Big Ideas: “We can lease cars without any long-term commitment or physical paperwork” With Scott Painter, CEO of Fair

I actually think auto customers have been living in a “Black Mirror”-style reality for many years now. Everything in automotive is set up to favor the lender, and no company has come along to seriously question this and offer a valid alternative until now. The current system forces customers to shoulder the financial burden, long-term […]

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I actually think auto customers have been living in a “Black Mirror”-style reality for many years now. Everything in automotive is set up to favor the lender, and no company has come along to seriously question this and offer a valid alternative until now. The current system forces customers to shoulder the financial burden, long-term commitment and steady depreciation involved in owning a car and essentially mandates that they become instant automotive experts the second they step on a car lot. To me, that’s an experience as foreign and discomforting as any dystopian storyline that “Black Mirror” could come up with.

Asa part of my series about “Big Ideas That Might Change The World In The Next Few Years” I had the pleasure of interviewing Scott Painter, the founder and CEO of Fair. Scott is a serial entrepreneur in the automotive and technology industries who has founded dozens of disruptive companies over the past 25 years, including TrueCar and CarsDirect, both of which ended up going public. Painter’s new venture aims to bring the automotive customer experience into the digital age in a single app that lets users shop, sign, and pay for a pre-owned car entirely on their phone.

Thank you so much for joining us! Can you tell us a story about what brought you to this specific career path?

Ithink a lot of people assume that anyone who’s made a career in the automotive industry is a total, unabashed car nut. And while I certainly appreciate and admire automobiles, I found myself far more attracted to the processes around how we buy, sell and even maintain them. Even as a teenager, I found I had a natural ability for negotiation and a certain stubbornness that just happened to suit a career in the car business. And the more I learned about how it worked the more I simply didn’t understand why it had to operate in such a fundamentally different way than every other industry in existence, and why people just seemed to accept that. It’s quite literally the problem I’ve been trying to solve my entire adult life.

Can you share the most interesting story that happened to you since you began your career?

For me, it’s honestly having the tremendous fortune to be working at the intersection of transportation and tech at this specific moment. How we get from Point A to B — and how we pay for it — is being disrupted more significantly than at any other time in modern history, from ridesharing to electric and autonomous cars to questioning a lot of the underlying assumptions about how we own and drive vehicles. Being in mobility now is like being in computers in the 1980s or at the start of the social media revolution a decade ago. Everything is in play and up for grabs right now, a feeling that’s validated by the huge investments being made in the space by outside entities and incumbents alike.

Can you tell us about your “Big Idea That Might Change The World”?

Sure. Fair is an app that basically puts the entire end-to-end process of getting a car on a customer’s phone. Users can enter their name and phone number to shop pre-owned cars with all-in monthly payments they can afford, sign for the one they want with their finger, then pick up their keys and drive it for as long as they want — with no long-term commitment or even physical paperwork. Essentially, we’re trying to bring the auto industry into the click-and-get-it Amazon age.

Some people might think the car industry has been operating digitally for years because they see websites that let them shop for cars or apps that can help them line up financing. But those tools all eventually lead to the same outdated and friction-filled dealership experience that auto customers have been putting up with for decades, and have loudly said they don’t want anything to do with.

Fair is a totally new invention that allows a customer to get exclusive access to a car by making an upfront start payment and then an all-in monthly payment that includes practically everything they need to drive, including roadside assistance, a limited warranty, routine maintenance, even optional insurance. Once they’re up and running with Fair, they’re just paying for their car by the month for as long as they want the car and can turn it in any time with just five days’ notice.

How do you think this will change the world?

Fair has already begun to fundamentally change our relationship with cars in several important ways.

For one, it totally reclassifies the car from being an asset we have to own to being a service we experience. Buying a car has always been a weighty, hassle-laden commitment that is equal parts terrifying and exhausting, and is predicated on the idea of borrowing a huge amount of money to underwrite the full price of an asset that will consistently depreciate over time. Absolutely none of this makes sense for the modern consumer. After all, the monthly payment of a car is oftentimes not much more than what we pay every month for our phones. Given this, why would we dedicate a good chunk of our available credit to buy a car only to be locked into driving it for years on end?

