

What if you need a car, but you have a fear of commitment?

To buy a car, an auto loan locks you in for 5 or 6 years. A lease is a shorter term alternative, but it's still a 3 year deal. However, there's a third, even more flexible option: A monthly subscription.

Enter Fair, which is two-year old startup where you choose a used vehicle, get approved and complete the transaction — all on your smartphone app. The service falls somewhere between a long-term car rental, and a shorter term car lease. Today, Fair is available in 22 cities and 12 states, with plans to go national by year's end.

"What we're doing is giving mobility without going into debt with a car loan," Fair founder and CEO Scott Painter told CNBC's "On the Money" in a recent interview.

"Americans are already at a place where we understand that we pay for what we want to use," he said, adding that Fair promotes the idea that a car "doesn`t have to require this big burden of debt."

It's an idea that's already got some adherents in car manufactures like BMW, Volvo and Cadillac, all of which are testing their own auto subscription models that give customers more flexibility to acquire new vehicles.

Painter explained that Fair clients pre-qualify on the app by scanning a driver's license. After selecting a car and linking a bank account, the used car can be picked up at the dealer.

"All the cars that are in the Fair app are located on dealer lots and we partner with dealers," said Painter, the former CEO and founder of TrueCar and CarsDirect. "Fair actually acquires the vehicle once you select it, and then we enter into an agreement with you as our driver to subscribe to that car. So for dealers this represents a sale."

According to Painter, Fair has 20,000 customers and is adding 500 a week. He added that the average Fair user is paying a monthly fee of $360 a month. Available vehicles range from a Nissan Versa subcompact for $125 a month, all the way up to a McLaren 570S Coupe (which you can drive away with, if approved), for about $4,000 a month.

Before a driver gets their used car, Fair requires an upfront fee they call a "start payment" that's "based on the value of each vehicle." After 3 days or 100 miles, the start payment is non-refundable. And if you want to change your car, each new vehicle requires a new 'start payment."

Bundled in the monthly fee is a warranty and standard roadside maintenance. For an additional fee, Painter added that Fair offers month-to-month auto insurance, or drivers can use their own policies.

He specified that Fair makes money when customers "pay month-to-month [and] we generate fee-based revenue" — but accurate pricing of used cars is key to making a profit.

"Actually, the reason we're able make money at it is because we understand today what a car is worth using data," Painter said.

"These markets for new and used cars have become so transparent, and we have absolute clarity around what a car is worth, just based on a VIN number and a license plate," he added. "We can see mileage, age, condition, repair history and understand what that car is worth."

With its built-in advantages, the subscription model of car ownership is "definitely going mainstream and becoming a true alternative to…the hassle of getting a car loan and going into debt to buy a depreciating asset."















On the Money airs on CNBC Saturday at 5:30 am ET, or check listings for air times in local markets.

