🗣️ TLC Drivers Upset About Leasing "Mafia", We Investigate
Meeting on proposed issuance of 1,000 new EV-only TLC Plates characterized by drivers calling out leasing "mafia" and "scams". Why are TLC drivers paying $450+ per week for Camrys? We investigate
TLC Commission meeting on proposed release of 1,000 EV-Only Plates became sounding board for drivers complaining about leasing companies
We analyze the TLC leasing industry and the implied financial math of a $475 per week Toyota Camry
FHV Leasing Caps, resembling those already in place in the taxi medallion market, will likely need to be instituted
A much anticipated TLC Commission meeting, focused on a proposal to issue 1,000 new EV-only NYC TLC Plates, turned into a sounding board for driver complaints against leasing companies.
Multiple references were made to large leasing companies and their rental rates. Names like Buggy, Fast Track and Tower were specifically referenced and accused of operating a “mafia” and “scam” by several drivers.
While the focus of driver complaints were on the large leasing companies, who control thousands of FHV Licenses (a/k/a TLC Plates), we think our insight on this subject can be uniquely technical and well balanced. As we’ve disclosed in several of our articles, before starting AutoMarketplace, our start in the TLC industry was founding and running a vehicle leasing company focused on the luxury market. We solely focused on UberBlack qualified vehicles (i.e., our entire initial fleet consisted of BMWs).
We understand the industry well, from the operational challenges to financial math. From our previous coverage (and suggestion(s)) of FHV Lease Caps to “One Driver, One Plate” politics to sharing data outlining how much of the market these leasing companies control, it’s probably worth inviting an honest discussion.
Leasing “Mafia”?
The best way to start any discussion accusing companies of operating as a “mafia”, a very serious accusation, is by looking at the data. Data provides a hard truth.
Most NYC TLC industry participants are well aware that when drivers make reference to the TLC leasing company “mafia”, they are often referring to four companies (actually three). Some of these companies existed before Uber/Lyft arose, while others greatly expanded as the apps gained dominant market share.
These four companies are:
American Lease
Tower
Buggy*
Fast Track*
*These four companies are essentially three companies now, given a recent deal that effectively resulted in Buggy and Fast Track having the same corporate owner.
So, let’s answer the following questions first.
How many TLC Plates do these companies control?
What % of the TLC leasing market do these companies control?
How many TLC Plates are controlled independently by drivers?
Question #1: How many TLC Plates do these four (really three) companies control?
ANSWER: It appears these four (three) large leasing companies control between 10,000 to 12,000 TLC Plates, or 10% to 12% of the entire market. It’s very hard to get an exact figure (i.e., Company could own multiple LLCs, Corps), but if you look at the most recent insurance data, combined with FHV ownership data, one can come up with an educated estimate.
Question #2: What % of the leasing market do these companies control?
ANSWER: It appears these four (three) companies roughly control 35% to 40% of the entire FHV Corporation market. However, any independent TLC driver can also lease out their plate to another driver, so it’s hard to exactly illustrate their true control of the leasing market in a clean way (i.e., a TLC driver can rent out their vehicle to another TLC driver in a peer-to-peer fashion).
Question #3: How many TLC Plates are controlled independently by drivers?
ANSWER: Independent TLC drivers (owner-operators) seem to control ~71% of all TLC Plates. In other words, a large majority of FHV Licenses are controlled independently by drivers.
$475 Per Week Camry!?
Now, that we’ve established the TLC vehicle leasing market’s ownership makeup, let’s move onto how much these companies charge. Per the commentary on the call a few days ago, several drivers, many who were in leasing arrangements, quote figures ranging from $400+ per week to $600+ per week. Based on our knowledge of the current NYC TLC leasing market, we would say most current leases fall between $425 to $525 per week, for an UberX-qualified vehicle (i.e., Toyota Camry). Therefore, we’ll use $475 per week for our financial calculations.
