Fair’s board has not yet approved a plan, and bankruptcy is not guaranteed, though a decision on the debt could come within months, Stewart told Automotive News. The company owes $315 million in senior secured debt to SoftBank, in addition to other unsecured liabilities, he said.
The vehicle leasing model “required it to raise a lot of debt, and the company has not been able to repay that debt and doesn’t have the ability to pay it,” he said. “And for us to raise the capital we need to pursue the marketplace business requires that debt to be eliminated or meaningfully reduced.”
Stewart said expanding Fair would be difficult because the demand for used-vehicle subscriptions and leasing products is limited compared with demand for cash or financed vehicle purchases. He added that some loan terms and new-vehicle leases also are cost-competitive for some consumers, and a short-term vehicle subscription comes with higher costs.
Fair’s brand and technology instead can serve a marketplace model that facilitates a vehicle transaction between consumers and dealerships without carrying the risk on the company’s balance sheet, he said.
The company’s model, he said, would be 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. In this case, us.”
Stewart said Fair would handle an entire digital transaction, including finance and insurance and paperwork. Partnering dealerships would arrange test drives, trade-ins and vehicle delivery as well as longer-term service needs, he said. Consumers would transact digitally from Fair, which would purchase the vehicle in a wholesale transaction from the dealership and sell it directly to the buyer without holding it long term on the company’s books, he said.
“In my opinion, the choice and the right path forward was incredibly obvious,” he said. “And so we chose not to go raise money for our leasing business and we are now choosing to go raise money for our marketplace business.”