Westlake Financial Services is backing NextCar, Scott Painter’s new subscription service. Painter is the founder and former chief executive of leasing app and subscription service Fair.
Los Angeles, Calif.-based Westlake signed a letter of intent Dec. 17 agreeing to provide NextCar with a $400 million debt facility to purchase cars as consumers sign up for a subscription, Painter told Auto Finance News. NextCar allows users to pay a monthly fee to drive a used vehicle.
NextCar will hold the asset on its balance sheet and sell the car back to the dealer when the subscription ends, Painter said, adding that Westlake will service the subscription contracts.
The $400 million credit line should allow NextCar to fund the purchase of about 20,000 to 30,000 vehicles, with NextCar buying the cars as subscription contracts are finalized, Painter said.
The program differs from traditional subscription models, such as those offered by Audi, Nissan and Jaguar Land Rover, in that NextCar isn’t purchasing or using a fleet of vehicles to rent to consumers. Instead, the company aims to offer an alternative ownership model to consumers who may not qualify for traditional credit. The partnership with Westlake opens up the opportunity for dealers on the lender’s platform to offer the product.
“Having flexible capital that allows you to operate in a much different way than a traditional auto loan is essential,” Painter said. “The relationship with Westlake is premised on giving us that kind of flexible capital that will allow us to not treat subscriptions like mini loans, but rather a contract that allows the customer to get access to a vehicle without having to purchase that vehicle.”
A subscription, Painter said, is a short-term arrangement that is fundamentally different from typical auto loans. Monthly payments cover the car’s depreciation in value, applicable taxes, insurance, warranty and roadside assistance.
NextCar’s goal, Painter said, is not to bring a new, competitive product to the industry, but rather to supply the technology, software and financial solutions for existing subscription providers and dealers to offer “scalable and profitable” programs.
“We’re not out there marketing NextCar,” Painter said. “There are times when building something outside the company’s four walls is much more efficient, and I think that what we’re building can serve a much broader group of subscription platforms.”
Westlake, a full-spectrum lender, manages a portfolio of $12 billion and originates indirect and direct auto loans, with more than 20,000 new and used car dealerships in its network, according to a NextCar company release.
“Subscriptions are a new product line for [Westlake] to appeal to a broader array of dealers and customers, with the intention of growing the total assets they manage,” Painter said, adding that subscriptions are “the perfect business model to create shorter-term access to mobility.”