Uber Shuts Down US Car Leasing Program After Losses Reportedly Hit $9000/Car

Uber's Xchange Leasing service will no longer be able to lease cars to drivers in the United States. A spokesman Wednesday confirmed to the Wall Street Journal the company was shutting down its car leasing program in the country.

The possible reason behind the decision may be that the company was losing more money in the program than it had bargained for — $9,000 for every car instead of $500 — according to an earlier report. The company hasn’t confirmed if a replacement to the program would be introduced.

Until its shutdown, Xchange Leasing was available in 19 U.S. states. At least 500 drivers may lose their jobs following the decision. The shutdown had been expected for long and several rumors indicating the possibility had surfaced last month. According to the WSJ report, the company said it was losing 18 times more money per vehicle than it earlier thought.

Uber started the leasing program in 2015 to help out drivers who could not buy cars due to bad credit ratings. But it seems the program failed since the drivers had to pay high premiums because they belonged to the high-risk category. The drivers would work long hours to pay up hefty premiums and ended up wearing down the vehicle, and lowering its value. Furthermore, Uber would rely on car dealers who would bump up the price while leasing vehicles and thereby the car would end up costing even more.

The decision can also be viewed as a part of Uber’s revamping plan after former CEO Travis Kalanick’s resignation. The new CEO, Dara Khosrowshahi, who joined Uber from Expedia in August, said earlier the company has to change its way of working. The $68 billion startup has remained mired into a string of controversies in the recent times, including the use of greyball tool to evade law enforcement authorities. Before Khosrowshahi joined, the company reported losses of around $645 million, which could have a huge impact on its initial public offering, expected to be launched next year.

When Uber recently lost its license to offer the services, Khosrowshahi blamed the company’s bad reputation for it. The fact that it cannot offer its services in London anymore would be a huge loss to the company as it employs 40,000 licensed drivers in the city and around 3.5 million Londoners use the app.

Khosrowshahi is considered an expert at restructuring companies and has served as the former head of corporate development, mergers, and acquisitions, for a group of companies, which later became a large media conglomerate called InterActiveCorp (IAC).

The company hasn’t commented on its car leasing program in Southeast Asia, where it is plagued with the issue of leasing defective vehicles. In terms of a long-term view, the company is actually working on vehicles that wouldn’t even need drivers — it has started a self-driving program in partnership with General Motors and is expected to use self-driven vehicles. It has already started testing these cars in multiple U.S. states including California.