Fair secures $100M debt facility from Ally

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Fair, the used-vehicle leasing subscription service headed by auto retail heavyweights, has secured another line of credit, this time from a Detroit auto finance giant.

Ally Financial Inc. will provide Fair with a $100 million debt facility, the companies said Tuesday, deepening the lender’s relationship with the subscription service and underscoring Fair’s ability to attract significant capital.

As part of the deal, Ally is making an equity investment in the company, according to Fair. The subscription platform would not disclose the amount, but said Ally will become a minority shareholder with the investment.

Ally’s contribution brings Fair to a total debt facility exceeding $1 billion, according to one of the company’s co-founders. Fair uses its debt facility, which functions through a subsidiary, to buy vehicles for its consumer business as well as its partnership with Uber.

SoftBank-led funding
Fair — led by former TrueCar CEO Scott Painter and Georg Bauer, former head of financial services for BMW, Mercedes-Benz and Tesla Europe/APAC — launched in August 2017 and has rapidly expanded.

“We have developed a presence along two verticals out of the gate,” Bauer told Automotive News. “We focused initially on our consumer business, but we have also developed a very strong and powerful partnership with Uber along the way.”

In May, Fair launched its Fair Rental Program with the ride-hailing app to increase access to vehicles for prospective Uber drivers. Uber also reportedly sold its leasing company to Fair in 2018.

Last year, Japanese technology giant SoftBank Corp. led a $385 million funding round for Fair, which included investments from Exponential Ventures, Munich Re Ventures’ ERGO Fund, G Squared, Expanding Capital and CreditEase.

Ally credit line
With Fair, consumers can shop for used-vehicle leases with no term through a mobile app. They scan their licenses to get prequalified for a range of monthly payments that cover maintenance, a warranty, insurance and roadside assistance. Customers can also return their vehicles whenever they want.

Ally, one of the largest auto lenders in the U.S., is the most recent company to invest in Fair’s credit line for vehicle procurement. Credit Suisse, Goldman Sachs and Silicon Valley Bank provide the remaining $900 million in credit to Fair.

Fair’s used-vehicle inventory tends to fluctuate at or below 100,000 vehicles, Bauer said. Inventory comes from manufacturers and the nearly 4,000 independent and franchised dealerships that work with Fair, he said. The Santa Monica, Calif., company employs more than 600 people.

Fair has used two of Ally’s digital tools since forging a partnership in 2018. It’s using Clearlane, the bank’s digital financing platform, in a pilot program in Southern California and South Florida, and the digital wholesale auto auction tool SmartAuction to acquire and remarket vehicles.

Bauer said the company plans to continue scaling up, but will focus on creating a sustainable business.

“We might take a look at additional markets but nothing is decided yet. We are expanding into more states throughout the U.S., building more dealer partners,” Bauer said.

Fair operates in 21 states and has served 45,000 customers.

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