In describing his company’s strategic alliance with Ally Financial, Fair chief executive Scott Painter used a locomotive analogy.

“In a lot of ways, Fair is the train. And Ally is the railroad,” Painter said in a phone interview on Tuesday.

“We get just a tremendous amount of liquidity and distribution through Ally, and I think it’s a very complementary partnership in the sense that we don’t do the same thing. We provide Ally with a product for both their customers — dealers — and the dealer’s customers by providing them with access to a unique product like Fair. So I think it’s a win-win,” he said.

To continue the metaphor, the first two stops on this Ally-Fair express are in remarketing and flexible consumer financing.

Through the strategic relationship between the two companies announced Tuesday, Ally is providing its SmartAuction platform as a remarketing solution for returned cars in the Fair program.

Meanwhile, Fair will be able to offer flexible car financing through Ally’s Clearlane program.

Here’s how that shakes out.

If and when a consumer exits a Fair agreement and the vehicle is returned, Fair gives the originating dealer the first shot at buying the car back. If the dealer chooses not to buy it back, the car will be offered to other dealers on SmartAuction.

As far as the Clearlane piece, Southern California dealers using this multi-lender, digital financing platform from Ally will be able to utilize the Fair mobile app for consumers who wouldn’t qualify for traditional financing or want other options.

The two companies said in a news release they are considering expanding this piece of the agreement nationally.

“Fair is a leader in the evolution of used-vehicle financing and we’re thrilled to work with such a trailblazer to support a flexible solution for the benefit of both consumers and dealers,’’ said Tim Russi, president of auto finance for Ally, in the release.

“We see this as a starting point for our companies to work together and are engaged in exploratory discussions on several other fronts to expand our relationship,” Russi said.

So perhaps even more stops on the aforementioned metaphorical railroad.

'We need access to liquidity'

As it stands, the means to liquidity and distribution that Ally can provide Fair is something that’s paramount to a company that has its sights set on national scalability.

“What’s important to understand about our business model is that we’re both a buyer of vehicles and a seller,” Painter said. “We need access to liquidity — not just because we don’t want to hold inventory, but because in order for our access to capital to scale, we need to be able to see cars come in and out of our system, very much the same way that a dealer who operates a flooring line has to operate their credit lines.

“So, Ally is a tremendous enabler for our business and great potential partner for us, and we’re thrilled that they see it the same way,” he said. “They just give us tremendous access to immediate liquidity and that is one of the big challenges to solve in a business like ours, so we’re thrilled about the partnership.”

Furthermore, the fact that Ally’s SmartAuction platform is an online auction gives Fair a remarketing channel that aligns with its digital-first operations on the consumer-facing side.

“The SmartAuction channel for us is consistent with our belief that the entire sale of a vehicle can done without physical inspection. It can be completely digital and, therefore, totally efficient,” Painter said.

On the Clearlane side of the equation, Fair is going to wait to reveal “tactical detail” of how that solution is deployed, but Painter did note that, “what we will be is another financing option for dealers in the Ally network to be able to get deals done. And in many cases, it’s going to be deals that they could not have gotten underwritten previously.

“So, I think it’s another example of where there’s a real complementary partnership between Ally and Fair,” he said.

Partnerships on path to scaling

Since its debut in early fall, partnerships have played a crucial role in Fair’s path to growth and scalability. Fair launched a partnership with Uber in January to give the ridesharing company’s drivers a flexible ownership option.

Along similar lines, Fair purchased the active lease portfolio of Uber’s Xchange Leasing portfolio. Fair then bought certain assets of the Skurt vehicle-delivery app in February.

That aimed to help Fair scale vehicle delivery, pickup and fleet maintenance.

Asked what drives the company’s partnership mentality when it comes to scaling, Painter said: “I think that there’s obviously an explosion of innovation going on in the flexible ownership space, in general, and I think that there’s a real move to thinking of the car as a service, across the industry. So, obviously for us, it’s about some of the big building blocks.

“Fair not only focused initially on a phenomenal product that’s unique and is built around some very clear value propositions for the consumer, but we also did it with a brand name that we think scales not just here in the U.S., but globally,” he said. “And obviously that also means that we need to have all of the core ingredients that make what we do possible.

“That’s going to ultimately be about access to capital, liquidity for the vehicles that are coming out of the system and distribution for the product to dealers as partners,” Painter said.  

“Anything that can help us to scale more quickly and to remove friction from the business and risk from all dimensions of the business,” he said. “Risk is sort of a really important thing to be aware of when scaling a business, not just innovating. The things that stand in our way are pretty meaningful. And so whenever we can see ways to check some of those boxes and really test the theory about how consumers feel about our product and our brand, without letting other things stand in the way, we like those kinds of partnerships.

“And again, I think we’re very much aligned with where the industry is headed on this. I do think that traditional car ownership is fundamentally changing and I think we’re going to be a large part of that equation. And so having, I think, almost tectonic partners is where we need to be thinking.”

For more on Fair, see Auto Remarketing's podcast below with Painter and Fair co-founder Georg Bauer, recorded at the J.D. Power Automotive Summit last month.