Leasing the used car market
Discussion
Hi all,
Sitting here with a business idea to lease used cars, particularly the mid-upper end of the market (Porsche 911s, Aston V8s, Jag F types, etc). These cars a relatively high in volume (compared to Ferrari's etc.) so more information known, more dealers, etc.
The customer would be pre-approved for credit to a limit, go select the exact car of choice, liaise back with my business and if we are both in agreement, proceed like a 'normal' lease. A small deposit up front, again like a usual lease (6+23)
The agreement would include everything from tax to mot to servicing (tyres at an additional cost) - a complete solution for the customer
I need to understand the VAT rules a little better but by my calculations/estimates on residuals, etc. I think I could lease a used F type (2012 3.0 V6) for around £560 a month, an R8 (2008 4.2) for around £600. Both 6+23 deals, around 15% mark up on costs
Talking to a few friends they think that is reasonable and think there is a market for those who just want to pay a fixed monthly fee without any worry of high bills, the hassle of selling, etc.
What do you think? I can't see this offering anywhere else through a fairly thorough search.
Sitting here with a business idea to lease used cars, particularly the mid-upper end of the market (Porsche 911s, Aston V8s, Jag F types, etc). These cars a relatively high in volume (compared to Ferrari's etc.) so more information known, more dealers, etc.
The customer would be pre-approved for credit to a limit, go select the exact car of choice, liaise back with my business and if we are both in agreement, proceed like a 'normal' lease. A small deposit up front, again like a usual lease (6+23)
The agreement would include everything from tax to mot to servicing (tyres at an additional cost) - a complete solution for the customer
I need to understand the VAT rules a little better but by my calculations/estimates on residuals, etc. I think I could lease a used F type (2012 3.0 V6) for around £560 a month, an R8 (2008 4.2) for around £600. Both 6+23 deals, around 15% mark up on costs
Talking to a few friends they think that is reasonable and think there is a market for those who just want to pay a fixed monthly fee without any worry of high bills, the hassle of selling, etc.
What do you think? I can't see this offering anywhere else through a fairly thorough search.
No all costs I would cover. Those sort of big bills you speak of are the big scare yes, but this business would benefit from economies of scale. Not only by splitting these big bills over 100s of cars, but by having buyer power with independent garages
Just how often are those £10k bills on these modern cars? 1 in 25, 50? We all know "a guy who spent £15k in 18 months on a Porsche Boxster" but that is only because these stories are written up, not a lot of owners discuss the relatively pain free motoring on these cars.
Wow just noticed this is my first post on PH. I've been on here for years. That's some good lurking!
Just how often are those £10k bills on these modern cars? 1 in 25, 50? We all know "a guy who spent £15k in 18 months on a Porsche Boxster" but that is only because these stories are written up, not a lot of owners discuss the relatively pain free motoring on these cars.
Wow just noticed this is my first post on PH. I've been on here for years. That's some good lurking!
Hi. I have completed a little research but agree the FCA regs and all things consumer credit would be a stumbling block. That being said I did find out that 49,000 companies are registered by FCA to provide credit services. How hard can it be...😉
The £560 I've noted is a 30% saving on the 812 you have. Obviously new vs old but I for one love a 3 year old car. Let the chap/chappess who has to have new pay the bulk of the depreciation. More great cars for me.
Of course plenty of homework still to do. First you got to find out if there is a market right?
The £560 I've noted is a 30% saving on the 812 you have. Obviously new vs old but I for one love a 3 year old car. Let the chap/chappess who has to have new pay the bulk of the depreciation. More great cars for me.
Of course plenty of homework still to do. First you got to find out if there is a market right?
