Car loans are important and a big portion of the market. According to Business Insider in 2016 nearly 30% of consumers debt in the United Kingdom was due to car finance. In addition around 80% of new cars that are sold come with a personal contract plan, a kind of leasing. All of this financing comes from either banks or car manufacturers. However, some investors can get into car financing through peer-to-peer lending.
Buy2Let Cars is the brainchild of Reginald Larry-Cole, a former car salesman who, as well as wanting to make money for himself and his investors, is on a crusade to bring affordable motoring to “everyday workaday people” – people who can’t get a lease deal through traditional means. Not people working 16 hours a week at the local takeaway with their income topped up by tax credits, says Larry-Cole. “Responsible people” – think nurses, teachers and police officers – “who have found themselves in a situation where credit is poor but they still have disposable income.”
The principle is simple. As an investor, you stump up the money for a car. Buy2LetCars buys the car, negotiating a healthy volume discount from the manufacturer. The car is leased to a customer who pays you an agreed monthly figure for three years. At the end of the three years, the car is handed back and sold on the second-hand market. Larry-Cole has this covered with a separate venture, PayGoCars. This way, he says, you’re getting the retail price for the car, not the wholesale price you might get if it was sold at auction. The investor reaps the rewards: a £7,000 investment will get you a 7% return; £14,000 gets you 9%, £28,000 gets you 11%.
Very high returns imply very high risk. Buy2LetCars has a default rate of around 3% on lease payments, says Larry-Cole. But he insists that, since 2012, none of his investors has lost any money – indeed, everyone has received the return they were expecting. All customers go through a credit check, and cars are fitted with starter interrupts and trackers. If a customer is late with a payment, they are given a series of automated warnings. If they don’t pay up, the car won’t start. And if the car is stolen, the tracker lets Buy2LetCars know where it is.
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