Credit-poor drivers are reportedly becoming indentured to their cars by the ride-hailing behemoth. Is it time for a “fair-trade” alternative?

Uber’s claims to be a steady income supplier have grown shakier with everylabor lawsuit and fare cut. Now an investigation by Bloomberg goes inside the world of the company’s year-old, Delaware-based auto-financing subsidiary, Xchange Leasing LLC, whose model appears to be as predatory as they come.

Somewhat like the subprime mortgages that imploded the U.S. economy in 2008, Xchange appears to target consumers who don’t have the credit to qualify for a conventional car lease. According to Bloomberg, Xchange is leasing cars using a line of credit worth $1 billion, which exposes the risky leases to “many of the world’s biggest financial institutions,” including Goldman Sachs, Citigroup, JP Morgan, Morgan Stanley, and Sun Trust. Meanwhile, the seemingly “low” weekly or monthly payments that these leases offer credit-poor consumers can quickly skyrocket far above the real value of the car, locking drivers into a deal many can’t ultimately afford.

According to an Uber spokesperson1, 10 to 15 percent of people who sign up to be drivers are qualified, but don’t have the right kind of car and are unable to buy one due to bad credit. Xchange leases are designed to address this, and are “more flexible” than other subprime car lease options. Through Xchange’s partnerships with key auto dealerships, drivers can opt to return the car after the first 30 days of their lease without any impact to their credit or penalties, apart from payments and an initial $250 deposit. Unlike other leases that charge drivers per mile after a certain threshold, Uber’s leases offer unlimited mileage. It’s a way to keep drivers in their seats.

Subprime leases seem to help further that goal.


Uber has been in the subprime lease business since at least 2013, when it first partnered with Santander to finance vehicles to drivers with poor or zero credit. Santander was subpoenaed by the Department of Justice in 2014 for being a leading issuer of securities connected to subprime auto leases. Uber’s relationship with the company ended last year.

Now, besides launching its own financing subsidiary with Xchange, Uber has also partnered with Toyota—which also bought a small stake in the company—to lease out cars. Bloomberg reports that this year, between its newfinancing and discount programs, Uber said it “will put more than 100,000 drivers on the road.”

  • 1. This post has been updated to include comments from an Uber spokesperson.