Buy2letcars

ivormonee

I would think that there will be a substantial fleet of cars which will very likely be sold over time as the leases expire on each one to pay back as much as possible to those who invested.

underground99

ivormonee said:

I would think that there will be a substantial fleet of cars which will very likely be sold over time as the leases expire on each one to pay back as much as possible to those who invested.

One would like to think that, but at the last published exempted annual accounts Raedex has a lot more liabilities than it had tangible assets, as did its other subsidiary Rent 2 Own Cars; there were only a few million worth of fixed assets (of which some would be cars) to support the intercompany debts, and so the providers of the £35m worth of loans into Buy2Let Cars are likely to go quite hungry, even if the cars can be sold for anything close to their depreciated value. 

And those numbers are at least a year out of date because they are from 2019 while they were still accepting new investor money last year.  There may be a whole load of other intertwined businesses (they didn't publish consolidated accounts but other companies are mentioned in some of the press reports), some creditors will get paid first (eg employees), and the FCA didn't like their accounting anyway. If you were an investor,  give the liquidator your proof of debt, assume nil recovery, and then you might get a pleasant surprise if it isn't a nil recovery - but it won't be close to what you would want to be paid.

jimjames

Some more info here
https://bondreview.co.uk/2021/02/21/breaking-buy2letcars-closed-to-new-investment-by-fca-assets-frozen/

I still think the FSCS info is confusing. Even on the FCA link today it says you need to check with FSCS whether you are protected.

Any scheme that goes insolvent as soon as new money dries up sounds like it has all the hallmarks of a Ponzi scam. Seeing the investors of this company saying they've been paid every time is exactly the same as LCF investors back in Dec 2018 who believed every word that LCF said until the facts actually came out.

I think investors might consider this item on the BTLCars website rather misleading by underplaying the shortfall issues.

When might I get back less than I invested?

If an end user fails to pay the vehicle hire payments and it is not possible to lease out that vehicle to another user, then Buy2LetCars will arrange for the sale of that vehicle. After the sale of the vehicle the amount returned to you will always be at least 85% of the amount you invested, as Buy2LetCars will pay you any shortfall up to this amount. However please note that this does not mean your investment is completely guaranteed up to 85%, as this amount depends on Buy2LetCars being able to make up any shortfall.

jimjames

Seeing some of the Trustpilot reviews unsurprisingly there seem to be people who are confused about what they are receiving each month. On the plus side at least the capital is being repaid every month so they won't be waiting for the end of the contract to get all their money back but it does mean that they don't know the return until the end of 3 years.

underground99

jimjames said:

I still think the FSCS info is confusing. Even on the FCA link today it says you need to check with FSCS whether you are protected.

Generally the FCA stick to doing their thing and let the FSCS do theirs. They don't want to create the expectation that people should complain to the FCA about stuff or get answers from FCA about compensation claims, and they don't know how you came to invest in what you invested in (e.g. perhaps you were advised by a rogue adviser who was regulated and could be complained about).

So their stock answer when dealing with FAQs about whether a complaint can be made or compensation can be claimed is to tell you to check the register for authorisations and take it up with FOS (complaints) or FSCS (compensation). Here, they say the company in which you invested is not authorised, but can't be bothered to give you chapter and verse about whether or why you could or couldn't claim: take it up with the compensation scheme - its not our job.

The previous press release was explicit that the entity into which people invested was not authorised so there couldn't be a FOS or FSCS route on that direct investment. If you used an FCA regulated middleman to arrange your investment with the company (which seems incredibly unlikely, but maybe somebody did), then there is a potential route to compensation, but all FCA are doing is saying it's not FCA that would deal with your compensation or complaint, here's the link to the comparison o scheme website, sort it yourself.

jimjames said:

I think investors might consider this item on the BTLCars website rather misleading by underplaying the shortfall issues.

When might I get back less than I invested?

If an end user fails to pay the vehicle hire payments and it is not possible to lease out that vehicle to another user, then Buy2LetCars will arrange for the sale of that vehicle. After the sale of the vehicle the amount returned to you will always be at least 85% of the amount you invested, as Buy2LetCars will pay you any shortfall up to this amount. However please note that this does not mean your investment is completely guaranteed up to 85%, as this amount depends on Buy2LetCars being able to make up any shortfall.

So, you might not get your money back if we don't get the expected revenue (or the vehicle) back from the hirer, as we will make up some of the shortfall, but note that depends on us being able to do so.

Any intention to help an investor out with a shortfall against an intended return that adds the explanation 'however, that will only happen if we're able to make up the shortfall' is not misleading. It is telling you that there can be a shortfall and they may not be able to pay it. As it was an unregulated opportunity you shouldn't expect FCA-quality risk warnings. 

From a commercial perspective, a loan to a company or to a bloke down the pub that they say they will guarantee with their own money or profits is not worth the paper it's written on anyway, as without further investigation and an intimate knowledge of their finances and everything that could possibly happen to them over time, you don't know if they will honour their commitments even if they have the means to do so, and you don't even know they will definitely be in business when you need them to pay your 'shortfall'. 

