Despite the influx of car manufacturers and startups into the vehicle subscription market, used-car lessor Fair welcomes the competition, Founder Scott Painter told Auto Finance News.
“We’re eager to see others in the space because, frankly, we don’t want to make all the mistakes,” Painter said. “There’s going to be a lot of trial and error, a lot of learning, and we’re all going to learn a lot from each other.”
Earlier this month, Fair partnered with Ally Financial Inc. to provide an alternative finance product to the lender’s dealer network. Fair buys the used cars directly from dealers when consumers agree to the flexible month-to-month lease. Returned vehicles are first offered to dealers for purchase, then they are posted on Ally’s SmartAuction platform.
Painter believes Fair consumers will hold onto their vehicles for 12 to 18 months, which will bring them back to the dealership for sales and servicing more often than with a standard 60-month loan or three-year lease. Competitors in the used-car subscription space often just provide the technology and fleet-management tools for dealerships to sell existing inventory via subscription, but Painter believes one of Fair’s distinguishing factors is that it owns the collateral.
“One of our primary objectives is to make this a product that works for dealers as a group, and not just trying to rent out a small fleet of cars,” Painter said. There will be an “explosion” of new-car subscription programs in the coming years, he said, but those programs will only be viable if they are backed by OEMs and the “tremendous amount of incentive money” they pump into the market.
“The simple [truth] of it is that when a new car becomes a used car, it goes through its single greatest depreciation moment,” he said. “Offering flexibility on a new car on the front end is not recoverable.”