Yes very similar however not all dealers are the same. Some do offer some excellent packages, and some perhaps not so. With me (and this will take time I know) you get the gold standard start to finish. Customer satisfaction absolute key here. Pre-approved credit would allow the customer the freedom (to a certain extent - no yellow Bentley Conti's please!) and not tied into a perhaps a 2nd choice just because they favour that dealer's finance package over another
Plus some rates are much higher than I calculate. What would be reasonable estimate for the cost per year on 50 Audi R8s (to allow for spread of cars). £2500 per annum? That's £250k in a 2 year period I budget. I think that would cover inc. buffer
As the business grows, knowledge grows, buyer power grows and more predictable profits/pricing comes into play
Plus some rates are much higher than I calculate. What would be reasonable estimate for the cost per year on 50 Audi R8s (to allow for spread of cars). £2500 per annum? That's £250k in a 2 year period I budget. I think that would cover inc. buffer
As the business grows, knowledge grows, buyer power grows and more predictable profits/pricing comes into play
I think there is some confusion, the business I propose would not be a dealer. I would not purchase any cars I would let the customer go out and source their chosen car (within some set criteria) from a reputable dealer/trader. The car does not need to be 3 years old but perhaps a maximum 10. Prior to purchase I was thinking using a company like 'click mechanic' to go and inspect the car as a 3rd party all the while preparing a scan of the car for dents, chips, paintwork issues, smoking/non smoking etc. They provide this service for about £100 and again if I partnered with them I am sure a volume discount to be had
- Could people pay it all up front, so give you £15k up front for use of an R8 fully warrantied for 2 years?
Yes I don't see why that couldn't be an option. Save on a credit fees/interest
- If the car needs repairs or significant work done would you provide an equivalent loan car? I guess some repairs could take a long time if it's an engine rebuild or similar
Good point. I don't think it would be reasonable to provide an equivalent, but something above the Daewoo Matiz's of this world. Decent 5 series or something of that ilk. Could again partner with one of the leading hire companies for discounts
- What are you going to do when the cars are returned?
Either;
Offer them for sale to the leasee for a reasonable purchase price
If still a desirable car, phone around my existing clients to see if they would have interest when the current leasee's term is up
Immediately sell to trade (I do not want the added expense of a showroom nor the aggravation of selling)
- Could people pay it all up front, so give you £15k up front for use of an R8 fully warrantied for 2 years?
Yes I don't see why that couldn't be an option. Save on a credit fees/interest
- If the car needs repairs or significant work done would you provide an equivalent loan car? I guess some repairs could take a long time if it's an engine rebuild or similar
Good point. I don't think it would be reasonable to provide an equivalent, but something above the Daewoo Matiz's of this world. Decent 5 series or something of that ilk. Could again partner with one of the leading hire companies for discounts
- What are you going to do when the cars are returned?
Either;
Offer them for sale to the leasee for a reasonable purchase price
If still a desirable car, phone around my existing clients to see if they would have interest when the current leasee's term is up
Immediately sell to trade (I do not want the added expense of a showroom nor the aggravation of selling)
KevinCamaroSS said:
R8 22mpg. 4K miles (5mpl) Fuel cost = 4000/5*£1.25= £1,000 for fuel, therefore other running costs = £2,000, depreciation a further £3,000, so £6000 all in. Remove fuel and insurance totally £1,500 = £4500 cost to you.
The £2.5k i quoted was just for servicing. I factored another £3k in for depreciation also (plus taxes among other things)Hmm yes the scam thing had crossed my mind. Need a think on that one...
Another good point. Perhaps there might be wiggle room though as if i go to buy an R8 now with the funds (ie my business transfers the full value to the dealer/trader immediately) he/she might be more willing to offer a discount than if I go saying "Love it. Here's £3k down, can I have the rest on finance please?"
Not sure as not an expert in the art of car buying.
If the car was up for £40k and my 2 year trade in value (estimate) was £34k then I say to customer it is £650pm (for example)
If the customer was savvy enough to secure it for £38k, my trade in value would still be £34k and the customer could reap the benefits in a lower monthly (in this case £83/month over 2 years)
Thanks for the replies guys.
Not sure as not an expert in the art of car buying.
If the car was up for £40k and my 2 year trade in value (estimate) was £34k then I say to customer it is £650pm (for example)
If the customer was savvy enough to secure it for £38k, my trade in value would still be £34k and the customer could reap the benefits in a lower monthly (in this case £83/month over 2 years)
Thanks for the replies guys.
