Fair prepares for new chapter in online retail

Fair's new life as an online retail site will find it listing dealers' vehicles for free and even paying them for each sale. However, it will sell customers vendors' finance and insurance products and said last week it might buy a "large dealership group."

Fair Financial Corp. is reinventing and renaming itself after five years of focus on used-vehicle subscriptions, a business CEO Brad Stewart described as challenging and capital-intensive. The company, now known as Fair Technologies, is considering options including bankruptcy to eliminate more than $315 million in senior secured debt.

Fair seeks to launch its new platform in the first quarter of 2022, and Stewart estimated the company would reach a decision on resolving the company's financial situation within the next two or three months.

In an interview last month, Stewart described the new Fair model as analogous to "either Carvana without owning the cars, or think of it as Autotrader where you can purchase the car and have all of the things that go along with it — insurance and F&I products and logistics — facilitated by that platform."

As an online retail site, Fair will eventually look to connect customers with leases, but "we just will offer them as a facilitator and not a balance sheet play," Stewart said. But Fair will first focus on used-vehicle for-sale listings, the "easiest and biggest market," he said.

The company will take no commission on the sale nor charge for listings, and it plans to pay dealers $250 to $750 in back-end support per sale, Stewart said.

Fair's old subscription model required the company to carry vehicles on the books. Under the new format, it will hold them momentarily, Stewart said. Once a customer selects a vehicle, Fair will buy it from a dealer and then immediately sell it to the consumer — with Fair's own financing and F&I add-ons potentially attached.

Fair said it was "negotiating partnerships with a number of financial institutions to serve as lenders on its platform, offering customers across the credit spectrum a variety of ways to finance their vehicle — whether they want a lease, a loan or to pay in cash."

This would compete with a core profit center for Fair's dealer partners. But the company said it felt retailers would support the platform.

"Our goal is to deliver incremental transactions at attractive unit economics to our dealer partners," Fair said in a statement. "We will do this by offering robust incentives for all transactions and offering incremental value in many other ways, including through trade-in inventory, service leads and valuable technology. Fair has been supported by thousands of dealers over our brief history and we expect this tremendous support to continue and grow."

Fair also said it might seek to buy "a large dealership group, which would continue to operate independently to provide a ready supply of cars, and serve as an unparalleled resource of operational and logistical expertise."

The company would not disclose the name of the group but said it was "actively exploring partnerships including M&As."

Fair expressed confidence that an in-house retailer would not deter competing dealers from joining the platform. "Any M&A or partnership is designed to support our dealer partners," the company said. "The marketplace inventory will be presented exactly as provided by each dealer partner. There will be no marketplace preference given to any inventory (or associated services) owned by Fair's investors."

Partner retailers would arrange test drives, trade-ins and vehicle delivery as well as longer-term service needs, Stewart said.

"Fair will also continue to serve as a hub for customers across all aspects of their drive," the company said, "from purchasing insurance or an extended warranty to scheduling an oil change or service appointment."

Lindsay VanHulle contributed to this report.