Used-vehicle subscription service Fair is expanding into longer-term leases for pre-owned vehicles, offering consumers lower rates than its month-to-month option in exchange for two- or three-year lease terms.
The Santa Monica, Calif., company said Thursday that the options would lead to incremental savings for customers as the cost of the transaction is spread over a longer period. A two-year lease will cost, on average, $40 per month less than a monthly subscription, Fair said, while a three-year lease will cost an average of $70 per month less.
New CEO Brad Stewart, who joined the company in May, alluded to the prospect of longer lease terms shortly after taking the top job. Stewart said they're intended to offer more flexibility to budget-conscious consumers or those who may not need to quickly swap vehicles, which could help Fair win over more customers and grow the business.
The company said the model also offers alternatives to vehicle ownership, particularly in the used-vehicle market.
The longer-term lease options were piloted first in California and are now available in Florida, the two states in which Fair operates. Stewart said within the past 30 days, up to 35 percent of customers have chosen a longer-term lease, and "almost exclusively" for three years. He added that he anticipates that at least half of Fair's customers will be in longer-term leases within the next 12 months.
"This is part of our vision, which is to ultimately [match] the customer's unique needs in terms of the length of the program to the products that we're offering," Stewart told Automotive News. "Right now, I think we've made a meaningful jump" in providing "the best of both worlds."
Fair is based on a mobile app and allows consumers to drive a used vehicle on a subscription basis after paying an initial "start" fee, followed by a monthly payment. Roadside assistance, limited warranties and routine maintenance are included in the monthly payment.
The product expansion comes as the company has struggled to make its month-to-month subscription model profitable. Stewart said he doesn't believe expanding into longer-term leases signals that a short-term subscription model is not sustainable, but rather that the market for a month-to-month option is not as large and, thus, offering that option exclusively would not help the company grow.
"Ultimately," he said, "we're trying to build a national brand that stands for elegance and sophistication in car transaction and car financing."
Fair, founded in 2016 by Scott Painter, now operates only in California and Florida after it pulled back from a number of markets. Stewart said the company needs to expand into more markets, but for now is focused on meeting its goals in the two states before it considers entering a third location.
He added that the company also is considering future products, including a design-your-own lease program and a lease-to-purchase offering.