Uber Offers Direct Vehicle Leasing

uber-offers-direct-vehicle-leasing-uber-app-taxi-practicesUber, a “disruptive technology” that has changed peoples’ lives with app-based ride sharing, keeps stirring the pot by creating new opportunities for its drivers that some say are not in drivers’ best interests. The latest wrinkle in this saga is the San Francisco, Calif.-based company’s decision to offer direct car leasing to its drivers.

Uber will lease cars to drivers through a subsidiary called Xchange Leasing. Unlike most multi-year leases that have fees for early termination, drivers who participate in Xchange for at least 30 days can return the car with only two weeks’ notice, and limited additional costs.

The program allows unlimited mileage and the option to lease a used car, with routine maintenance also included.

Will It Help Uber More Than Drivers?

The leasing option could help Uber escape the scrutiny the company could face over pushing drivers into subprime car loans. Last year, the U.S. Department of Justice subpoenaed two of Uber’s vehicle financing partners, General Motors and Santander Consumer USA, according to valleywag.gawker.com.

While Uber claims the lease option will help drivers, the offering hasn’t come without controversy. Some drivers have criticized the move as another way Uber has managed to circumvent requirements to provide employee benefits.

One California-based driver, using the pseudonym “John Doe,” told Hacked.com that by leasing cars to drivers, Uber will have more control over drivers while not having to reimburse drivers for vehicle expenses. “John Doe” claims that by leasing cars, Uber is obligated to reimburse drivers for vehicle expenses under California law.

“Uber has repeatedly argued that they are an app-based technology platform, connecting riders and drivers. However, financing, owning and managing a fleet of cars makes them identical to a taxi cab company,” “John Doe” told Hacked.com. “Uber is breaking California law by violating the definition of a Transportation Network Company (TNC), which “is not permitted to itself own vehicles used in its operation or own fleets of vehicles.”

Hacked.com was able to confirm this requirement by viewing a California Public Utilities Commission document online.

“For the first time ever, Uber is directly financing drivers without providing any reimbursements for vehicle expenses,” “John Doe” said. “I’m scared to think that Uber will control not only how much drivers make, but also access to their personal vehicles.”

“Judging by the reaction in driver forums, I’m not alone,” he said. “Will Uber punish drivers who lease through Xchange for also driving for competing on-demand platforms like Lyft and Postmates? If you drop below a 4.6-star rating, will Uber ban you AND repossess your car?”

Uber Will Gain More Control Of Drivers

uber-offers-direct-vehicle-leasing-uber-app-taxi“By setting driver wages, exercising the right to terminate drivers and using drivers for its core business, Uber has crossed the boundary as an employer,” he added. “They have artfully shifted payment risk to drivers while withholding the most basic labor protections, including minimum wage, overtime pay, medical insurance and unemployment benefits.”

“John Doe” acknowledged the new leasing program’s benefits of eliminating mileage limits and the ability to end the lease early without penalty. “It is favorable, but my warning to all Uber drivers remains: beware of giving Uber too much power,” he said.

Also read: Despite Denial, Uber Users Complaining of Hacked Accounts

The Uber Controversies Continue

Uber’s new leasing policy adds another twist to a nationwide debate over app-based ride sharing programs.

Uber drivers have filed class-action lawsuits claiming they Uber has incorrectly classified them as independent contractors.

Three drivers sued Uber in San Francisco, Calif. federal court, contending they are employees and entitled to reimbursement for expenses, including gas and vehicle maintenance that drivers currently have to cover. The lawsuit, if allowed to proceed as a class action, could cover more than 160,000 California drivers.

Uber argued that the lawsuit should not proceed as a class action, citing statements of support from hundreds of other Uber drivers in a case that could decide whether they are independent contractors or employees, according to Reuters.

uber-offers-direct-vehicle-leasing-uber-app-lyftThe results of this broader legal battle could reshape the “sharing economy,” as companies say the contractor model allows for flexibility that many see as important to their success. An ultimate finding that drivers are employees could raise Uber’s costs beyond the lawsuits’ scope and force it to pay Social Security, workers’ compensation, and unemployment insurance.

Re/code, an online technology news site, calculated that Uber could pay an additional $208.7 million a year if it had to reclassify its California drivers.

Many drivers, for their part, are highly critical of Uber. But based on a review of comments on driver forums, there is not a unified plan for what drivers should do to improve their situation.

Said one Facebook post: “They are making billions without having to pay the worker’s taxes, unemployment insurance, proper commercial vehicle insurance, workers comp, or fixed hour wages. They – Uber, Postmates, Lyft, and their ilk, are truly getting something for nothing. The worker takes all of the risk, (but) reaps little of the rewards.”

Said another Facebook post: “Do you people realize that once Uber drivers are deemed employees the whole business plan is gone and it’s Uber who?”

Images from Shutterstock.

Lester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.