This company offers the prospect of an accelerated return on your money through leasing cars. How does it work, and should you consider investing?
You might not associate buying a car with making money. But Buy2LetCars.com lets you do just that.
Founded in 2012, the company allows people to invest in motors, which are then leased out for inflation-beating returns.
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How it works
Investors essentially replace banks in providing funding for car purchases.
This involves putting down a lump sum to fully fund the purchase of a new or second-hand car.
Buy2LetCars then arranges for a driver to lease the car through its sister company Wheels4sure.
Investors receive between 7 and 11% IRR, depending on the funding option they go for.
There are four options to choose from, which I’ve set out below. They are all based on monthly repayments over a 36-month term.
|
Amount Funded |
Units Funded |
% IRR |
Monthly Repayment |
Gross Final Payment Month 37 |
Gross Interest |
|
|
Level 1 |
£7,000 |
1 |
7% IRR |
£164.69 |
£2,054.00 |
£983.00 |
|
Level 1 |
£8,000 |
1 |
7% IRR |
£188.22 |
£2,347.43 |
£1,124.00 |
|
Level 1 |
£9,000 |
1 |
7% IRR |
£211.74 |
£2,640.86 |
£1,264.00 |
|
Level 1 |
£10,000 |
1 |
7% IRR |
£235.27 |
£2,934.29 |
£1,405.00 |
|
Level 2 |
£14,000 |
1 |
9% IRR |
£250.00 |
£8,080.00 |
£3,080.00 |
|
Level 3 |
£28,000 |
2 |
10% IRR |
£511.38 |
£16,382.00 |
£6,792.00 |
|
Level 3 |
£42,000 |
3 |
10% IRR |
£767.07 |
£24,573.00 |
£10,188.00 |
|
Level 3 |
£56,000 |
4 |
10% IRR |
£1,022.76 |
£32,764.00 |
£13,584.00 |
|
Level 3 |
£70,000 |
5 |
10% IRR |
£1,278.45 |
£40,955.00 |
£16,980.00 |
|
Level 3 |
£84,000 |
6 |
10% IRR |
£1,534.14 |
£49,146.00 |
£20,376.00 |
|
Level 4 |
£98,000 |
7 |
11% IRR |
£1,871.52 |
£57,071.00 |
£26,460.00 |
|
Level 4 |
£112,000 |
8 |
11% IRR |
£2,138.88 |
£65,224.00 |
£30,240.00 |
|
Level 4 |
£126,000 |
9 |
11% IRR |
£2,406.24 |
£73,377.00 |
£34,020.00 |
|
Level 4 |
£140,000 |
10 |
11% IRR |
£2,673.60 |
£81,530.00 |
£37,800.00 |
|
Level 4 |
£154,000 |
11 |
11% IRR |
£2,940.96 |
£89,683.00 |
£41,580.00 |
|
Level 4 |
£168,000 |
12 |
11% IRR |
£3,208.32 |
£97,836.00 |
£45,360.00 |
|
Level 4 |
£182,000 |
13 |
11% IRR |
£3,475.68 |
£105,989.00 |
£49,140.00 |
|
Level 4 |
£196,000 |
14 |
11% IRR |
£3,743.04 |
£114,142.00 |
£52,920.00 |
|
Level 4 |
£210,000 |
15 |
11% IRR |
£4,010.40 |
£122,295.00 |
£56,700.00 |
|
Level 4 |
£224,000 |
16 |
11% IRR |
£4,277.76 |
£130,448.00 |
£60,480.00 |
|
Level 4 |
£238,000 |
17 |
11% IRR |
£4,545.12 |
£138,601.00 |
£64,260.00 |
|
Level 4 |
£252,000 |
18 |
11% IRR |
£4,812.48 |
£146,754.00 |
£68,040.00 |
|
Level 4 |
£266,000 |
19 |
11% IRR |
£5,079.84 |
£154,907.00 |
£71,820.00 |
|
Level 4 |
£280,000 |
20 |
11% IRR |
£5,347.20 |
£163,060.00 |
£75,600.00 |
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At the end of the lease term, you get a final exit payment from Buy2LetCars as it takes the vehicle off your hands, which together with the monthly repayments sees your capital returned with interest on top.
Once you’ve invested your lump sum, a car is bought and leased but all running and maintenance costs are the responsibility of the driver and Wheels4sure.
The person that leases the vehicle is responsible for insuring, servicing and taxing it over the three-year period.Buy2LetCars manages the whole process throughout the term.
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Is this dodgy?
It might seem counterintuitive to invest in a depreciating asset.
But Reginald Larry-Cole, co-founder of Buy2LetCars, says they’re only offering a piece of what banks and finance companies have been profiting from for years.
According to Buy2LetCars, eight out of 10 new cars are funded by a bank or financial institution.
Since 2012, the company has built up a network of investors, contracts and gained recognition including inclusion in the Barclays and BGF Entrepreneurs Index and the Mishcon CITY AM Leap 100 Index, which highlights the company as one of the country’s fastest growing and exciting new businesses.
But most importantly five years on there are also testimonials starting to flow in as the first round of funders complete the cycle, getting the returns promised.
You can see more testimonials from investors on the website and reviews on 192.com. There’s also more about what drivers think about the cars here.
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 as well as those determined to work for themselves 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 lease agreement limits private users to 15,000 miles and PCO cars to 40,000 per year, which ensures wear-and-tear is kept to a minimum.
How does 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 supply agreements directly with the car Manufacturer.
The firm also pockets money each time a car is leased through a set-up fee charged to the driver.
And it profits from the difference between what investors get and what drivers are charged.
Larry-Cole added that there is also money to made from the resale opportunity at the end of the funding cycle or a second-hand car lease agreement with a new driver.
There are no hidden fees for investors.
Are returns guaranteed?
Returns aren’t guaranteed as all investments involve an element of risk.
However, Buy2LetCars says its record to date shows a 0% default to investors and all contracts have been paid at full value.
Larry-Cole told us that the credit quality of the lease portfolio is 97% performing, with bad debt around the 3% mark, but the technology used limits non-payment events.
If a driver fails to keep up with repayments and defaults the car will be repossessed. Buy2LetCars as the management company will have to repossess the car and re-lease it for the remainder of the term to protect the monthly payments.
But the website states monthly payments may be adjusted to reflect the new hire terms obtained and you will always receive at least 85% of your initial loan amount back.
Verdict
Buy2LetCars.com is certainly a unique proposition.
Investors are potentially able to get inflation-busting returns on their capital, decent credit-worthy people rejected elsewhere are given access to affordable finance 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 reasonably successful, with more than five years trading under its belt and a funder default rate of 0%.
Buy2LetCars says many investors have funded multiple vehicles, with the largest private investor now funding a portfolio of more than 100 vehicles.
But you’ll need a sizeable investment to get started – the minimum entry level is £7,000 – 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 two- or three-year term, like a fixed-rate bond.
While the parent 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, so your money is at risk.
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.
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