I think the idea that you could easily lose all your money for a variety of reasons was reasonably well explained within the first few posts of the thread, as it had been in other threads about the same company going back years. "this amount depends on Buy2LetCars being able to make up any shortfall" isn't something that should be taken to mean that the company will always and definitely make up any shortfall, right? 

Usually with an unregulated product they will underplay the risk of something going wrong, "don't worry, we check every so often that the hirers have insurance" and overplay the value of any guarantee, "don't worry, we will pay you out if we can afford to". Posters on this thread noted the high risk nature immediately because there are so many bad private investments out there with similar characteristics.

From an investor education perspective, it's quite good when a company goes under losing investors thousands - because once the company is dead and gone they will not bother coming back and making litigious threats against blogs and forums for those threads that had pointed out immediately that they were high risk with total losses possible.  This means that as long as the forum users don't kick off a witch hunt on individual directors personally causing takedown notices, the thread will be preserved as a cautionary tale to be shared with people enquiring about similar opportunities going forward.

So while you can empathize with people losing large amounts of money - whether this week is

 buying to let cars, or 'investing' in a football index - it is good to tell people that they should have seen the signs because next time if they have another set of life savings available to lose they will hopefully steer clear of losing it in an unregulated failed business or scam.

Delburn

Thank you for challenging me Underground.
I would be happy to defend my comment on the basis of the FCA's detailed reasoning for acting which they have now published.  However, I take your point about takedown requests.  Therefore I have edited my previous comment.

https://www.fca.org.uk/publication/supervisory-notices/first-supervisory-notice-raedex-consortium-ltd-2021.pdf
The FCA stated that the reasons they acted in February included:
"As such, it appears to the FCA that the Firm is likely to fail to satisfy the Appropriate Resources Threshold Condition in that it is unlikely to be capable of meeting its debts as they fall due."

"The FCA considers that the financial position of the Firm and the Group makes the Firm’s business model fundamentally unsustainable and places consumers who invest money at direct risk of loss."

ivormonee

Could it be that none of this would have happened had it not been for the marked reduction in driving as a result of lockdown? Without the pandemic, the wheels4sure business would have carried on leasing vehicles thereby facilitating a continuing income stream for the company which would then continue to feed into buy2letcars to pay the agreed revenues back to the investors.

Regardless, the issue for investors now, is what might be recoverable, and to some degree, when. I am not familiar with the set up regarding the actual vehicles; do they act as security/ are beneficially owned (directly or indirectly) by the investors? If they are not "ringfenced" in this way, and my guess would be that they are very likely not, then they will be owned by buy2letcars. In which case their ultimate sale, as and when each one's lease expires, will fetch proceeds much lower than their acquisition cost and a lot of that will go towards repaying creditors higher up the list than investors, who are likely to be lower, or lowest, in the list of creditors.

We won't know the outcome of any of the above now or in the foreseable future; it will only become apparent once the administrators do their often-long-drawn-out work. There may be other scenarios/ avenues that are followed, different to the above, but the above is fairly typical in most cases.

jimjames

ivormonee said:

Could it be that none of this would have happened had it not been for the marked reduction in driving as a result of lockdown? Without the pandemic, the wheels4sure business would have carried on leasing vehicles thereby facilitating a continuing income stream for the company which would then continue to feed into buy2letcars to pay the agreed revenues back to the investors.

The company had been losing substantial amounts of money up to the most recent accounts which long predate Covid19. The lockdown may have made it more difficult to continue to gain customers that would pay sufficient for a car to sustain 11% payments to investors as well as fees for the company and paying the cost of the car back.

The literature implied that the investor was buying a car and they may expect that asset exists for them. In reality as you have explained they have no ownership of a car just a loan of money to the business.

ivormonee

jimjames said:

ivormonee said:

Could it be that none of this would have happened had it not been for the marked reduction in driving as a result of lockdown? Without the pandemic, the wheels4sure business would have carried on leasing vehicles thereby facilitating a continuing income stream for the company which would then continue to feed into buy2letcars to pay the agreed revenues back to the investors.

The company had been losing substantial amounts of money up to the most recent accounts which long predate Covid19.
The literature implied that the investor was buying a car and they may expect that asset exists for them. In reality as you have explained they have no ownership of a car just a loan of money to the business.

That's really useful to know, ie. that pre-dated information already indicated problems/ financial losses. So the collapse may have been/ was inevitable.

The loan to the company, rather than asset purchase (albeit a depreciating one), then means investors will have no security nor any other preferential treatment.

On a side note, if the literature implied that the investor was "buying a car", and indeed the name "buy2letcars" itself implies this, then I wonder if there's any recourse regarding mis selling. Just a thought.

justme111

The very point of them not being regulated for selling loans /investments is that there is no recourse - as far as I understand.