Uber Santander Lease Program – Detailed Analysis
So let me preface this post by saying it is not a good deal to be leasing from Uber if you have alternatives. You are paying for a low residual lease with a high interest rate on a brand new car, which doesn’t make financial sense unless you really need a car and don’t have any alternatives. The leasing program also depends on you being an Uber partner for 52 months as your car payments are taken from your Uber weekly paycheck. I always recommend getting a used car as someone else is already paying for the initial depreciation and extra fees for a new car. You generally can get a better deal on a slightly used car or a much older luxury car. However, for drivers with bad or no credit, there isn’t many options on new cars, and almost no options for loans on a used car. At the end of this post, you’ll see why its actually not that bad considering some drivers have no other options.
I myself have my eye on an 2010 or older M5. Tweet me or leave a comment if you think I should get something else.
Uber Santander Lease Details
Anyway, here is the general terms of the lease agreement:
- 220 a week for the first year, then,
- 175 a week for the rest of the 52 month lease.
- The total payments is somewhere around $36000 for a $25000 car.
- The lease is based 40,000 miles a year, but they claim unlimited miles.
- The residual value is $1 so you technically own the car after the lease term
- To end to lease, there is a $1000 fee and reduces $250 for every year of the lease. Note that if you end the lease after 1 year 11 months, it will still be $1000. You need to wait until 2 full years for it to be reduced by $250.
So lets compare it to a lease agreement for a person with good credit that can get a lease directly from a dealership. I looked into why leases are so cheap from many automotive companies. Toyota has actually one of the cheapest lease agreements I could find mainly because of their higher resell value. You can lease a Camry for the same price as an Hyundai Elantra, which is pretty nuts because the Camry is worth at least $5,000 more than an Elantra. It’s not the fact that you have good credit that this lease is so cheap. It is the fact that they have a bunch of dealer promotions and high residual value that makes it cheap. Unfortunately, dealerships will often not able to give this type of lease to people with bad credit as the lease hinges upon the buyer to pay throughout the life of the lease for the dealership to make any money. Once you actually look at the numbers, its hard to believe that dealership makes any money off of these cheap lease agreements. If anyone were to default on these lease, the dealership would be stuck without any additional payments and a car that may be worth much less than the real residual value of the lease.
A Typical Lease Analysis: 2015 Toyota Sienna
So here is the breakdown of a typical car lease with good credit directly from the dealership. I picked the Toyota Sienna as it has a higher capitalized cost, which is a bit closer to what the Uber Lease agreement MSRP starts at:
- 2015 Toyota Sienna for just $269 a month (doesn’t include tax)
- 36 -month closed end lease on Sienna 2015 Models 5338.
- $2,999 due at signing which includes first month’s payment of $269, acquisition fee of $650, customer capitalized cost reduction of $2280, security deposit of $0
- $28456.84 adjusted capitalized cost assumes dealer participation, which may vary.
- MSRP $32545 includes destination charge. (You can haggle this down, which lowers your capitalized cost)
- Taxes, license, title, insurance, regionally required equipment, and other dealer’s charges are extra, and are not included in the amounts shown.
- Excludes $350 disposition fee due at lease end.
- Lessee pays maintenance, excess wear and tear and $0.15 per mile charge for all mileage over 12000 miles per year.
- Lease end purchase option $18798.00.
So got all that? Did you know all that goes into a lease? Actually, one of the more important items as part of a car lease is the money factor, or the interest rate, and they don’t publicize it at all. From my estimation, a good rate is under 0.001 so under 3% interest. The ones I can find online are often 6% interest or 0.00241 money factor. To be honest, this is just peanuts as it just drives up your payments by $20-$50 a month. Uber’s lease is normally about $400-$600 dollars a month higher than what you can get directly from a dealer.
So here are the values you need to focus on:
- $269 a month (doesn’t include tax) or $282 with 5% sales tax
- Lease Term: 36 months
- $2999 due at signing (Down payment)
- $2280 capitalized cost reduction
- $28456 adjusted capitalized cost (Starting value of your lease)
- Lease End Purchase Option $18970
So I hope that you see with various dealer incentives and your $2999 down payment, the capitalized cost is $28,456, down from the MSRP of $32k. The residual value is also pegged at $18970, which is a tad higher than the KBB value of a good condition 2012 Sienna with 36k miles. This is assuming that a 2012 Sienna now will have the same resell value as a 2015 Sienna in 2018.
