The location where AmeriTrust Financial chose to set up shop is subtly telling. Silicon Valley is not Fort Worth. Fintech disruption is less common in this city than oil money and cattle auctions. However, a former Tesla executive named Jeff Morgan has spent the last year persuading billionaires and institutional investors that autonomous technology, electric cars, and buy-now-pay-later schemes are not the next big thing in American auto finance. Morgan is sitting somewhere in a modest office park in Texas. It’s leases for used cars. The dull kind. The kind that no one else seems to be interested in writing.
It’s probably interesting because it’s a strange hill to climb. Morgan spent years assisting Tesla in figuring out how to lease cars nationwide, so he saw firsthand how difficult leasing is when the OEM safety net is removed. In their entire lives, the majority of used car dealers have never made a lease offer. They wouldn’t know where to begin. The paperwork alone, the state-by-state title forms, the residual calculations—it’s the kind of administrative maze that silently destroys brilliant ideas before they even make it to the showroom floor.
Morgan frequently cites startling statistics that are worth considering. Roughly 25% of financing for new cars comes from leasing. The market for used cars is roughly three times bigger than that of new cars. And yet leasing a used car? about 3%. After removing certified pre-owned programs from the major manufacturers, some industry observers estimate the number to be even lower, closer to 0.3%. It’s not a gap, but a chasm. It remains to be seen if AmeriTrust can truly cross it.
To be honest, the pitch to dealers is clever and mechanical. Send in a single application. Get the loan and lease answers side by side in a matter of minutes. pre-filled agreements. Real-time inventory calculators that produce penny-accurate payments instead of the rough estimates dealers usually wave around. financing on the same day. It seems that AmeriTrust is more concerned with removing the friction from the dealer’s side of the desk—where most lease deals quietly die—than it is with reimagining the customer experience.
As this develops, it’s difficult to ignore how, over the past two years, affordability has permeated almost every discussion about automobiles. Prices for used cars increased and continued to rise. Loan terms were extended to 72 months, then 84 months, and rumors of 96-month agreements are currently circulating. Every extension reduces a monthly payment while simultaneously increasing negative equity. There is some logic to Morgan’s claim that leasing is a better way to lower a payment without trapping buyers. It’s unclear if American consumers, who were brought up with the notion of eventually owning a car, will accept that reasoning.
Reasonable doubts have been voiced by auto press skeptics. It is difficult to predict residual values for used cars. Collateral may be punished by subprime lenders. Furthermore, it’s actually difficult to underwrite profitably without scale, which is the historical reason used-car leasing hardly exists, not because no one considered it. AmeriTrust is wagering that technology and patient capital from its billionaire backers will be able to solve problems that previous decades’ underwriters were unable to.
Talking about this story, there’s a sense that AmeriTrust will either grow into a quiet billion-dollar company in five years or end up as a cautionary note in some textbook. In its early days of leasing, Tesla encountered similar skepticism. When CarMax attempted to standardize the retail of used cars, it also failed. Businesses that break into underserved markets are typically rewarded by the market—as long as they don’t break their own teeth in the process. As of right now, Morgan is hiring, growing state by state, and training dealers who have never signed a lease. There it is, the trillion-dollar market. There was always going to be someone who tried it.