I think until I can provide comparable quotes it is difficult to prove this is a viable offering. If a dealer was charging £700 and I was charging £680 then absolutely this model is bust given the negligible difference. I'll work on some real world examples.
I'm a commercial accountant by trade so a little knowledge of the finance markets. I have friends and family in the brokerage game so will be discussing with them soon. Sure many pitfalls to overcome!
And to the gentlemen who mentioned a niche market, absolutely spot on. In my target market (approx £25k to £75k, between 3-10years, "mainstream") there are the following for sale on Autotrader as at today
Aston 326
Bentley 436
Jaguar 150
Maserati 119
Porsche 990
Approx 2,000 cars. The 'for sale' market for these cars represents 5-10% of total cars on the road therefore a conservative estimate of 20,000 cars. A 5% share of that market would be fine by me!
Easier said than done I know, I know...
I'm a commercial accountant by trade so a little knowledge of the finance markets. I have friends and family in the brokerage game so will be discussing with them soon. Sure many pitfalls to overcome!
And to the gentlemen who mentioned a niche market, absolutely spot on. In my target market (approx £25k to £75k, between 3-10years, "mainstream") there are the following for sale on Autotrader as at today
Aston 326
Bentley 436
Jaguar 150
Maserati 119
Porsche 990
Approx 2,000 cars. The 'for sale' market for these cars represents 5-10% of total cars on the road therefore a conservative estimate of 20,000 cars. A 5% share of that market would be fine by me!
Easier said than done I know, I know...
Hi all, great feedback thanks.
For those in the know, if I buy a used car I do not pay VAT, but if I PCP a vehicle from a trader/dealer, does that monthly payment include VAT? Therefore PCP is much more expensive because of this?
I would be de-risking the business model by using a 3rd party specialist for warranties. For example, one warranty provider has offered a fixed fee for mechanical failure, servicing, mot inc. wear and tear. Can even pay a premium to include items such as suspension, clutch. I think it wouldn't be unreasonable to suggest a £250 excess or similar on something like a clutch to avoid a piss take.
For those who bother to negotiate with warranty providers, it is not unreasonable to get a 5-10% discount. If I were a business sending 100s of cars there way, sure additional discounts to be had. Likewise partnering with some insurance brokers (although aware insurance not quite the same)
For the poster who suggested they may be some quibbles if the owner said "the suspensions is baggy" and demanded it fixed. This could be another issue.
I wouldn't be competing directly with the main dealers who as one poster said has the high finance backing, more the specialist trader
For those in the know, if I buy a used car I do not pay VAT, but if I PCP a vehicle from a trader/dealer, does that monthly payment include VAT? Therefore PCP is much more expensive because of this?
I would be de-risking the business model by using a 3rd party specialist for warranties. For example, one warranty provider has offered a fixed fee for mechanical failure, servicing, mot inc. wear and tear. Can even pay a premium to include items such as suspension, clutch. I think it wouldn't be unreasonable to suggest a £250 excess or similar on something like a clutch to avoid a piss take.
For those who bother to negotiate with warranty providers, it is not unreasonable to get a 5-10% discount. If I were a business sending 100s of cars there way, sure additional discounts to be had. Likewise partnering with some insurance brokers (although aware insurance not quite the same)
For the poster who suggested they may be some quibbles if the owner said "the suspensions is baggy" and demanded it fixed. This could be another issue.
I wouldn't be competing directly with the main dealers who as one poster said has the high finance backing, more the specialist trader
So if a PCP allows someone to hand the car back no questions asked at the end of the term, surely it makes sense to PCP rather than lease the used car game?
Could I not offer a PCP package then with maintenance and essentially only charge VAT on the maintenance element? is £645 + (for example) (£250 + VAT) = £945 as opposed to (645 + 250 + VAT) = £1,074?
Could I not offer a PCP package then with maintenance and essentially only charge VAT on the maintenance element? is £645 + (for example) (£250 + VAT) = £945 as opposed to (645 + 250 + VAT) = £1,074?
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....
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