Lease Calculation: 2015 Toyota Sienna
So according to Edmunds Car Lease Calculator at a 0.001 Money Factor, here are the stats for this lease:
- $28,456
- $333
- Security Deposit: $500
So the two values are close: $282 vs $333
Lease Calculations: Uber Santander Lease
Here are the values I used in the Edmunds Car Lease Calculator:
- MSRP: $25000
- Lease Term: 52 months
- Money Factor: 0.0025 (or 6% interest)
- Miles Per Year: 40000
- Acquisition Fee: 1000
Here is the lease summary:
- Total loan: $35787
- Monthly: $826
- Deposit: $500
So the $826 a month is not too far off from the $220 a week first year, $175 a week onwards. It is an average of $807 a month given those payment terms. I started to play around with the values in the calculator. The only one that really matters in the calculator is the miles per year, despite the residual value of $1:
| Car | 25000 | 25000 | 25000 | 25000 |
| Fees | 600 | 600 | 600 | 600 |
| Rebates | ||||
| Lease Term | 52 | 52 | 52 | 52 |
| Residual Value | 1 | 1 | 1 | 1 |
| Money Factor | 0.0025 | 0.0025 | 0.0025 | 0.0025 |
| Interest | 6 | 6 | 6 | 6 |
| Miles Per Year | 12000 | 20000 | 30000 | 40000 |
| Acquisition Fee | 1000 | 1000 | 1000 | 1000 |
| Total Loan | 26600 | 28853 | 32320 | 35787 |
| Monthly | 614 | 666 | 746 | 826 |
| Deposit | 500 | 500 | 500 | 500 |
So you can see how the mileage is one of the main drivers of the large weekly payment, increasing it by $200 a month.
Now lets take a look at how the residual value drives the lease payments:
| Car | 25000 | 25000 | 25000 | 25000 |
| Fees | 600 | 600 | 600 | 600 |
| Rebates | ||||
| Lease Term | 52 | 52 | 52 | 52 |
| Residual Value | 18000 | 12000 | 6000 | 1 |
| Money Factor | 0.0025 | 0.0025 | 0.0025 | 0.0025 |
| Interest | 6 | 6 | 6 | 6 |
| Miles Per Year | 12000 | 12000 | 12000 | 12000 |
| Acquisition Fee | 1000 | 1000 | 1000 | 1000 |
| Total Loan | 26600 | 26600 | 26600 | 26600 |
| Monthly | 294 | 401 | 507 | 614 |
| Deposit | 500 | 500 | 500 | 500 |
So the first column shows a resell value of $18000. This is a similar residual value to what you can get from the dealer, and you can see a pretty low monthly payment. Now when you start decreasing the residual value, the monthly payments balloon up.
Uber Lease – Money Factor Analysis
It doesn’t make sense that the extra mileage would cause payments to go up as the residual value was already down to $1, so I went back and played around with the interest rate and here were the other values I used:
Here are the values I used in the Edmunds Car Lease Calculator:
- MSRP: $25000
- Lease Term: 52 months
- Money Factor: 0.01
- Miles Per Year: 12000
- Acquisition Fee: 1000
Here is the lease summary:
- Total loan: $26600
- Monthly: $826
- Deposit: $500
I brought down the mileage to the industry standard 12k miles and jacked up the money factor to 0.01. Now this makes a bit more sense.
So what does 0.01 money factor translate to.
0.01 x 2400…..
I’m not that good with math, but that’s 24%!
Breakdown of Uber’s Lease
Lets summarize how Uber’s lease is so expensive:
- $294 a month – Base lease payment (as an example)
- $325 a month is because of the low residual value (essentially, it resembles more of a loan than a lease)
- $190 a month is because of the high interest (relative to a money factor of 0.0025, which is 6% interest, still a bit high for people with excellent credit)
To be honest, that doesn’t look that bad. Essentially you are paying $200 more a month just because of interest. For people with no credit, this may be the only alternative you have in getting any car. For part time Uber drivers, many drivers can easily make $200 in a month. Many drivers can net that after expenses in a week so the deal isn’t terrible, but just not ideal. People with poor credit don’t have many ideal options. I have spoken to many drivers who said Uber/Santander was the only lender willing to finance their car. Some drivers noted that the lease doesn’t even show up on their credit report.
It comes down to $190 a month for 52 months is about $10,000 in total and its a long investment into Uber for that long. There is no guarantee of income for those 52 weeks as Uber could lower prices again so the longetivity of Uber is something to consider if you do intend to lease with Uber/Santader.
You can get out of the lease, but you will have to pay $1000 in the first year (up to a year and 11 months and 30 days) and goes down $250 per year. It may make sense to do the lease only if you have went to every single dealership in your city and checked about their financing options. At this point if you are looking for a car, it doesn’t really matter what car it is as long as there is a financing option.
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