When times are tough one needs to think differently. And
that is exactly what great companies do. I recently came across an article to
illustrate the point, writes Noddy Schutte.
One would have thought that the US would be wary of the
subprime market and shy away from the high risk associated with this kind of
lending.
Contrary to this belief Uber, through a wholly owned Delaware-based
subsidiary called Xchange Leasing, managed to secure a credit facility of $1
billion to fund new car leases.
Xchange may be key to Uber's continued expansion. In its
relentless pursuit for growth, Uber needs new drivers, and many of those
drivers need cars. To help them get started, Uber has been offering short-term
leases since June this year.
Uber also announced a partnership with Toyota to finance
even more cars. Uber stated that its financing and discount programs, which
include Xchange, will put more than 100,000 drivers on the road. That requires
dipping into the vast pool of people with bad or no credit records.
In a deal led by Goldman Sachs, Xchange received a $1
billion credit facility to fund new car leases. The deal will help Uber grow
its U.S. subprime auto leasing business and it will give many of the world's
biggest financial institutions exposure to the company's auto leases.
The credit facility is basically a line of
credit that Xchange can use to lease out cars to Uber drivers.
Xchange caters for people who have been rejected by other
lenders. Uber's lease is more flexible than most subprime leases, the company
said.
After the first 30 days of the lease, a driver can return the car to Uber
with two weeks’ notice, without any additional fees, apart from the payments
they owe and the $250 they pay up front.
Many other leases also charge drivers per mile if they
exceed a certain mileage threshold. Not Xchange, though; Uber wants to
incentivize drivers to keep logging miles.
In a statement made by Uber, Chapin said: “Many Americans
don’t have enough cash on hand to buy a car. Many others could be denied leases
or charged high rates due to their credit quality, and could owe thousands of
dollars in penalties if they break the contract early.
"Xchange provides access
to high quality cars with no restrictions on mileage (unlike most leases) and
the ability to break the lease early with minimal fees.”
Drivers pay a $250 upfront deposit and then make weekly
payments to Uber over the course of the three-year life of the lease. As a
video promoting the arrangement puts it: "The best part: Payments are
automatically deducted from your Uber earnings."
It is this kind of thinking that makes a difference, when
times are tough, in a great company.
We share the top used car sellers for the month of May.
Top 5 passenger vehicle sales per manufacturer
VOLKSWAGEN FORD TOYOTA BMW
NISSAN
Top three commercial vehicle sales
per manufacturer
RANGER 2.2TDCI XL P/U
D/C NP200 1.6 A/C P/U S/C NP200 1.6 A/C SAFETY PACK
P/U S/C
Top 10 derivatives sales
FIGO 1.4 AMBIENTE RANGER 2.2TDCI XL P/U D/C
NP200 1.6 A/C P/U S/C NP200 1.6 A/C SAFETY PACK P/U S/C
UTILITY 1.4 S/C P/U HILUX 3.0 D-4D RAIDER R/B P/U D/C
POLO GP 1.2 TSI TRENDLINE (66KW) HILUX 3.0 D-4D RAIDER
4X4 P/U D/C POLO 1.6 TDI COMFORTLINE 5DR ECOSPORT
1.0 ECOBOOST TITANIUM MICRA 1.2 VISIA+ AUDIO 5DR (D86V)
The average age of vehicles sold in May was 3.88 years.
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