Car

Cars without Commitment: Fair Says It Has Hatched a New Method of Vehicle “Ownership”

You’ve heard it before. Traditional notions of buying, selling, and even owning cars are being challenged by eager startups as well as established automakers. There is Ford’s focus on mobility. GM has its Maven and Book by Cadillac ride-sharing programs. And new online and app-based companies are intent on either grabbing some of established dealerships’ foot traffic or putting an end to the traditional brick-and-mortar model altogether. Not Fair, though.

Fair, a Southern California startup that promises “endless cars” at “extraordinary prices” with “no commitment,” sees itself as a partner for dealers rather than a replacement. “We’re not looking to disrupt car dealers. We’re looking to collaborate,” according to Fair founder and CEO Scott Painter. Perhaps even more ambitious, the company also sees itself as a solution to the much-talked-about industry headache of a crush of late-model vehicles coming off lease.

Fair works like this: Users put down a “start payment”—typically about $1000, although it can climb to $2000 or $3000 for premium models—on a lightly used car or truck, and then they pay a monthly rate to keep the vehicle for as long or short a time as they’d like, only needing to give five days’ notice to change to a new car. (They also have to pay another start payment each time they swap a vehicle.) Fair owns the car, but it’s registered to the “lessee.” It is essentially used-car leasing without the minimum terms found in leases, although it does come with a limited warranty, roadside assistance, and routine maintenance coverage. The whole thing is mobile app based—of course.

Fair focuses on giving users a single monthly payment for a car or truck. Painter said it’s designed so that financially strapped young Americans can budget their transportation dollars in a simple way rather than worry about costs such as maintenance and loan or lease payments. Insurance offered through Fair can also be rolled into the monthly cost.

Fair works like this: Users put down a “start payment”—typically about $1000, though it can climb to $2000 or $3000 for premium models—on a lightly used car or truck, and then pay a monthly rate to keep the vehicle for as long or as short an amount of time as they’d like (they also have to pay another start payment each time they swap a vehicle). Fair owns the car, but it’s registered to the “lessee.” It is essentially used-car leasing without the minimum terms found in leases, although it does come with a limited warranty, roadside assistance, and routine maintenance coverage.

The entire process is based on a mobile app—of course—and Fair focuses on giving users a single monthly payment for a car or truck. Painter said it’s designed so that financially strapped young Americans can budget their transportation dollars in a simple way, rather than worrying about several costs such as maintenance or loan/lease payments. Insurance offered through Fair can also be rolled into that monthly payment.

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“So the goal here is not only to give you a simple way to manage it visually but to give you a single monthly payment that’s lower than what you normally would have spent [on financing and everything else],” Painter said.

Shoppers can browse Fair casually or get right to the brass tacks of what the company will agree to sell, er, lease them. In the latter case, the Fair app scans the user’s driver’s license and then does a “soft pull,” or informal background check, of their credit that does not affect their credit scores, Painter said. The app then shows all the cars available in the market within a user’s price range. Shoppers can otherwise start their search by first plugging in how much they want to pay per month and then narrow things down by brand or through general categories such as “luxe” or “green.”

There were some 1100 cars and trucks listed on Fair this week, all under six years old and with less than 70,000 miles on their odometers. Those vehicles are actually at dealerships, which is where Fair’s partnership model comes in. Fair has about 75 franchised dealers’ inventories at its disposal, and each dealer is trained in working with the app. Once a user agrees to “buy” one of the vehicles, Fair actually purchases it from the dealership. But first, a contract between Fair and the consumer is generated on the mobile app, which is best described as a rental or lease agreement. “It’s neither, really,” Painter clarified. “It’s a new kind of contract.”

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The shopper does not yet have to sign anything. The next step would be heading to the dealership to check out the vehicle or arranging to have the dealer bring the car or truck to them. After a test drive, if there is still interest, the user signs a contract, and Fair wires the dealer the amount of the car, effectively purchasing it as a wholesaler.

Fair currently operates only in Southern California so far, but Painter said the plan is to grow inventory there by about 10 times the current amount and then go statewide. The company intends to expand beyond California to about a dozen additional states in 2018. Painter declined to say which states are on Fair’s radar but said they’re places where you’d typically find early adopters to this kind of new technology.

So, is this the “future of car ownership,” as Fair insists at the opening of its app? It does seem different, at least. And Fair is by no means a fly-by-night startup: Painter is the founder of TrueCar and CarsDirect, and Fair’s president is Georg Bauer, a former CEO of BMW Financial Services and Mercedes-Benz Credit Corporation as well as a management consultant for Tesla Motors.

Painter said he and his Fair collaborators have spotted (as have many others) the imminent “tsunami coming of off-lease cars” hitting the U.S. market. It is the logical outcome of the auto industry’s recovery from bleak times at the turn of the decade followed by auto leasing ballooning to record levels in 2015 and 2016. “It’s really going to be a challenge for auto retail,” Painter said of all the lightly used vehicles coming off lease. And so in comes Fair to help, and to capitalize, Painter and company hope.

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