale price of approximately $15,000 can expect to pay about $120 per week on a 36-month lease term through Xchange Leasing. A lease on a 2013 Toyota Corolla with a sale price of $13,500 will cost a driver approximately $110 per week on a similar lease term. Both of these figures include taxes and registration. On an annual basis, Uber’s weekly figures come out to $520 per month for the Camry and $477 per month for the Corolla.

Clearly, Uber’s program is aimed at drivers who have trouble getting credit to lease or buy a vehicle. In order to continue to expand, the company must sign on more drivers, and providing a new leasing solution could help Uber to grow at an even quicker rate in the future. Uber is currently one of the fastest-growing sharing-economy companies, operating in 57 countries with an estimated value of more than $40 billion. At the same time, the company has been in conflict with transportation authorities around the world, as well as with attorneys who are trying to deem Uber’s drivers as employees that are entitled to benefits. Now, the company’s entry into auto leasing puts it in contact with yet another set of regulators in a controversial business. For example, last month, the U.S. Consumer Financial Protection Bureau (CFPB) said that it would oversee non-bank auto lenders who process at least 10,000 loans or leases per year. The CFPB said that it seeks to ensure that such leases are marketed accurately and that debt collectors operate fairly, and if Uber’s leasing program takes off, the company may soon be entering into a new set of regulatory complications to overcome.