As initially reported by the Wall Street Journal, Uber first began toying with the idea of closing down the business over the summer. The original hope was for a buyout, but the company appeared to get impatient a few months ago, and shut Xchange Leasing down without a buyer over the summer, affecting about 500 jobs. Simultaneously, however, Uber launched a sale process, and now, that process has reached its conclusion.
It’s unclear how much Fair paid for the leasing service, but the company itself is well versed in the rentals business. Its customers name a price for a rental vehicle, and Fair does what it can to match these customers with a car purchased from a local dealership. These vehicles can then be returned at any time. Thus far, the firm has raised around $85 million in equity, and has racked up $1 billion in debt (sound familiar?).
Unfortunately, this didn’t work quite as planned, as the Journal reported many drivers returning the leased cars in “poor shape, damaging their resale value.” Ultimately, the company was forced to place drivers in increasingly expensive leased vehicles, which meant that the drivers had to work longer hours in order to pay back the lease, thereby creating more wear and tear, and perpetuating a vicious, net-loss cycle.
By July, Uber realized that Xchange was in the red by about $9,000 for every vehicle in the fleet (previous estimates suggested this figure was just $500). There were a total of about 40,000 cars in the fleet, which represents a whole lot of debt.
Hopefully, the sale of the business will do something to negate that red zone.
