Uber is planning to close out or sell its car-leasing division in the U.S. by the end of this year, according to a source familiar with the situation.
According to news from CNBC, Uber will shut down, sell to a partner or consolidate the car-leasing business to make it more efficient. The ridesharing company is taking a harder look at expense management after losses of $3 billion last year. The Wall Street Journal reported that the average loss per vehicle in the leasing division was about 18 times what Uber executives had estimated.
In fact, the actual losses were about $9,000 per car, more than the estimated losses of around $500 per vehicle, according to the WSJ. While scaling back on leasing would affect about 500 jobs out of Uber’s workforce of 15,000, the carsharing company will make sure there’s a vehicle option for drivers who use its Xchange leasing division.
Uber launched the U.S. car-leasing program in 2015, investing around $600 million in the business. The ridesharing company has since expanded Xchange Leasing into 24 U.S. metro areas, including 14 branded showrooms, and raised a roughly $1 billion credit facility from a consortium of banks.
But Uber has struggled to control losses at Xchange Leasing despite rates of more than $500 a month. The high lease fees pushed many drivers to work longer hours and return the vehicles in poor shape, damaging their resale value. The carsharing company allowed drivers to return vehicles with just two weeks’ notice after the first month and didn’t restrict mileage, unlike traditional leases. The inconsistent earnings have made it a difficult business to maintain, thus leading Uber to consider its expense management.
In the meantime, Uber has been on a quest to improve relationships with drivers, announcing an 180-day plan this summer to make driving “more flexible and less stressful.”