Scott Painter

USED-CAR buyers in California are being offered a flexible car payment system similar to a lease but they have the option of handing the car back to the dealer with just five day’s notice.

The concept, which is being rolled out across Los Angeles dealerships, is designed to keep buyers from being locked into long leases. Its backers claim used-car buyers will replace their cars more often and potentially source their replacement cars from the same dealership.

It is suggested the process will increase stock turn from the same number of buyers as they may own two or more cars over the equivalent time of a three-, four- or five-year lease.

New “owners’ get a five-day trial period (providing they drive less than 100 miles) and after that can return cars at any time with five day’s notice and no penalties (other than poor condition adjustments).

The new concept, run under the brand banner, “Fair”, is the latest automotive venture by US-based serial entrepreneur Scott Painter. Mr Painter developed Cars Direct, one of the first online auto sales companies in the US. This was followed by a dealer leads website, TrueCar, which accumulated 10,000 dealer clients.

Georg Bauer

He went on to launch Beepi which raised $200 million to arrange the sale or leasing of used cars between sellers and buyers on a phone app. Beepi took a nine per cent commission on the sale. Mr Painter closed the company in February this year and it is being broken up to pay creditors.

Fair, which is a business run by Painter and former Tesla and BMW financial services chief Georg Bauer, claims that it does not lock the buyer into a traditional lease.

The key difference is that the cars offered on the app are in dealer stock.

It allows purchasers to choose a vehicle on the Fair phone app, get approved with a driver’s license and bank account and then pick up the vehicle from the dealership.

When the delivery is made, Fair buys the car from the dealer. When the owner returns the car, Fair will offer it to its customers via the app, offer it to the dealer to repurchase at a wholesale price or auction it.

It is designed for people who want a car on demand but don’t want to be locked into ownership over a long term.

Mr Bauer said that a traditional lease can take customers out of the dealer market for three, maybe five years.

Mr Bauer said Fair made it easy for consumers to have a vehicle and the flexibility would bring them into dealerships more frequently. He said Fair receives a commission on the sale.

Vehicles available can be up to six years old and have up to 60,000 miles (100,000km).

Mr Bauer said Fair has now partnered with 15 dealership groups in the Los Angeles region and lists about 900 vehicles. It now plans to expand through California by the end of the year and across the country next year.

Others are experimenting with similar flexible lease-style programs including Lynk & Co – the Geely-owned brand that launches in the US in 2019 – and Tesla Network, which will let owners rent out their cars.

The alternative ways that people use and finance cars may become attractive to dealers, said Alan Haig, president of dealership advisor Haig Partners in Florida.

Mr Haig told Automotive News: “Big retailers such as AutoNation, even manufacturers, are trying to make pricing more transparent.
“Dealers will be increasingly open to selling cars online.”

By Neil Dowling and John Mellor