Peer to Peer car purchase investment scheme.

Peer to Peer car purchase investment scheme.

Author
Discussion

Cliftonite

Original Poster:

8,406 posts

137 months

Cliftonite

Original Poster:

8,406 posts

137 months

Wednesday 20th August 2014
quotequote all
Text of the above:

This company offers the prospect of an accelerated return on your money through leasing cars.


You might not associate buying a new car with making money. But Buy2LetCars.com, a peer-to-peer company founded in 2012, allows people to invest in brand new motors, which are then leased out for potentially healthy returns.

Compare peer-to-peer savings returns

How it works

Investors essentially replace banks in providing car finance. This involves putting down £13,500 to fully fund the purchase of a new car.

Buy2LetCars then arranges a credit-worthy individual to lease the car through its sister company Wheels4sure.

With the vehicle leased out you receive £250 a month for a total of 36 months, starting 30 days after the deal is set up.

After three years, during which you would have racked up £9,000, you receive a fixed sum exit fee of £8,955 for handing over ownership of the vehicle to Buy2LetCars.

So in total you receive £17,955, £4,454 of which is profit, which represents a 33% return on your original investment (11% per annum) before tax.

Once you’ve invested your lump sum you will own the car but all running and maintenance costs are the responsibility of the driver like any normal car finance arrangement.

The person that leases the vehicle is responsible for insuring, servicing and taxing it over the three-year period.

Compare peer-to-peer savings returns

Is this dodgy?

It might seem counterintuitive to invest in a depreciating asset.

But Scott Martin, co-founder of Buy2LetCars, says it’s only offering a piece of what banks and finance companies have been profiting from for years.

According to Buy2LetCars, seven out of 10 new cars are funded by a bank or financial institution.

Safeguarding your asset

Each driver is thoroughly checked before being approved.

Buy2LetCars says it wants to appeal to key workers like nurses and teachers and those in full-time employment that have found it hard to access finance despite being fully able to afford it.

As well as stringent checks, the new cars are all fitted with technology to prevent misuse.

This includes GPS tracking so the company knows where the vehicle is at all times and technology which can disable the car if the driver doesn’t keep up repayments.

In addition the hire agreement limits all end users to 15,000 miles per year, amounting to 45,000 over the term of the deal, which ensures wear and tear is kept to a minimum.

How do Buy2LetCars make money?

Buy2LetCars says it makes money in three main ways.

It makes some of its money when each new car is registered thanks to agreements with Nissan, Vauxhall and Hyundai.

It also makes money each time a car is leased through a set-up fee charged to the driver, which averages around £599.

And it also profits from the difference between what investors get and what drivers are charged, which ranges from £299-£349.

There are no hidden fees for investors.

Guaranteed returns

Buy2LetCars says investors never lose any money as their agreement is with the firm rather than the driver

So the company will have to make payments regardless of if something goes wrong with the person hiring the car.

Buy2LetCars as the management company will have to repossess the car and re-lease it for the remainder of the term. But bad debt is low at under 1% due to stringent credit checks.

As well as a guaranteed return, Buy2LetCars also offers the guaranteed buyback.

The company says it feels comfortable doing this as the car is still a valuable asset to them even after three years. They say that's because it will still have three years manufacturer’s warranty left (all its cars have a six-year warranty to start with), a low mileage of up to 45,000 and a full service history.

Verdict

Buy2LetCars.com is certainly a unique proposition.

Investors are potentially able to get inflation-busting returns on their cash, decent credit-worthy people rejected elsewhere for credit are given access to affordable finance for a brand new car on a long-term lease and the company wins through the managing process on both sides of the equation.

And so far the model has proved relatively successful, the company says, with more than 250 investors and about 600 vehicles funded.

But you’ll need a sizeable investment to get started at £13,500, when most other peer-to-peer platforms promising to boost returns only require a minimum of £10.

The other downside is that you can’t access your capital until the end of the three-year term, like a fixed rate bond.

While the company is regulated by the Financial Conduct Authority, you should be aware that your money isn't covered by the Financial Services Compensation Scheme in the event that Buy2LetCars goes bust.

There are a variety of other ways you can boost the returns on your cash using peer-to-peer platforms so take a moment to consider all your options before you decide where to put your money. For more read Peer-to-peer: What return will you get on your money?

marshalla

15,902 posts

200 months

Thursday 21st August 2014
quotequote all
Company's current worth : £0 according to its own accounts.

http://companycheck.co.uk/company/07631458/BUY-2-L...

chrisr111r

188 posts

128 months

Monday 1st September 2014
quotequote all
could be an interesting one to watch for the future though...

There are a lot of alternative/p2p/crowdfunding type things springing up these days. I've been testing the water with ratesetter for nearly a year and have just seen that there is a new property investment op just starting as well, so interesting times, and anything we can do to divert some of the profit of the global banks to our own pockets the better i say wink