Let’s ask the most obvious question. What’s the leasing math on a $475 per week Toyota Camry? On its face 🤑, to some, it might sound like a ridiculous price. Is it?
ANSWER: The quick answer is, it depends. For example, the answer varies based on the car model, make, mileage, condition and other factors such as a TLC driver’s driving record (i.e., insurance costs). Below, we break down some very specific lease math and considerations. In some instances, $475 per week is (perhaps) unfairly expensive, while in other instances it seems like a very commercial (or fair) deal.
NYC TLC Fleet Economics
For this illustrative exercise, we will focus on a TLC-plated 2021 Toyota Camry being leased at $475 per week.
Purchasing a Vehicle
Let’s start with the purchase of the vehicle. As most drivers (and passengers) can attest to there are several commonly used cars in NYC’s for-hire transport market. However, the Toyota Camry is undoubtedly the most popular, used by many TLC drivers and fleets due its comfort and (legendary) reliability.
Therefore, for the purposes of this exercise, we are going to assume that we buy a few year old pre-owned Camry (Note: many drivers buy brand new cars for over $40,000, we advise against this, but that’s for another article!).
The Kelly Blue Book (KBB) fair market price for a low mileage, two year old Camry (price will vary on mileage, model, condition, vehicle packages, etc), that a TLC fleet or driver would buy is between $20,000 to $30,000. Let’s assume $25,000, or $27,219 including 8.875% New York State sales tax.
Credit Score & Vehicle Financing
We likely want to pay the car off in 4 years, as the vehicle will have accumulated well over 125,000 miles if used full-time in the TLC industry. Remember, this vehicle is already 2 years old, so it’ll be 6 years old at the end of the loan period. Since depreciation is a non-cash expense, the way we’ve included it in this analysis is via adding the implied equity of the vehicle that remains at the end of the 4 year TLC use period.
We run our calculations below on a 4-year loans assuming the following scenarios:
📈 Prime credit (above 660) and market rate financing
Prime auto financing rate of 5%
📉 Subprime credit (below 600) and market rate financing
Subprime auto financing rate of 15%
VEHICLE MATH (📈 PRIME)
VEHICLE MATH (📉 SUBPRIME)
The implied net weekly cost of the vehicle, for a fleet or driver with access to prime auto financing, would be about $128 per week over four years. For an individual or fleet that only has access to subprime credit the like-for-like weekly cost would be $158 per week.
Let’s move on to insurance.
Insurance
All vehicles used in NYC’s for-hire transport industry are required to keep commercial liability insurance providing, at minimum, $100,000 per person / $300,000 per accident liability coverage and $200,000 personal injury protection (PIP). This insurance does not provide comprehensive & collision coverage, only liability coverage. For example, if you are involved in a collision that resulted in physical damage to the car, the cost to repair the damage is not covered by the liability insurance and would only be covered if the other driver was at-fault.
The cost of liability insurance can vary greatly based on a driver’s record. For example, at-fault (even 50/50 fault) accidents can increase an individual’s annual premium by over 25%. Most drivers’ annual premiums will be somewhere in the range of $4,000 to $7,000 per year. So, we’ll assume a $5,500 annual liability insurance premium. Since the car also has financing it would be wise (not necessarily required) to buy a high deductible comprehensive collision policy. The annual premiums on these policies are usually 8% of a vehicle’s value.
Using these assumptions, we estimate the weekly insurance expense below.
Maintenance
The cost of maintenance is always a tricky thing to estimate, especially over an extended period. Many people may not appreciate the wear and tear cars go through “driving TLC” 🚕 in NYC. If a car is proactively maintained perhaps the only service it will ever need are oil changes (assuming it’s not an EV) every 3,000 to 4,000 miles plus new tires and brakes every 12-18 months. Sometimes though maintenance can get costly, especially when a car has transmission, coolant system, battery and/or engine issues. EVs can also get extremely costly to repair in certain instances.
