Cheap Long-term Car Rentals from Fair
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If you’re a citizen of the United States, there’s a little-known trick that lets you avoid paying taxes. Just make less than $100,000 a year and spend no more than 30 days a year in the United States. That’s easy enough to do, but the problem is that during the 30 days you spend a year in the United States
smoking weed spending quality time with your family, you need a car to drive. Owning a car is not an option if you spend that little time in the States. It’s already bad enough that the majority of people only utilize their cars about 5% of the time, but when you only spend 30 days a year in the country, that number gets far worse. Sure, you can rent a car. Let’s price that option for a 30-day trip back to the States in April of this year:
That’s actually a decent price at around $40 a day, that is until you tack on $10 a day for insurance at least bringing the total cost to just under $1500 for an intermediate size car. That’s still a decent price at $50 a day for an intermediate size car, but not when you compare it to a monthly lease payment of around $231 a month for the Toyota Corrola (that includes the $3,500 down at signing). Forgetting about cost for a second, there’s actually a much bigger problem that may not be so obvious to most common folk. Just how the hell are we going to justify the six-figures we all spent on getting our MBAs if we have to drive around town in a Toyota Corolla looking like a bunch of tools? It’s becoming quite clear that the traditional car rental model is broken in more ways than one. Then we came across a really cool startup that may just be what the doctor ordered.
Founded in 2016, Santa Monica, California startup Fair has taken in $16 million in seed funding followed by a whopping $1 billion in debt financing from the likes of Penske and BMW to develop their “flexible car ownership” platform. One reason these firms are willing to pony up such a big amount of cash is the pedigree of the founder, Scott Painter. During the 49 years he has spent on this earth, Mr. Painter has founded multiple companies including CarsDirect (acquired for $1.1 billion) and TrueCar, a publicly traded company with a market cap of just over $1 billion. Here’s what he plans to do next.
Fair lets you shop, get approved and pay for your car all on your phone, with just a driver’s license and bank account. You pay a “start payment” when you get your car and monthly payments as low as or lower than a typical loan or a lease. The package comes with a limited warranty, routine maintenance (oil and filter changes, tire rotations, and multi-point inspections), and roadside assistance.
Once you’ve picked your car, you can pick it up at a local dealership in a matter of minutes as opposed to hours of being harangued by a car salesman. You don’t even need to have a credit score as their platform sifts through your bank account to determine just how much of a monthly payment you can afford. If the examples they give on their website are indicative of the monthly payments you might expect, they’re certainly more affordable than a long-term car rental:
One way that they ensure you get the best price is by using artificial intelligence algorithms to process pricing data which leads to a price that they guarantee is less than any comparable lease offering. The app is only available on iOS at the moment and restricted to the State of California. Christian Wardlaw over at the New York Daily News gave the app a whirl and here’s what he had to say about the experience when compared to the traditional method of leasing:
On the Fair app, I found a dark blue 2016 Honda Civic LX sedan with a continuously variable transmission and 18,571 miles on it. This certified pre-owned (CPO) vehicle, based on 15,000 miles of driving each year, would cost $242 per month plus tax, and the start payment would be $600. Next, I went to Honda’s website and built a dark blue 2017 Honda Civic LX sedan with a CVT. Using the site’s payment calculator, a 36-month lease allowing 15,000 miles per year would cost $221 per month plus tax with $600 due at signing. That’s $21 less than the Fair car.
That’s not exactly an apples-to-apples comparison though, since there is a huge difference between being locked into a contract for 36 months and being able to exit a contract with 5 days’ notice. Still, this shines the light on the “start payment” which certainly comes into play if you’re considering renting the car for just one month. Here’s the cost per month based on duration:
- Month 1: $842 per month
- Month 2: $542 per month
- Month 3: $442 per month
- Month 4: $392 per month
- Month 5: $362 per month
It looks like we could rent the car for just one month and still be under the cost of a traditional car rental, though the Honda Civic is considered a “compact” and we wouldn’t be seen dead in anything less than an entry-level BMW because MBAs. To be fair though, you would be hard pressed to find a car rental that would be less than $30 a day, so if you just need 4 wheels and a seat for a month, Fair still comes in below traditional long-term car rentals which usually offer discounts in weekly increments.
Fair isn’t alone in their plan to enable “vehicle ownership as a service”. The bright minds over at CB Insights identified car subscriptions as one of the top 15 tech trends to watch for 2018 while citing that auto manufacturers such as Volvo, Lincoln, and Porsche are all offering various subscription services for their vehicles. A key difference between these services and Fair’s offering is duration. As an example, the Volvo offering requires a one-year commitment:
We can see now that this differs from a lease in two main respects. The first is that you can rent a car for as little as 35 days (taking into account the 5-day notice needed to cancel the car subscription) and then, of course, the fact that just about everything is included in the monthly price.
Apple co-founder Steve Wozniak was quoted as saying “cars will only be a luxury item that people can subscribe to rather than own” which is exactly the direction that Fair is taking us. While we were thrilled to bits because this startup offers a solution for long-term car rentals, the bigger picture here is one of using technology to make the world a better place. Providing a platform that allows for flexible car ownership makes it easier for people to own cars whenever it suits them which (all things being equal), which should result in increased usage of vehicles and a significant reduction in the number of car salesman who will now have to go find real jobs so they can start adding some value to society.