Painter says Fair needs to work on its finances

TrueCar founder Scott Painter says his fledgling venture, Fair — a used-vehicle subscription service — shuffled its management, cut its staff and invited its largest stakeholder to take over as CEO so that a refocused company can "figure out every month how to continually refinance and structure all this debt."

Fair was founded in 2016 in Santa Monica, Calif., by Painter and fellow auto industry veteran Georg Bauer. The company developed a mobile app that lets consumers obtain vehicles online as an alternative to a short-term rental or a long-term lease. According to Fair's website, it now operates in 17 states. Early investors included BMW i Ventures and Penske Automotive Group Inc.

Painter resigned Oct. 30 as CEO, saying in a memo to employees that he had "concluded that new leadership is needed to sharpen the company's focus on its core strengths and to pave the way to profitability," according to The Wall Street Journal. Adam Hieber of SoftBank took over as interim CEO.

In a telephone interview, Painter said he continues to believe in Fair's concept: allowing consumers to pay an open-ended monthly subscription for late-model used cars that Fair purchases from dealers, including a "start fee" large enough to keep consumers from constantly turning over their vehicles. But, he admitted, the underlying finances have proved challenging at his latest venture as an automotive retail disrupter.

"The jury's out on whether or not we were going to be successful, you know, and whether or not we're going to be long-term profitable, but that's obviously what we're hoping and what we are working towards and what we are committed to getting to, for sure," Painter told Automotive News.

Painter said the executive shuffle was required "because we're going through a scaling moment and we need to prioritize. ... I invited Adam and the team from SoftBank in. The whole reason we chose SoftBank in the first place was really how capital-intensive this business was, and, to some degree, I'm relieved that I've got partners that are here to help me figure this out right now."

Fair's business model, Painter said, works somewhat like an automotive version of a real estate investment trust, which uses borrowed money to purchase and operate income-producing commercial real estate.

Fair borrows funds from lenders to buy used vehicles for subscribers, who pay an upfront cost and monthly fees to use the vehicles, as well as cover costs of registration, taxes and maintenance. The interactions, from choosing a vehicle to making payments, are conducted through the app.

Painter said about half of Fair's 65,000 active subscribers are ride-hail drivers and that the average monthly payment among subscribers is "north of $500 per month."

The company's woes were evident in online comments about its app. Customers complained about rapid increases discovered in Fair's "start payments" — nonrefundable upfront payments that consumers make with each vehicle they obtain through Fair. Comments indicated that start payments that were $800 jumped to $3,000, or a start payment that was $1,400 was now more than $5,000 for the same vehicle.

Painter asked for patience from Fair's customers.

"I would probably give us a couple of weeks, maybe even a month, to figure out how to remap all of the pricing," he said.

"We're hitting a scaling moment — 65,000 cars is over $700 million worth of cars. We have facilities that are well over a billion dollars now. The dollars involved mean that we have to get it right, now more than ever. It's just the reality of our scale. We're not an experiment. This is no longer a startup. And if you don't have everything lined up to scale, you shouldn't hit that button."