Secondly, because Fair is not based on long-term financing, we can make getting a vehicle more attainable, especially for the millions of people who can’t qualify for a traditional loan or lease. We can accomplish this because we actually buy the car in cash once a customer selects it in the app and will then let them use it for as long as they want. We’re not lending our customers any money or locking them into a long-term commitment, which means we can often accept customers with imperfect or even non-existent credit. While anybody with a credit score under 600 if going to be hard-pressed to get a decent auto loan, Fair can often accept customers with a lower credit score as long as they have a way to pay. This grants access to mobility for a huge chunk of Americans who would otherwise have to subject themselves to a high-interest loan or go without a vehicle altogether.

But the checkmate moment we’re really after is to eliminate auto debt. At $1.2 trillion, it’s bigger than credit card debt, just a shade smaller than student loan debt, and has wreaked just as much havoc on the financial futures of Americans as either of those. Both the length and payments for the average car loan are at all-time highs and a record number of Americans are 90 days or more behind on their payments; it’s literally an albatross around the necks of consumers that we want to eradicate.

Keeping “Black Mirror” and the “Law of Unintended Consequences” in mind, can you see any potential drawbacks about this idea that people should think more deeply about?

I actually think auto customers have been living in a “Black Mirror”-style reality for many years now. Everything in automotive is set up to favor the lender, and no company has come along to seriously question this and offer a valid alternative until now. The current system forces customers to shoulder the financial burden, long-term commitment and steady depreciation involved in owning a car and essentially mandates that they become instant automotive experts the second they step on a car lot. To me, that’s an experience as foreign and discomforting as any dystopian storyline that “Black Mirror” could come up with.

Was there a “tipping point” that led you to this idea? Can you tell us that story?

I like to think I’ve been chipping away at fixing the unfairness of the automotive customer journey my entire career, but only recently has technology advanced to the point of enabling a true tipping point for a comprehensive consumer solution like Fair.

I started CarsDirect in the late ’90s which, among other things, introduced the concept of digital, upfront pricing by giving customers access to an actual figure a dealer is asking for before they ever even step foot on a lot. At TrueCar, we took this a step further by letting customers know what they should be paying for a car.

Both of those were important, yet admittedly incremental improvements to a process that remained fundamentally broken. I knew the problem wouldn’t truly be solved until people could get a car the same way they can stream a playlist or order something from Amazon. But the only way to make that happen was to fund the transaction ourselves and eliminate the need for third-party financing, which has always been the major obstacle in creating a seamless, start-to-finish digital auto transaction. And since cars are a steadily depreciating asset that we would have to own in this scenario, we had to have scientific-level clarity around what those cars would be worth now and at every point in the future. Unfortunately, technology just couldn’t provide this until relatively recently. So in terms of a “tipping point” that allowed us to pursue an idea like Fair, it really came down to machine learning developing to the point it could accurately chart a vehicle’s future value, which is fundamental to our business.

What do you need to lead this idea to widespread adoption?

One of the traditional obstacles to growth in the auto industry is that the laws and regulations governing it vary greatly, so achieving scale requires a dedicated state-by-state legal exploration and campaign. This has proven extremely challenging for some new business models in our space, but we’re experiencing an overwhelmingly positive reaction as we continue to scale nationwide because Fair represents a tremendous business opportunity — not competition — to the existing dealer framework. We depend on our dealer partners to supply vehicles for our customers, and since a Fair transaction represents a sale to them, it really has turned out to be the win-win we hoped it would. Even with the disjointed regulatory environment we’ve had to face, Fair is now active in almost 30 major markets across the country, which makes it available to almost 70 percent of American consumers.

I think the bigger challenge ahead of us, quite frankly, is simply changing how consumers think about getting a vehicle. We’ve all been conditioned to think we have to borrow a massive amount of money to buy a car that will steadily depreciate while we own it. We don’t question why we’re forced to drive our cars well after we fall out of love with them, or why we’re subjected to huge penalties or a massive credit hit if our situation changes and we can’t afford to pay any more. Fair is an entirely new way of accessing a vehicle, and our main obstacle may well be simply the time it takes people to shift their thinking.