For this exercise we will assume weighted average maintenance costs of about $2,500 per year over 4 years, which we believe is a conservative estimate (i.e., oil changes, tires, brakes and normal wear and tear costs).
DMV, TLC & Inspection Fees
These costs are straightforward and regulatory in nature. Every for-hire vehicle needs to pay the following:
~$450 annual DMV registration fee
$625 biennial NYC Taxi & Limousine Commission (TLC) inspection fee
$111 for three $37 NYS inspections every 4 months
Sales Tax Considerations
Although we’ve incorporated the 8.875% sales tax in the initial vehicle purchase price, leasing companies involved in short-term rentals (less than 1 year) could be liable for as much as 19.875% sales tax on a large portion of their weekly lease (i.e., insurance and certain regulatory costs would likely be excluded if unbundled in an invoice).
Summary Breakdown & Conclusion
In the above exercise we made assumptions on many things that are variable in nature from auto financing rates to maintenance & insurance costs. As a final step, we also made assumptions around overhead and employee costs. The more scale or automation a leasing company has, the more they can minimize these expenses (alternatively smaller leasing companies are at a disadvantage vs. larger ones).
We hope you found this analysis of the costs associated with an NYC TLC lease useful. Leasing companies could argue that a 15% cash profit margin per car is fair given the risks they take on, including:
🚕 Arguments TLC Leasing Companies Could Make:
High driver turnover resulting in weeks where the car is unoccupied.
Not receiving rental payments (i.e., bad debt).
Administration related to driver parking tickets, E-ZPass and TLC summonses.
Losing vehicles to crashes or theft and the financing being underwater (i.e., insurance payout less than remaining loan on vehicle).
Unexpected maintenance costs arising.
Covering the cost of overheads in tough labor market.
Alternatively drivers could make many valid arguments of their own.
😑Arguments NYC TLC Drivers Could Make:
Charging $400+ per week for 6+ year old Camrys or similar vehicles, in bad condition, is unfairly expensive. This is a very valid complaint in our view.
Might be financially ahead owning (vs. leasing) because they have a clean driving record, no history of accidents and are planning to work in the TLC industry long term.
Good overall credit and consistent record of timely payments.
No incidences of parking tickets, E-ZPass violations or TLC summonses.
Proactively take care of car, lowering probability of large maintenance events and increasing ultimate residual value of car.
Will use the car for more than 5 years.
If they are forced to pay maintenance expenses to rental company-owned auto repair or body shop, the implied leasing company profit is actually higher.
In our view, what the industry does need to be mindful of is TLC fleets, especially large ones, using their for-hire vehicle licenses to start price gouging. To be clear, we do not believe current lease rates (for the most part) could be described as price gouging.
Our guess, and this was also mentioned by New York Taxi Workers Alliance (NYTWA) leader Bhairavi Desai on this week’s Commission call (although she quoted some confusing medallion numbers), is that the NYC TLC may create (after careful study and public hearings) FHV “Lease Cap” rules to prevent drivers being gouged by leasing companies (or other TLC drivers who independently rent their vehicles). We are in support of FHV Lease Caps, given the regulatory dynamics of the market.
The yellow cab industry already has lease caps rules, so there is industry precedent. In making any new rules though, the TLC will also have to incorporate many things, including ensuring a formula that incorporates the cost of a vehicle (i.e., Cadillac vs. Toyota), the dynamic nature of the insurance industry and inflation related to business expenses such as auto repair labor rates. For example, imagine how the above leasing math may change if instead of a $25,000 Camry, it’s a $60,000 Tesla or Mercedes 🤔.
As always, let us know your thoughts in the comments section below or by emailing us at info@automarketplace.com.
AutoMarketplace.com NYC covers the for-hire transportation industry and automotive news. Check out AutoMarketplace.com on YouTube ▶️
These problems need to solve. Now is the best time. Now or never
They should be lease caps. These leasing companies charge very high. I like a 2021 Toyota wav cost $750 a week.