Uber Gets Run Over by Its Own Subprime Auto Leases
I am not sure to understand.The example 2014 Toyota Corolla at US$122 per week makes in a 130 weeks lease with Xchange some 122x130= 15,860 US$ and a 2.5 years (high mileage) old Corolla may still have some minimal residual value, let's say US$ 1,500.I.e. roughly total reimbursement of the list price of the car:http://toyotanews.pressroom.toyota.com/releases/2014+toyota+...Assuming that cars in such a situation are bought "in bulk" and thus with a 10, maybe 15% discount, very roughly it should mean that in the US$ 15,860+1,500=17,360 of reimbursement some minimal costs for interests and expenses are included on an initial spent sum of around US$ 16,000/16,500.So, at least in theory it seems like a "side-business" that is going to make even or maybe loose a few hundred dollars each car (for interests on the loaned money), but this only if everyone keeps the car and pays the leases for the whole period.Now, you get one of those (and you get one of those because you have no money and no good credit record) and after 25 weeks/6 months you give it back.You pay US$3,300 (25*122+250).Xchange has in its hands a six month old car with (say) 20,000 miles on it.That still has a market value, but maybe since you sell it wholesale to some second hand dealer and you only get - say - US$8000/9000.So, 3,300+8500=11,800So in this case Xchange seems like having lost - roughly - US$ 4,500 per car, half the US$ 9,000 stated.There must have been some large avoidance of repayment (and repossession of the cars, etc.) to make that number on average.