Leasing the used car market
Discussion
Karl, many thanks I am sure i'll be in touch!
Kevin, I've looked around many dealers and all offer their own form on financing. It could be quite daunting to some, and perhaps the best offer is not on the table or very little flex. Some people also do not know the full extent of a good warranty, and do not have the time to ring around and get the best deal. Then there is the servicing; knowing who to go to, ensuring value for money, etc.
What I want to offer is complete peace of mind, minimum hassle, great customer service, fully transparent and all for a fixed fee.
You may be inclined to ring around yourself being competent in the game, and I know many who would do this (including me!). But I also know a few friends and family who know very little about cars other than they would like something decent, but are scared of all the 'horror stories' on Porsche' bore-score, Audi RS4 £15k suspension bills, etc. So they end up with new 5 series on lease....
Kevin, I've looked around many dealers and all offer their own form on financing. It could be quite daunting to some, and perhaps the best offer is not on the table or very little flex. Some people also do not know the full extent of a good warranty, and do not have the time to ring around and get the best deal. Then there is the servicing; knowing who to go to, ensuring value for money, etc.
What I want to offer is complete peace of mind, minimum hassle, great customer service, fully transparent and all for a fixed fee.
You may be inclined to ring around yourself being competent in the game, and I know many who would do this (including me!). But I also know a few friends and family who know very little about cars other than they would like something decent, but are scared of all the 'horror stories' on Porsche' bore-score, Audi RS4 £15k suspension bills, etc. So they end up with new 5 series on lease....
Ok, ill bite.
Op, id like an e60 m5. I can get a nice 2008 model for £16k.
Id like to do 10k miles pa over 3 years.
If i put down £4k and borrowed 12k id pay back roughly £350pm. I could get a warranty for say £60pm.
ROUGHLY what would you charge? Where is your margin?
Or, i could go to a main dealer and get a £30k f10 m5 for a bit more on pcp.
It just would not work, you would go bust and sink very Very Quickly.
How would you check the car needed repairs? What if i bought off a mates dealership and a week later the engine blew? How would you price it? How would you checl repairs were genuine?
It would take so much admin and be for so little reward.
Op, id like an e60 m5. I can get a nice 2008 model for £16k.
Id like to do 10k miles pa over 3 years.
If i put down £4k and borrowed 12k id pay back roughly £350pm. I could get a warranty for say £60pm.
ROUGHLY what would you charge? Where is your margin?
Or, i could go to a main dealer and get a £30k f10 m5 for a bit more on pcp.
It just would not work, you would go bust and sink very Very Quickly.
How would you check the car needed repairs? What if i bought off a mates dealership and a week later the engine blew? How would you price it? How would you checl repairs were genuine?
It would take so much admin and be for so little reward.
How many million would you put in your business for your guarantee that YOU would repair anything to be of any value?
What if you had 5 cars and the e60 m5 blew its engine and you had a legal battle with the owner to prove whose fault it was (did he top up the pil or not etc)? Assume you needed to pay £20k for a new engine where would this money come from? If you just guarantee youd fix it but have no money to back it up then why would i trust your guarantee? Youd just close the company, wouldnt you?
What if you had 5 cars and the e60 m5 blew its engine and you had a legal battle with the owner to prove whose fault it was (did he top up the pil or not etc)? Assume you needed to pay £20k for a new engine where would this money come from? If you just guarantee youd fix it but have no money to back it up then why would i trust your guarantee? Youd just close the company, wouldnt you?
funt1m3 said:
Karl, many thanks I am sure i'll be in touch!
Kevin, I've looked around many dealers and all offer their own form on financing. It could be quite daunting to some, and perhaps the best offer is not on the table or very little flex. Some people also do not know the full extent of a good warranty, and do not have the time to ring around and get the best deal. Then there is the servicing; knowing who to go to, ensuring value for money, etc.
What I want to offer is complete peace of mind, minimum hassle, great customer service, fully transparent and all for a fixed fee.
