Buy2Let Cars Goes Bust - Will Investors get any money back?

This blog had previously highlighted the promotion techniques of Buy2Let cars and warned that these sort of promotions to unsuspecting investors were a possible disaster waiting to happen. It looks like that has now come true with the company going into administration because it was insolvent.

The FCA information below shows some serious discrepancies over the details provided by the company compared to the officially listed records of vehicles.

There are some worrying bits of information coming out that suggest the model publicly promoted by Buy2Let cars wasn't actually what happened in practice. Investors may have thought they were buying an actual car but the cars weren't owned by the entity that they handed money over to.

The FCA statement on the supervisory notice that they have been told thet Buy2Let cars had 1200 customers and 1200 leases. There are 4 companies in the group, Raedex Consortium, Paygo Cars Ltd, Buy2Let Cars Ltd, Rent2Own Cars Ltd. PayGo and Raedex Consortium are regulated by the FCA. PayGo is believed to sell on the second hand vehicles after leases end.

Investors loan money to Buy2Let cars which passes it on to Raedex and Rent2Own via intercompany loans. Apparently the registration of the vehicle is stated on the loan agreement but it is unclear how this works when any amounts can be invested - so how do multiple investors own the same car?

Buy2Let cars has stated it owns 1200 cars but according to the FCA the number of charges registered at Companies House is only 69 vehicles far below the numbers claimed.

The FCA sampled 10% of the leaseholder list and checked 102 vehicle registrations on randomly chosen pages of the list. By checking with DVLA 55 of the vehicles appears to be second hand. Buy2Let cars claimed that a minority of their business was second hand vehicles yet this isn't backed by this random check. The FCA points out that second hand vehicles would not have the discounts that could be made on new cars.

2 of the vehicles could not be identified by the DVLA. 18 leases were made before the vehicle was put on the road.

When the FCA looked at the accounts and balance sheet for the Group companies they have questioned the valuations and accounting standards used. They have stated that they believe the company is insolvent based the numbers.

As a result they have stated that instead of the company being solvent with assets of £32.52m and liabilities of £31.64 million they actually have assets of only £14million with liabilities of £34 million.

Of course these numbers depend on the actual vehicles existing as per the company claims. If that's not the case then the actual assets could be much lower.

Based on the numbers in the FCA report and the amounts that are falling due to investors over the next few years it would appear that the flow of new investors money is required to keep the payments to existing investors and keep the company solvent. This is the normal definition of a ponzi scheme where new money is needed to keep it running.

Buy2Let cars promised investors that they would guarantee 85% of the price if the lease ended. As  stated many times before these sorts of guarantees are worthless if the company is insolvent as is the case with Buy2Let cars now.


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