Uber is moving deeper and deeper into the world of financing. The network transportation giant has launched a car leasing program called Xchange Leasing as an alternative to the financing deals in which Uber drivers buy vehicles directly from manufacturers. Uber and Westlake Financing are offering car financing for drivers through the vehicle solutions program.
The leasing option, called Xchange Leasing, is administered directly by an Uber subsidiary, and it is more flexible than a traditional lease. A driver will be able to return cars with just two weeks’ notice without additional cost. Uber will also apparently cover the maintenance costs for leased vehicles.
Xchange Leasing is apparently only available in Los Angeles, San Francisco, San Diego and parts of Maryland and Georgia. It sounds like a pilot program that will soon be rolled out nationwide and perhaps worldwide.
Ford, GM, Toyota, Nissan, Volkswagen, Hyundai and Chrysler are participating in the program, according to Uber’s website. Those companies are also participating in Uber’s new vehicle purchase program, or Uber Vehicle Solutions.
This program could be a major profit center for Uber; in particular, it could generate a lot of float and provide Uber with a steady source of income, which it might need. Another reason for the program is to limit Uber’s liability and help it avoid insurance costs.
One interesting point here: Uber will probably have to provide insurance directly for the drivers participating in the program. That means Uber will have to become an insurance company or form a close relationship with one.
Uber will need to provide insurance because it would be responsible for the vehicles. It would be the one sued over any accident. My guess is that Uber will soon develop its own insurance policy that will be offered directly to drivers. It is already experimenting with something like that in some cities.
Uber Rental Coming?
Uber is also developing a rental car option with a Zipcar competitor called Flexdrive. They want to develop a weekly pilot rental program for Uber-X Drivers in Nashville, Dallas and Atlanta. Interestingly enough, in that program, Uber will cover all the expenses of car ownership, including insurance and maintenance.
The program would allow people to take Uber-X vehicles out whenever they wanted or to use Flexdrive vehicles parked out on the street for Uber driving. It might be popular in college or military towns where there are lots of young people looking for part-time or weekend work.
One has to wonder why Uber has not simply partnered with one of the big car rental companies like Hertz Global Holdings (NYSE: HTZ) or Avis Budget Group Inc. (NASDAQ: CAR) for this program. They have the infrastructure to offer something like this nationwide.
Are Uber Drivers Employees?
Uber’s latest experiments will undoubtedly revive the legal battle over whether Uber drivers are employees are not. Since Uber itself will own the vehicles and pay all or most of the expenses, it will be hard to call the drivers “independent contractors.” That will make legal battles like the ones in Florida even more pertinent.
The question of independent contractors has become so pressing in the U.S. that even Congress is attempting to address it. U.S. Senators Al Franken (D-Minnesota) and Robert Casey (D-Pennsylvania) have revived a piece of legislation called the Payroll Fraud Prevention Act.
The Act would allow persons that thought they were misclassified as independent contractors to sue companies for lost wages and damages. It’s a direct attack on Uber, which has been fighting efforts to reclassify its drivers as employees. The legislation will probably not get anywhere in a Republican-controlled Congress but shows how deep the dissatisfaction with the current labor market is.
Obviously Uber will be expected to lobby hard against this legislation, although I imagine this issue will not go away and neither will attempts by government to address it.