You may be inclined to ring around yourself being competent in the game, and I know many who would do this (including me!). But I also know a few friends and family who know very little about cars other than they would like something decent, but are scared of all the 'horror stories' on Porsche' bore-score, Audi RS4 £15k suspension bills, etc. So they end up with new 5 series on lease....
So are you proposing financing the car, then leasing it to the customer?Kevin, I've looked around many dealers and all offer their own form on financing. It could be quite daunting to some, and perhaps the best offer is not on the table or very little flex. Some people also do not know the full extent of a good warranty, and do not have the time to ring around and get the best deal. Then there is the servicing; knowing who to go to, ensuring value for money, etc.
What I want to offer is complete peace of mind, minimum hassle, great customer service, fully transparent and all for a fixed fee.
You may be inclined to ring around yourself being competent in the game, and I know many who would do this (including me!). But I also know a few friends and family who know very little about cars other than they would like something decent, but are scared of all the 'horror stories' on Porsche' bore-score, Audi RS4 £15k suspension bills, etc. So they end up with new 5 series on lease....
If so, have you got access to the several million that it would take, to make the numbers fly that you are talking about?
Also, if you're offering an all inclusive rental service (which leasing is) then are you not seriously exposing yourself to the risk that you'll get takers who'll simply rag the car constantly knowing its not going to be their problem until they blow an engine or box?
I cant see where the margin is on this, relative to the huge risk with EVERY transaction?
I wouldnt like to be selling used exotica (and the people do have huge margins to fund repairs from) but you're effectively going to pay retail prices for cars and fund all the risk from your (what must be minute) margin?
jonah35 said:
Ok, ill bite.
Op, id like an e60 m5. I can get a nice 2008 model for £16k.
Id like to do 10k miles pa over 3 years.
If i put down £4k and borrowed 12k id pay back roughly £350pm. I could get a warranty for say £60pm.
ROUGHLY what would you charge? Where is your margin?
Or, i could go to a main dealer and get a £30k f10 m5 for a bit more on pcp.
It just would not work, you would go bust and sink very Very Quickly.
How would you check the car needed repairs? What if i bought off a mates dealership and a week later the engine blew? How would you price it? How would you checl repairs were genuine?
It would take so much admin and be for so little reward.
And what if the car you were buying was in Aberdeen?Op, id like an e60 m5. I can get a nice 2008 model for £16k.
Id like to do 10k miles pa over 3 years.
If i put down £4k and borrowed 12k id pay back roughly £350pm. I could get a warranty for say £60pm.
ROUGHLY what would you charge? Where is your margin?
Or, i could go to a main dealer and get a £30k f10 m5 for a bit more on pcp.
It just would not work, you would go bust and sink very Very Quickly.
How would you check the car needed repairs? What if i bought off a mates dealership and a week later the engine blew? How would you price it? How would you checl repairs were genuine?
It would take so much admin and be for so little reward.
If i as a seller were to sell you a car an F10 @ £30K, i'd have a £5K gross margin to play with, and i'd make may another £500 on the finance. I'd put a strong warranty on it, but i'd still be running the risk for the six months or so after you buy it that theres going to be a big bill, which could eat in to my £5,500 profit.
I dont see how what the O/P is proposing stacks up? Hes suggesting paying a retail price for the car - so no profit there - then finance it (so no profit there), put a 3 year warranty on it at £,£££s and then cover all non warranty repairs from his margin?
It just doesnt stack up - hes talking all of the risk for very small reward?
The idea is interesting but I don't think it would work due to some of the reasons above. Maybe the best way you could go about this would be to provide new cars and re-lease them in smaller numbers when they are returned or allow customers to continue to rent them on a pay as you go basis.
It could work like something like this.
Customer one leases a Lexus IS300 Premier for 2 years.
Customer two leases a Lexus IS300 Premier for 3 years not long after customer one.
