Uber drivers thought leasing cars would boost their credit scores. Wrong.

Uber is scrapping Xchange.
Uber is scrapping Xchange.
Image: Reuters/Chris Helgren
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Like a lot of drivers, Anthony Piemonte turned to Uber’s Xchange Leasing program because his credit was bad.

Uber leased him a 2017 Honda Civic last October in Boston for $163 a week, plus a down payment of $250. The lease came with unlimited mileage and basic maintenance but didn’t include auto insurance. Piemonte, 42, thought the price was steep, but he figured weekly payments to Xchange would help build his credit history, which the company had checked when he applied for a car. But when Piemonte pulled up his statement on personal finance site creditkarma.com a couple months in, the lease wasn’t there.

Uber said last month that it would shut down Xchange, its US auto leasing division that lost about $9,000 per vehicle. The company stopped issuing new leases on Oct. 6 and has emailed drivers offering $450 electronic Visa gift cards and free Uber rides home if they return their cars to an Xchange dealership within a week.

Xchange targeted a subprime market of drivers with poor or no credit and limited options for getting a car. Many of these drivers assumed making regular payments to Uber would improve their financial standing. Now, as the program winds down, they’re learning that leasing from Xchange didn’t build their credit at all.

Uber set up Xchange as a wholly owned subsidiary in July 2015. The program grew out of a vision by ex-Goldman Sachs commodities trader and then-Uber employee Andrew Chapin to let drivers with spotty credit lease cars by tying the contracts to their Uber earnings. Xchange received a $1 billion credit facility to fund new leases in a deal led by Goldman.

The company has long promised its independent-contractor drivers the chance to “be your own boss,” but in practice has done little to empower them. Uber sets pay rates for drivers and determines what types of cars are allowed on its platform. Algorithms decide where they go every day. Gamified monetary incentives like “boost,” “quest,” and “surge” encourage drivers to work at certain times and places, without telling them they must. Uber has been making changes since June designed to improve the driver experience.

Uber never told drivers that leasing from Xchange would improve their credit. When the program rolled out it was billed as a “flexible” financing solution. Sample terms for Xchange advertise a variety of vehicle options with no mileage caps. “Xchange leasing did not claim that participation in Xchange would improve credit scores,” an Uber spokesman said in an emailed statement.

Drivers like Gene Neri made assumptions anyway. Neri signed up for Xchange in July 2016 after six months of driving for Uber in the Chicago suburbs with a van that got “extremely poor” gas mileage. Xchange charged him $133 a week for a 2015 Nissan Ultima and basic upkeep, like oil changes and tire rotations. Neri, 44, assumed weekly payments to Uber would boost his credit score. But when he checked Credit Karma and consumer credit reporting agency Experian for the first time last month, the lease didn’t show up.

On Sept. 21, Neri emailed Xchange customer support asking why his payments hadn’t been reported. “The whole point of me getting the leased car was to help build my credit history,” he wrote in his email. Christopher Arredondo, a support rep for Xchange, replied two days later. “I would like you to know that we value your business here at Xchange Leasing,” he wrote. “Xchange Leasing does not report negative or positive history to credit bureaus. The only time your credit is reviewed is the initial application process.”

Greg McBride, chief financial analyst for Bankrate.com, said Uber’s approach wasn’t unusual. “It’s up to creditors to report information to the credit bureaus and not all do,” he said. “Particularly for lending that’s done to subprime customers, it’s not unusual for things to not report to the credit bureau.”

Uber’s vehicle financing options have helped it exercise control over drivers. Xchange deducted its payments directly from a driver’s earnings each week, all but ensuring they would drive for Uber before a competitor. A rental option Uber offered through Enterprise Rent-A-Car required exclusivity. Uber paused a leasing program with four subprime auto lenders in New York earlier this year after Quartz reported how the dealers locked drivers into three-year contracts and frequently crippled them with debt.

Because Xchange didn’t report credit history, many of the drivers who leased through it have no more options for obtaining a car now, as the program is shut down, than when they started. Drivers with Xchange leases have the option to finish it out to the end of the contract.

Piemonte, the Boston driver, returned his Xchange car on Oct. 5. The office had him to sign a release that, among other conditions, waived his right to reinstate the lease or to purchase the vehicle. “It was very somber,” he said. Since then, he’s been driving for Uber with his own car.

Neri brought back his Xchange car on Oct. 16, in time to claim the $450 gift card. “Anything that they want to throw my way, I’m going to take it,” he said. “They’ve taken enough from me.”