SoftBank-backed Fair has terminated its leasing program and is pivoting its operational strategy to be more focused on its “core DNA” as a product and technology company as it creates a digital automotive marketplace.
The former used-car leasing app stopped originating leases about three to four months ago, Chief Executive Brad Stewart told Auto Finance News.
“Partly, that was to respect our lenders and balance sheet who saw what we saw, which was that the contracts [originated] were not necessarily as profitable as the company had originally imagined,” Stewart said. “We just did not see the risk return trade manifesting in the business we were originating even after we made improvements.”
Fair still manages a “multi-thousand car” fleet of between 5,000 and 10,000 vehicles, as well as a loan and lease portfolio, Stewart said. He noted that the startup is exploring what to do with its portfolio and fleet.
“It’s possible we sell the entire fleet and portfolio to someone that specializes in that investment,” Stewart said. “We are moving away from being a lender, lessor and portfolio manager to a product and tech company, full stop.”
Fair is shifting to focus its efforts on being a digital marketplace that will allow customers to shop for a vehicle, secure financing and shop for ancillary products in one place.
“We want that to be a two-sided marketplace between who we see as our consumers, which is people shopping for cars, but also dealers and dealer groups,” Stewart said. “We want to be out of the balance-sheet-intensive part of the business and want to facilitate all of the different transactions and transaction types that consumers could want.”
Fair is integrating “six or seven” global auto lenders onto its platform in addition to a finance and insurance marketplace, Stewart said. “All of these different modules are highly curated. If there’s a decision to make, then there’s a partner to select. There’s API integration and technical integration that needs to occur.”
Under its new model, Fair will generate revenue at every touch point along the customer journey, from vehicle purchase to financing and F&I products, Stewart said. “In some cases, we’re sort of a lead gen business,” he noted.
“It’s the story of startups: You make a bet on a space and you learn along the way,” Stewart said. “In our case, we learned that being a lender or lessor, or having balance sheet exposure at our stage, is just not the right play. But what we have learned, optimistically, is that the brand and the tech and the transactional interface that sits between the dealer and the consumer is something that is super powerful.”
The move is Fair’s second major operational pivot in as many years. In late 2019, the startup laid off 40% of its staff in an attempt to increase profitability amid the resignation of then-CEO Scott Painter. Stewart took over as chief executive in early 2020, and later that year Fair increased its product offering to offer two- and three-year leasing options. In January, Fair inked a partnership with online lending marketplace LendingTree to help bolster that offering.
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