There have been adverts on the radio from a company that wants your money so it can buy cars that it then leases out. The ad says returns of 8-11%. If this does actually happen, it's not a bad return in current low interest times.
What does the forum think?
I presume that in order to be a lessor of a car, one enters the world of financial regulation, which prevents DIY car leasing. Strange that leasing out property which has a far greater value (both capital and rental) is completely unregulated.
P.S. mods. Note that I have not named any company, and trust subsequent comments will do likewise to enables discussion.
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8-11% returns to small investors? - I wonder why the banks won't lend to them at better rates...
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I can guess the outfit you have heard plugging their wares on the radio.
Their registered office is not the place shown on their website but is a small side street shop (or the flat above)... which has two other companies registered there. None of the companies is more than 1-2yrs old. Two of the three directors of the car leasing outfit have only been on board for one month.
The business model seems to be you pay them £13,500. They buy a car for you (you have no choice in what or from where) which they then lease out to "vetted customers" and return you £250/mth. The car remains registered in your name for the 36mth lease. At the end of the 36mths you sell them the car and receive a guaranteed £9000.
There is something very odd about the figures. From various images it seems they mostly buy Hyundai i20s. These can be sourced for £8000 new so how could they ever be worth £1,000 more at 3yrs old, of course they aren't. Perhaps the £5,500 overcharge at the start explains that final buy back. The directors do not mention this price uplift but say the buy back is high because of the money they have earned from monthly payments over the 36mths.
So I wonder how much they are charging for these i20s? Remember they pay you £250 so they must charge much more. Ling can do an i20 lease for £180/mth so what sort of people are going to pay perhaps £100+ over the going rate each month.
A clue... they say they vet their lease customers manually in the old fashioned way and they are people like teachers etc.... commenting like the mortgage market there are "good people" who the banks won't lend to.
Tie that comment to the big sign in their shop window "Turned down for car finance? We may be able to help now". Ahh so we know the type of customer they really intend to lease the car that is registered in your name to.
Finally it seems if you express an interest it is quite likely you will be invited to a convincing presentation seminar... all starts to sound quite a familiar setup.
And if it all falls apart quickly the directors can't lose really. If they managed 500 investors they would have immediately made £2.75 million on selling the cars at inflated prices and your asset (as they call the cars) would be left with someone you might never trace.
Last edited by: Fenlander on Fri 22 Nov 13 at 10:06
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Nice bit of research, Fenlander.
What a cunning scam - I wonder how many too-greedy-to-think punters will fall for it?
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So the car is registered in your name? Leased to an unknown individual. What do you do when the first speeding ticket falls thro the letter box? I thought keeper liability was now the norm f you fail to identify the driver. Better still, no continuous insurance - sezed and crushed?
Ah so the investor is Rover Smith - 12 points and where do they get recorded? RSPCA?
Last edited by: sherlock1947 on Fri 22 Nov 13 at 10:34
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.Further to Fenlander's excellent post...
Unless my hangover is causing me to mis-think....
Receive £13,500 from your initial payment
Pay £9,000 @ £250 per month to you.
Pay £9,000 at end for car to you
Receive £3,500 from sale of car (retail)
Receive Lease payments of £250 * 36 = £9,000
Buy the car for £7500
That seems like a profit per vehicle of £1,000 for the company.
Loads more if you ramp up the lease costs because of the credit risk you lease to.
Of course you'd have to take the various costs from that, but that seems like a fairly good return and I don't see any risk for them, as Fenlander said - Its all your money until the point of lease-end / car purchase with no risk for them.
But I'd want to know what happens if the car "goes missing" before the end of the lease.? who loses that money?
I'd also like to know who pays for any damage to the car?
And what happens to bad debts?
And what other reasons might stop you getting the £9,000 for the car at the end? Because I suspect that's where the real gotcha is.
Last edited by: No FM2R on Fri 22 Nov 13 at 11:41
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I think there's a word for investment schemes where the money from new investors covers the interest/repayments to existing ones. I'm sure it isn't one of those.
I love the graph here - what could possibly go wrong?
goo.gl/MzMSoV
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The FAQ on that site are interesting, and "address" some of the queries above.
I'm intrigued by the implication that they are installing some tech in the car that prevents it "going" if the payments slip, and also "prevent" it going over 15k miles a year. They mention GPS. I wonder if it's a remote immobiliser system, of the sort legal in the States, but I've never heard of it being used here.
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One of the Directors of this company is also the owner of Creditlab in Streatham - Reginald Larry-Cole (assuming that its the same bloke).
He lists his interests as...
"Motivational self help tools (books, DVD's etc) Cars, All factors required for success, fine dinning, travelling, praying, comedy, driving leisurely."
Don't mind a bit of dinning myself.