What are your “5 Things I Wish Someone Told Me Before I Started” and why?

Boy. Five? That’s a lot. I’m pretty sure I’d have ignored most of the advice people would have tried to give me early on anyway. You’ve really got to make the mistakes on your own to learn. How about I give you one instead? A pretty practical one for the entrepreneurs out there. And it’s this: Before you start ramping up your company, take an accountant to lunch. I’m serious. There are so many financial and investment documents heading your way that they will literally bury you if you don’t understand the basics of what they’re about. Find a Big 4 accountant, schedule an hour at the restaurant of their choice, and spend 15 minutes each going over a balance sheet, an income statement, a statement of cash flow, and a pro forma. They are the four accounting documents that any startup founder needs to understand inherently. Learn how each of these documents differs, and what all the lines and columns mean. Without this knowledge, you aren’t ready to run a company. Period. Everybody who is going to consider investing in your company will speak Bible and verse from these documents. And if you can’t, it will show.

The future of work is a common theme. What can one do to “future proof” their career?

First off, you never want to think about your career as a way to make money because if you’re plotting about how you’re going to make your next paycheck or you’re thinking about your next job, your priorities are out of whack with what should be the central focus of your career: solving a problem. For some people, this is a big problem. Others focus on more specific things. But too often I meet people who are thinking about their career progression based on their title or how much cash they get paid — and that’s not a career path. That’s really just being opportunistic, and I don’t think that really adds a lot of value to the career narrative you should be trying to create. If you recognize and genuinely solve a problem, you’ll get compensated for it. So I would encourage anybody to think about the big thing they want to tackle and then everything else organizes behind that. If you’re doing everything authentically behind a central mission, then everything will unfold in front of you naturally.

Based on the future trends in your industry, if you had a million dollars, what would you invest in?

Fair, of course.

Which principles or philosophies have guided your life? Your career?

The last couple of years have really reinforced the lesson of making sure that you’re picking good people to be around you. Because even if things go bad, having good people around will make you feel a lot better about it — plus you don’t have to spend your time trying to outwit and outlast people with intentions that don’t align with yours. So just always be focused on hiring high-integrity people.

Can you share with our readers what you think are the most important “success habits” or “success mindsets”?

Without a doubt, an entrepreneur’s most valuable quality is an almost blind level of optimism. There are going to be so many setbacks and disappointments in the path of a young company that it’s not enough to just block out downside thinking; you almost have to be incapable of it. Of course, you should listen to and incorporate healthy questioning around your business model or strategy, but you need to so impassively handle rejection as to almost be oblivious to it. Pitfalls and seeming disasters are part of the regular cadence of being an entrepreneur and you’ll hire plenty of people to anticipate and fix the countless problems that come with that. But all your focus should be on the white space ahead that you’re trying to fill. If you sit around worrying about how things might break, your company will die on the launchpad. I guarantee it.

Some very well known VCs read this column. If you had 60 seconds to make a pitch to a VC, what would you say? He or she might just see this if we tag them 🙂

Fortunately, our business has grown to the point that the kind of investments we’re pursuing would require much more than a 60-second pitch. Beyond what I’ve already talked about, though, I’d probably point out that Fair is literally the first innovation in how people pay for cars since the advent of leasing more than 50 years ago and allows us to participate at all levels of the automotive industry’s $9.8 trillion total addressable market — from retail to insurance to maintenance and beyond. Our competition isn’t other companies in the space; it’s literally the concept of leasing and auto lending.

Beyond that, our consumer business is bolstered by our ongoing partnership with Uber, which allows their rideshare drivers to get a Fair car via the Uber app, pay for it weekly, and turn it in any time they want. With SoftBank serving as a mutual investor in both us and Uber, we can essentially eliminate any supply-side growth issues Uber might face by being a permanent solution for anyone who wants to drive for the Uber service.

How can our readers follow you on social media?

Fair can be found across all social platforms at @FairTheApp, while I can be found on Twitter at @TheRealScottPainter, as well as on LinkedIn.

Thank you so much for joining us. This was very inspirational.

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