Former TrueCar CEO Scott Painter's new venture, Fair, wants to do away with traditional car leasing, a model it has dubbed too "boring" for today's consumer.
The startup is an online used-vehicle buying platform that lists vehicles from partnering dealerships on a mobile app. Vehicles are listed with a set monthly payment and customers can choose a vehicle, get approved with a driver's license and bank account, then pick up the vehicle from the dealership. Customers can return the vehicle at any time with a five-day notice, at no cost.
"The traditional lease is financed through a 60-month loan, how boring is that?" said Georg Bauer, Painter's partner and former head of financial services for Tesla Inc. and BMW AG. "It takes the customer out of the dealer market for three, maybe five years."
Fair expects to manage this flexible ownership model by buying the vehicle from the dealership once a customer has selected it through the app. If the vehicle is returned, Fair will offer it back to the dealership at wholesale price, resell it through the app or take it to auction.
The app launched last week on the Apple App Store for the Los Angeles area. Fair plans to expand to the rest of California by year end and to locations across the country next year.
Painter's most recent attempt to expand into the online used-car sales market shut down this year. That company, Beepi, was reported in December to be merging with Fair. Beepi had closed its offices outside California and laid off 180 employees. In February, TechCrunch reported that the merger had fallen through, and Beepi was being sold in ? parts to pay off creditors.
Bauer declined to comment on any deal with Beepi, adding that he is "100 percent focused on launching Fair at the moment."
Current financing models, which lock customers in for multiyear periods, are detrimental to dealers and consumers, Bauer said.
By making it easy to pay for a vehicle and return it, the process is more attractive to consumers, bringing them to dealerships more often, he said. Fair would benefit as the middleman by setting monthly prices that are affordable but still profitable for the company. Vehicles listed can be a maximum of 6 years old and have up to 60,000 miles.
"It's a win-win-win," Bauer said.
But Fair isn't a broker, he said. Its model is more like a company that provides cars on demand, opening up access to vehicles to consumers who would typically avoid car ownership.
Bauer said the company partnered with 15 dealership groups in the initial region to list nearly 900 vehicles. He said Fair has received investments from dealers and automakers, including BMW, which led a recent funding round.
To keep up with changing consumer habits, manufacturers are experimenting with alternate ownership models. Lynk & CO, a new brand under Geely Holdings that plans to launch in the U.S. in 2019, intends to sell directly to customers and allow access to vehicles for short-term use through an app.
By year end, Tesla said it will introduce a Tesla Network, which will let owners rent out their cars when the owners aren't using them.
As margins on new-vehicle sales continue to shrink, dealers are also likely to explore alternate ways to sell and finance vehicles, including on mobile platforms, said buy-sell adviser Alan Haig, president of Haig Partners in Fort Lauderdale, Fla.
Although Painter's TrueCar venture rankled many retailers, the entrepreneur's Fair model could prove valuable to dealers looking for new ways to connect with customers, Haig said.
"Big retailers such as AutoNation, even manufacturers, are trying to make pricing more transparent," Haig said. "Dealers will be increasingly open to selling cars online."