He is also a director of Raedex, as is Stalina Elba who is the original director of Cars2Let and Creditgate.
It just doesn't "feel" very good.
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Just found out they charge £249+vat monthly for the i20. To the customer that makes the car £120mth over the going rate so further evidence they are going for the "can't get credit elsewhere folks".
However what concerns me is No FM's correctly calculated figures.... There is "only" £1000 per car in it for the company over 3yrs. Added to this I've discovered they do charge a £500 admin fee in addition to the 1st month's lease so that figure is actually £1500.
Even so...
They seem to have 3 working directors who surely will each want to take at least £50k a year out as salary or it's not worth the hassle. So that cost alone would need a fleet of 300 cars to support it... then there are all the normal costs of running a business/shop/office. It looks to me it would need a car fleet of 500 to make it move forward at all.
Can they really scale it to that level?
The real danger is it all fizzling with the company having profited from the admin fees taken from customers and excessive car cost charged to investors. There really would be a financial case for letting it all collapse after these initial funds were taken.
Another odd twist... you buy the car and lease to the company in question who in turn sub lease to their customer. They include a guarantee they will pay you £250mth even if they are unable to lease the car for any part of the period. Far too good to be true given the type of credit risk they will take on!
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Yes, good research Fenlander.
I was just a little bit suspicious, and you have confirmed it. There is after all nothing new under the sun.
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>>nothing new under the sun.
Four ways to get money.
Born to it.
Marry it.
Rip off loads of other people for it (some would call that hard work and capitalism, with a large element of right idea, right place, right time).
Steal it with a massive gun and risk chokey.
I have failed the first two and can't be bothered with the third and fourth.
Hey ho.
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>>>Yes, good research Fenlander.
Thanks. My "work" involves a fair bit of PC time several days a week and I'm fascinated by the ability to find so much out so quickly from the various sources so often let my fingers wander on something that interests.
Actually done everything I need to today and have to go out but twiddling thumbs waiting in for a discs/pads delivery so had a bit more time than usual to look into this one.
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>>They seem to have 3 working directors who surely will each want to take at least £50k a
>> year out as salary or it's not worth the hassle. So that cost alone would need a fleet of 300
>>cars to support it... then there are all the normal costs of running a business/shop/office. It
>>looks to me it would need a car fleet of 500 to make it move forward at all.
>
>>Can they really scale it to that level?
It depends;
If the actually amount of time involved was small then one could could running more than one company like this or otherwise occupied elsewhere. So first you'd need to factor in the fact that it may be part time.
Also one needs to understand what might be used to "improve" the return. One could imagine late payment charges, letters charges, GPS maintenance costs, etc. etc. Remember all those organisations, including Banks, who make little money from a perfect "account" but significantly more from one they can add "charges" to.
Further, I'd want to understand the small print to know what might impact the "revenue" to the investor, and the final return. I'd bet there's wriggle room there somewhere.
I'd also want to know what happens if either a car cannot be leased, or if that lease is legally terminated early (somebody dies, for example).
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Three working directors,sharp lads who want to make a quick profit.Sounds good smells off.
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For longevity look at some of the threads on PH in the NPE forum, some are into the thousands of pages from god knows when...
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I can appreciate all the sound reasons described on here on how it can't possibly be a sound and safe investment, I can see all the pitfalls.
But
Its been going for at least 18 months, and I can find many complaints from those who have invested. No-one appears to have been complaining about being ripped off, it hasn't been referred to any official financial or business authority for sanction.
I appreciate that the brown stuff is only likely to hit the air movement device in 18 months time, but if it was that dodgy there would be uproar now. You have to admit their management of the concept (up to now) is pretty sound.
Last edited by: Zero on Fri 22 Nov 13 at 23:00
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It's a fair point Zero however with the staggering £6000 overcharge for the car initially they could pay the monthly return back for 24mths out of that even if the car was never leased.
That huge initial income gives them a lot of breathing space.
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>> It's a fair point Zero however with the staggering £6000 overcharge for the car initially
>> they could pay the monthly return back for 24mths out of that even if the
>> car was never leased.
>>
>> That huge initial income gives them a lot of breathing space.
Yeah - aware that, like most ponzi schemes, early adopters usually come out fat and happy.
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It looks too good to be true, and it's unregulated. That's all I need to know!
The typical investor in this sort of thing looks at the promised return and compares it with the interest on a savings account. The results are often tragic.
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We have so little in savings it ain't worth finding a savings account! If rates went up I might bother looking.
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All of you are discussing the benefits and pitfalls of this scheme but no one has touched upon them just taking numerous peoples £13,500 and then just disappearing .Pure profit!
Just a thought :-)
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>> then just disappearing
>>
>> Just a thought :-)
They haven't - Yet.
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Buying cars to let - Lygonos
