Buy2letcars

[untakenname]

Was waiting at the lights today and noticed a shop called buy2letcars, they promise returns of 11% which seems pretty fanciful in the current economic climate.
Oddly enough have also just seen an advert for the company on tv just now so posting here, it looks too good to be true so was wondering if the concept is actually legit and if there's any safeguards from regulators for money invested?

[Mikebentley]

Not very helpful but I believe this topic was on here before a couple of years ago.

[Condi]

So do you give them the money, and they buy the car, or do you own the car and then they simply manage the lease? And how can you buy a car today, get rental income for 4 years, and then get your original lump sum back, because over that time the car has lost value?


Either way, it is 100% not protected should the company go bust. If it was not very risky it wouldn't have to pay 11% return...

[DonkeyApple]

In its crudest form the business wants to rent cars to the end of the market that has a truly terrible track record of repayment. The business does not have the money to rent these assets to sublet so needs to source capital from third parties. Every legitimate lender has zero interest in entertaining such a farcical risk so the business has to seek money from individual punters who are desperate to risk what little money they have in the vain hope getting some kind of return. And they probably have to pay fees on top for the privilege!

It’s basically the same mis-pricing model that all these high yield investment schemes operate on. The operator aims to sit in the middle taking all the revenue while forwarding all the risk to one side of the customer bank.

It’s a nice idea on paper but ultimately you’re being asked to lend money to individuals that even the most shonky lender won’t lend to due to the default risks and you are not willing or able to go into the borrower’s bedroom at 4am and smash their fingers with a hammer which is the key mechanism for reducing defaults at this level.

[NickCQ]

One of the directors listed on Companies House has an unfortunately distinctive and Google-able name:
https://metro.co.uk/2019/01/02/driver-drunk-fell-c...

[untakenname]

Thanks for the responses, thought to myself that the risk must be quite high to offer a double digit rate of return.

[DonkeyApple]

I imagine they’re making a very big turn renting out to people with no other option and will just cut the asset loose if they can’t seize it cheaply and easily. I guess they may even be Ubering the cars?

[trowelhead]

untakenname said:

Was waiting at the lights today and noticed a shop called buy2letcars, they promise returns of 11% which seems pretty fanciful in the current economic climate.
Oddly enough have also just seen an advert for the company on tv just now so posting here, it looks too good to be true so was wondering if the concept is actually legit and if there's any safeguards from regulators for money invested?

The last company that was offering these kind of returns (10% +) was lendy...

[A205GTI]

This is all you need to know form there website

Any investment you make with Buy2LetCars is not covered by the Financial Services Compensation Scheme (FSCS).

this is like the property gurus that pop up on Linkedin with no money down deals, get investors and don't worry about being regulated!

[Condi]

A205GTI said:

This is all you need to know form there website

Any investment you make with Buy2LetCars is not covered by the Financial Services Compensation Scheme (FSCS).

this is like the property gurus that pop up on Linkedin with no money down deals, get investors and don't worry about being regulated!

Not many investments are covered by the FSCS? Stocks and shares, bonds, funds etc are all regulated but your losses are not protected. The only thing covered by the FSCS is cash which doesn't make much return!

[JulianPH]

Condi said:

Not many investments are covered by the FSCS? Stocks and shares, bonds, funds etc are all regulated but your losses are not protected. The only thing covered by the FSCS is cash which doesn't make much return!

Losses are protected with investments up to the same £85k as with banks (per person per fund) when a firm fails (which is, again, the same as with banks.

This doesn't protect you from investment loss, of course, but investment firms have the exact same FSCS protection as banks.

[Condi]

Sorry, i know you're right because of your background, but that doesn't seem to make sense to me.

How are losses protected in an investment firm? If you buy shares and they lose value, or a company goes bust, or Woodford goes off piest, etc, non of those are covered. I thought it was just cash in the bank which was protected? Not to say all those examples wouldn't be legislated and authorised by the regulator to prevent outright fraud, but not protected surely?

[JulianPH]

Condi said:

Sorry, i know you're right because of your background, but that doesn't seem to make sense to me.

How are losses protected in an investment firm? If you buy shares and they lose value, or a company goes bust, or Woodford goes off piest, etc, non of those are covered. I thought it was just cash in the bank which was protected? Not to say all those examples wouldn't be legislated and authorised by the regulator to prevent outright fraud, but not protected surely?

Hi Condi

Loss of value due to investment returns is not covered, you are quite right. This applies to banks and investment companies equally.

The FSCS is a lifeboat fund that covers companies that hold your money going bust, not investment/trading/negligence losses.

The compensation applies equally to investment firms as it does to banks (though differently to insurance companies).

For investment losses (due to or other acts or other mistakes made by a regulated firm) you have the FOS, this covers up to £350k providing the firm is still in business.

So by only working with FCA Authorised and Regulated businesses do you have two sets of protection (£350k for bad advice, practice, negligence and even emotional disturbance) and the FSCS (£85k) should the regulated firm involved fail as a result of any of these - or any other - factors).

Basically, you (and me) have no protection against our own stupidity if we work with non-regulated firms.

If we work with regulated firms only than we have protection on two counts. 1, if they bugger it up, 2) if they drop off then end of the world.

Final thing, the FOS's remit is out the window if the firm folds. The FSCS maximum is just £85k per company.

Cheers!