Uber wants to disrupt the car loan and leasing industry
To many observers, the endgame of Uber’s auto market disruption is a world where you never own a car again.
But there’s an irony in how Uber, (2016 CNBC Disruptor No.1), plans to get there: It’s making a big push into the hundred-plus billion-dollar auto financing market.
Think about all the money that goes into leases and loans from captive financing units at Toyota, Honda and Ford, luring consumers into shiny new vehicles.
Automobile financing amounts to $116 billion a year just in the United States, according to IBISWorld, all for the sake of car ownership — or something resembling it.
Uber’s mission is very different than that of a car company. It wants more Ubers on the road by any means necessary, and the newer the car, the better. After all, it’s setting out to create the anti-taxi experience.
The company created Xchange Leasing last year as a wholly-owned Uber subsidiary. For a $250 deposit, an Uber driver can lease a new midsize or economy car, be it a Chevrolet Malibu, Honda Accord or Toyota Prius.
At a Chicago-area Nissan dealership, Xchange accounted for 41 percent of sales in May. In each of the first three months of the year, sales more than doubled from the same time in 2015, mostly because of Xchange deals, said a store executive, who asked that we not use his or her company’s name.
Financing cars by the thousands is hugely expensive. Xchange secured a $1 billion credit facility led by Goldman Sachs, according to a person familiar with the matter. The facility was put in place last week and includes capital from Citigroup, Deutsche Bank AG (New York Branch), JPMorgan, Morgan Stanley and SunTrust, the person said.
The credit facility was previously reported by Bloomberg News.
By the end of 2016, Uber expects that 100,000 cars will have been provided globally through the vehicle solutions programs, with $2 billion going toward car sales.