Buy2letcars

Grumpy_chap

ivormonee said:

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.

I understand that comment and, indeed, from what little I know of the scheme, that is how I thought it worked (buying a car to be leased onwards, not a loan).  Regardless, though, any recourse to "mis-selling" would be against a defunct company without assets, so nothing to pursue a "mis-selling" claim against.  I am assuming it is not possible to pursue such a claim through the company structure onto the (former) Directors in person.

jimjames

Some pretty shocking new information has come out from the FCA. It looks like the company was seriously overstating its accounts to appear solvent and the vehicles it had were not all the seemed to be. Assets of £14m and liabilities of £34m doesn't sound good for anyone who lent money to them. FCA info does suggest this had the hallmarks of a ponzi scheme as new investors money was needed to fund repayments to investors. Summary here:

https://damn-lies-and-statistics.blogspot.com/2021/03/buy2let-cars-goes-bust.html

ivormonee

jimjames said:

Some pretty shocking new information has come out from the FCA. It looks like the company was seriously overstating its accounts to appear solvent and the vehicles it had were not all the seemed to be. Assets of £14m and liabilities of £34m doesn't sound good for anyone who lent money to them. FCA info does suggest this had the hallmarks of a ponzi scheme as new investors money was needed to fund repayments to investors.

https://damn-lies-and-statistics.blogspot.com/2021/03/buy2let-cars-goes-bust.html

This really is pretty shocking. The page linked to in your comment to the blog made interesting reading. The bullet points (4.14 to 4.17) were very interesting, so much so that I searched on the FCA website to get the full report; however, I couldn't find it, and so I don't know how the blog writer got hold of that info. Would be good to know as there might be more eye opening stuff in it.

In the meantime, the blog summises, or rather the FCA does, that B2LCars did not follow accounting standards as well as providing incorrect info. on the cars themselves (ie. less cars in reality than what they really owned, more second hand ones and not new etc.). The £20m gap on the balance sheet - well, they were running a company that wasn't a going concern, in itself illegal, and funding returns from new investor money, thereby clocking up more debt over time. A "car crash" waiting to happen, so to speak!

Quick calc.: max. assets £14m; liabilities £34m. Future lease revenues not capitalised, already taken account of, but bad debts from defaulting leasees not included. Let's call them £0.5m. Let's say administrator's costs of £3m; preferential creditors £? - would need to look at last accounts to get a figure for amounts due < one year, but not sure which accounts to look at as there are multiple companies involved. Let's just stick a random figure of £3.5m. So, just realised, can't work this out without knowing what money is invested (how much of the £34m is investor money)! Call it £x, then knock off all the other bits, divide by £34m, to get a %age, then that's what investors would get back. Someone else can tidy this up if they are so inclined, but the %age isn't going to be big looking at the above.

Just had another look - is the investor money the number of cars times the amount per investor? ie. 1,200 x £7k = £8.4m. If so, we can finish this off: £34m - £8.4m = £25.6m total creditors excl. investors. Assets of £14m wouldn't cover this. But then there's an estimated £7m to come from future lease revenues, so £21m can be achieved. Still short of £25.6m. If any of this rough calculating is even remotely close then I don't think there's anything that needs spelling out regarding money being returned to investors. Of course, all my calculations and assumptions could be way off the mark!

jimjames

FCA report is here https://www.fca.org.uk/publication/supervisory-notices/first-supervisory-notice-raedex-consortium-ltd-2021.pdf

In theory if there was no pooling of investor money (which as I understand it would make it illegal) then each investor should own a car. So each would have to put in more than £7k if they are expecting to get a new car, I'd suspect double that. So 1200 x £14k = £16.8m of vehicles but that's the new price not current value.
If previous investor loans have been rolled up and new money used to pay them then it could leave those in at the end with little left. The £34m liabilities sounds like mainly investors to me

ivormonee

Thanks for that. The report is quite lengthy but 4.18 covers some of what I was attempting to work out and they give their conclusions in the section below that paragraph.

gary83

the trust pilot reviews have taken a marked downturn in the last day or so, it makes pretty sad reading, seems people had far too much invested in them & are still holding out hope that they’ll see a return or actually personally own any cars

https://uk.trustpilot.com/review/buy2letcars.com

resk

gary83 said:

the trust pilot reviews have taken a marked downturn in the last day or so, it makes pretty sad reading, seems people had far too much invested in them & are still holding out hope that they’ll see a return or actually personally own any cars

https://uk.trustpilot.com/review/buy2letcars.com

It is sad reading.  After a few pages you hit a wall of five star reviews talking about how great they are.  I'm guessing the vast majority of the "cars" they claimed to have sold to people didn't actually exist.  

Reaper

A lot of the reviewers are under the impression they directly own specific cars - that was their security if the worst happened. Unfortunately that's not true. One company in the group gathered money from investors and a different company owned the cars. The first loaned money to the second. With all the companies in the group having gone bust the investors are just creditors standing in line for whatever minimal assets are left.

jimjames

More info has come out today about SFO raids in relation to suspected fraud at Buy2Let cars, probably not a massive surprise when you look at the history of other similar companies that have gone under like LCF. I suppose the bigger surprise is how quickly the SFO have acted compared to others.

https://damn-lies-and-statistics.blogspot.com/2021/04/buy2let-cars-fraud-raids-arrests-made.html

Some interesting info has come out from people who have leased cars and very worried that they will lose their vehicles but are having problems getting them serviced and taxed.

Hopefully the feedback here stopped too many people who asked about investing from going ahead but there were still some on the LCF thread that thought they knew better and still took the plunge.

jimjames

An update from administrators, no wonder the SFO are involved when there is such a discrepancy in the amount invested vs the number of cars listed. Average value of car would be £67,000 if the investments vs cars matched up!

https://damn-lies-and-statistics.blogspot.com/2021/05/buy-2-let-cars-administrator-report.html

It's somewhat depressing to have yet another high risk bond failure through what appears to be a ponzi scheme but it also reinforces the comments many have made previously that the yields being offered are unsustainable and cannot be made from actual returns as a guaranteed rate. It also shows the level of due diligence that you would need to be doing to verify that such an investment is legitimate and I suspect there is no way that the owners would allow the DD to be done at a level that would be needed as the scam would be discovered.