2 Years later customer one returns his car and you re-lease it to customer 3 who wants to keep the car for a minimum of 2 years. One year in the car is just out of warranty the customer is unlucky and the Mark Levinson Stereo breaks costing several thousand pounds to fix. In this case to avoid significant loss to the business you guarantee the customer rental of a car so rather than paying to fix it you give customer 3 the identical car customer 2 has just returned and auction off the car with the broken stereo. You are also auctioning off all the other returned cars which have not been re-leased within a certain time frame which are perfectly good as you don't wan't a reputation for putting rubbish through the auctions.
What I would like to to see from a customer perspective is a flexible long term rental agreement that guarantees me a car for a fixed monthly fee for an agreed duration but is also flexible so can be extended at any time. I like the idea of being able to pay all rentals up front but would also like the idea of extending the rental period beyond agreed term and go on a pay as you go basis.
With the business model above you will make good money renting to customers who like the cars and keep them much longer. The car may generate no faults and they decide to keep it 5 years or more.
It could work like something like this.
Customer one leases a Lexus IS300 Premier for 2 years.
Customer two leases a Lexus IS300 Premier for 3 years not long after customer one.
2 Years later customer one returns his car and you re-lease it to customer 3 who wants to keep the car for a minimum of 2 years. One year in the car is just out of warranty the customer is unlucky and the Mark Levinson Stereo breaks costing several thousand pounds to fix. In this case to avoid significant loss to the business you guarantee the customer rental of a car so rather than paying to fix it you give customer 3 the identical car customer 2 has just returned and auction off the car with the broken stereo. You are also auctioning off all the other returned cars which have not been re-leased within a certain time frame which are perfectly good as you don't wan't a reputation for putting rubbish through the auctions.
What I would like to to see from a customer perspective is a flexible long term rental agreement that guarantees me a car for a fixed monthly fee for an agreed duration but is also flexible so can be extended at any time. I like the idea of being able to pay all rentals up front but would also like the idea of extending the rental period beyond agreed term and go on a pay as you go basis.
With the business model above you will make good money renting to customers who like the cars and keep them much longer. The car may generate no faults and they decide to keep it 5 years or more.
OP
To get this to work would require some real industry experience.
In terms of
Buying the cars - imo it would only work if you could buy them webuyanycar style i.e. Behind trade value.
Fleet management and preparation - would require real industry experts across U.K. To maintain fleet and understand what is required and if it is justified.
Selling of cars - years of experience and knowledge of where when how to sell the stock.
If you can do all this you may as well be a motor trader or work for a main dealer network. As you would earn more money and have an easier life.
To get this to work would require some real industry experience.
In terms of
Buying the cars - imo it would only work if you could buy them webuyanycar style i.e. Behind trade value.
Fleet management and preparation - would require real industry experts across U.K. To maintain fleet and understand what is required and if it is justified.
Selling of cars - years of experience and knowledge of where when how to sell the stock.
If you can do all this you may as well be a motor trader or work for a main dealer network. As you would earn more money and have an easier life.
daemon said:
As the O/P hasnt responded as to where the several million of cash / credit is coming from to fund this, has anyone else picked up on where or how that maybe i've missed?
Because it's not a viable business unless you are bored with a few hundred mil in the bank (and don't do coke & hookers). It looks more like an offshore money laundering product. You might get 50-70c on every $ put in.The problem is that it's a confused model. The product sold is Finance NOT the car itself, it's merely collateral (illiquid) to the loan.
This business can only be approached from the numbers end, not the product. The finance arms of Ford, GM etc are just that - finance. It wouldn't matter if the collateral was garden gnomes, as long they can be valued.
Without adequate observable liquidity and modelled amortisation curves you are borrowing millions unsecured at insane rates.
You can't even use the auctions as a representation of fair value / mark 2 market of the collateral. There is no observable depth, and what if the person whom paid 900k for a 964, was actually sitting on a warehouse full of them? Without adequate market depth information asset valuations can be pumped up.
This business has the potential to get rogered big time.
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