As part of the deal, Fair becomes Uber’s exclusive leasing partner for U.S. drivers seeking a vehicle for 30 days or longer. Although Xchange Leasing has been plagued by accusations of predatory lending and discrimination against minorities, Fair is working to repair that rift in consumer trust by offering rates and vehicles that Uber drivers can afford, Scott Painter, founder and chief executive of Fair, told Auto Finance News.
“We have to start with the fact that we’re not in the consumer lending business at all,” Painter said. “Unlike what Uber had done, which is to get into a leasing type operation, we don’t lend our customers money to acquire or lease vehicles at all. These vehicles are owned by us and we focus on the ability to pay and that’s what we use the technology to assess.”
Fair purchases used vehicles — often two- to three-year-old off-lease models — from dealerships and offers consumers a flexible month-to-month lease based on what they can afford, rather than a consumer’s credit score, the company told Auto Finance News. Vehicles are purchased from the company’s mobile app and can be turned in and canceled prior to the next billing cycle.
Drivers on Uber’s former program were often subprime borrowers who couldn’t get approved for a traditional lease and didn’t want to be placed in a two- to three-year term given that most rideshare drivers stop using the program after a year, according to a series of reports from Quartz. To account for that risk, borrowers were often paying weekly rates that were deducted from their paychecks and often totaled over $500 a month. On top of Xchange Leasing’s high costs, the payments did nothing to improve the drivers’ credit scores.
By contract, Fair claims it offers rates as low as $150 to $300 per month and told AFN that wages will no longer be automatically garnished in order to pay off the contract. Fair will introduce a new weekly payment plan for Uber drivers that is not currently offered to other consumers, Painter said.
“Uber was built on offering drivers flexibility around how and when they work, and we bring that same concept to the way drivers access vehicles,” Scott Painter, founder and chief executive of Fair, said in the release. “This partnership reinforces why the future of vehicle ownership lies in a flexible ownership model based on consumers’ needs.”
Xchange Leasing was never designed to be a money maker for Uber, but the program began losing 18 times more per vehicle than it had projected, according to a report from The Wall Street Journal.
In late September 2017, Uber stopped originating new lease contracts and by December had found a buyer in Fair. While Fair would not disclose how much the deal closed for, the net book value of Xchange’s more than 30,000 vehicles was roughly $400 million, according to documents obtained by The Wall Street Journal. Fair would not disclose how many lease contracts outstanding and how many vehicles it acquired in the deal, but Painter said the company is working to migrate those existing drivers onto new Fair contracts.
With this acquisition and partnership, Fair will have the national platform and spotlight for the chance to prove its unconventional financing model can work for the masses.
“Everything we do in the beginning of the app experience from a data collection point of view is getting to the bottom of that question — how much can you afford?” Painter told AFN last year. “It turns out everyone can afford something. You could be a single mom, working two jobs and you can only afford X. We’ll show you a ton of cars in that price range.”
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