Auto leasing app show gears up for relaunch

After a tumultuous 2020, Fair Financial Corp. trying to get back on the road.

The Beverly Hills-based automotive technology company, which launched in 2016 by offering subscriptions to its used car inventory, is changing its strategy. In Q1 2022, Fair will roll out subscriptions on leases for used cars supplied by third-party suppliers – with the broader aim of becoming a central hub for all automotive retailers.

“We want car purchases and transactions to feel sleek, beautiful and immersive,” said Brad Stewart, who took over as Fair’s 2020 director. for shopping.”

The original strategy had huge support. At the end of 2019, Fair had approximately $2 billion in debt and equity funding, a partnership with Uber Technologies Inc. and a remarkable valuation of $1.2 billion.

But the business quickly fizzled out. He resisted layoffs and a management reshuffle. He even took his app offline – twice.

“We’re moving … (toward) becoming a true technology company, which is obsessed with brand and consumer demand, as well as product and technology,” Stewart said.

wedge

Fair was founded by automotive tech mogul Scott Painter. The company previously purchased cars from local dealerships, held vehicle titles and handled registration.

Customers would find and subscribe to a car through Fair’s app, show their ID to the dealership, and receive the car. They would have three days or 100 miles – whichever comes first – to return the vehicle for a full refund. If customers were not satisfied with their vehicles after this initial period, they could return their cars and end their subscriptions without penalty, provided they had paid the subscription fees until the end of that month. .

Investors rallied to Fair. In September 2019, the startup secured a $500 million revolving credit facility from Japanese tech investor SoftBank Group Corp. to expand its partnership with Uber. The ride-sharing giant planned to use Fair to help its drivers rent cars on short-term weekly deals.

Fair’s business model had never proven profitable, and the company plummeted as a result. A month after securing the funding, Fair laid off 40% of its staff, including then-CFO Tyler Painter. A week later, Tyler Painter’s brother, company founder Scott Painter, resigned as chief executive; he said he disagreed with SoftBank’s strategy of involving Uber in Fair.

In October 2019, the company shut down its app as it hired a new management team and planned a relaunch. In February 2020, he ended his partnership with Uber. He restarted his app during that month, only to shut it down again and suspend new orders last April.

There are 5,000 users who still drive Fair’s original model cars, but once these cars are returned, they are wholesaled to a dealer through commercial car auctions. The company did not disclose the amount it made from these sales.

“It became clear that our subscription business was not growing as quickly as investors would like,” Stewart said. “It really spurred the development of our new business plan, which started in the fourth quarter of last year, and it has really continued to progress throughout this year.”

Change trigger

Although Fair is shifting gears, the company’s mission to make buying cars simple remains the same, Stewart said.

“It’s the place to go for people buying vehicles and ultimately managing their mobility after the transaction,” Stewart said. “My dream is that if people want to buy cars, the only place they really feel comfortable and safe to do so is on Fair.com.”

The industry – which generated $980 billion in U.S. sales in 2020 – is ripe for disruption, said Ruhell Amin, equity research analyst for Playa Vista-based investment advisory firm William O’Neil and Co. Inc.

According to Amin, almost “90% of vehicle buyers in the United States want some part of the vehicle purchase to be done online.”

He said companies like Carvana, CarMax Business Services, and TrueCar Inc., the last of which was co-founded by Scott Painter, have become used-car successes because of the trend of consumers embracing the trade. electronic.

“Auto consumers generally want to feel like they have more control over the buying process without being pressured,” Amin said. “They want their transactions to be more convenient and on their own desired timeline, and that’s really playing into this trend towards online that we’ve seen.”

As part of its brand evolution, Fair will change its legal name from Fair Financial Corp. to Fair Technologies Inc. and moved its headquarters from Santa Monica to Beverly Hills.

Its new model focuses on partnering with used car dealerships to provide leases, rather than owning its own inventory of vehicles.

And it will focus on “consumer-oriented technology” instead of infrastructure and inventory, Stewart said. Some of the platform’s new features will include connecting users with loans, car trades, and customizable insurance plans.

The platform will also allow customers to extend warranties and schedule auto service appointments.

Fair executives would not disclose whether they had secured any new funding or investments to fund the development of the new platform.

But for all of that to happen, Stewart said, Fair will rely heavily on partnerships. In addition to entering into agreements with local dealers, the company works with financial institutions, such as Ally Financial Inc., JP Morgan Chase Bank, Wells Fargo and Co., Bank of America and Westlake Financial Services, based in Hancock Park, to provide loans. . Fair is in the process of selecting a partner to offer car insurance through its platform.

Deployment

The company’s platform will showcase cars from “hundreds to thousands” of physical dealerships that users can browse and compare for the best prices and payment options, said Craig Nehamen, the company’s chief strategy officer.

Users will be able to rent a car online with a seven-day money back guarantee. If the supply is local, users will have the opportunity to take a test drive before buying.

“Our intention is to provide the benefits of (both) shopping in the online retail marketplace and a traditional reseller,” Nehamen said.

Nehamen said the company aims to register 100 trades per day through its platform after a year back in the market, but the company’s goals will be “unrelated” to trading volume.

“The entire organization will be focused on listening and learning from each client to refine the build,” Nehamen said.

On the consumer side, Nehamen plans to integrate AI-powered assistance and recommendations; transparency related to the condition of cars, their prices and dealerships; and the flexibility to complete any stage of the car buying experience online or in person.

New tools will be released throughout the quarter with the first launch planned for California, followed by its debut in other states by the end of 2022.

“The consumer experience is going to be a lot broader and a lot more immersive,” Stewart said. “What we’re going to deliver to consumers is a premium e-commerce experience.”