Fair, the used-vehicle leasing subscription service led by TrueCar founder Scott Painter, announced this week that it hired former Tesla executive Diarmuid O'Connell as chief strategy officer. Could the convergence of two industry disrupters reshape the traditional auto lending model?
Both Painter and O'Connell are known for shaking up auto retail: Painter by positioning TrueCar as a way for dealership-wary customers to get the best price on cars and O'Connell by leading Tesla's state-by-state battle to sell its vehicles through factory-owned stores.
With Fair, they aim to turn auto lending on its head. Fair makes "it possible for folks to access car ownership without having to burden themselves with financial instruments that lock them in," O'Connell told Automotive News.
Fair allows consumers to shop for used-vehicle leases with no term via a mobile app. They scan their licenses to get pre-qualified for a range of monthly payments that include maintenance, a warranty, insurance and roadside assistance. Rather than stick to a two- to four-year term, customers can return their cars whenever they want.
If a Fair-like model becomes widespread, lenders may have to adjust their financing practices to stay relevant. Ally Financial has already prepared for a potential industry shift. Last month, Fair and Ally announced a strategic relationship in which Fair will use Ally's SmartAuction platform to sell its returned cars and offer consumers flexible financing powered by Ally's Clearlane program.
It's impossible to know which emerging trends will stick -- but if lenders don't latch on to some alternative financing models, they may risk being left behind.