When I speak to investors, one of the most common questions they ask me is…
“What happens if the customer leasing the vehicle stops paying?”
It is a legitimate question and when they see the answer, they either say or think the following…
“I wish I had thought of this business first.”
It all comes down to a stream of revenue from the one vehicle. The car is not just a car, is has become a business.
Prior to seeing our zoom presentation, the average person looking to invest thinks that we only make money from leasing the vehicle. If that was the case, we would be nervous too, but we actually have five streams of revenue in place to protect your investment. These revenue streams have put us in a position where we have paid 100% of our monthly income to our investors and 100% of the profits we have promised.
Most companies will hide their revenue streams, but we see our investors as partners in this venture, so let me pull back the curtain and show you how it works.
First revenue stream – Our cash rebate
We have negotiated a substantial discount with the manufacturers in which we purchase the car from, using your funds. This rebate is paid back to us in a cheque for every vehicle we purchase, called a procurement margin. This can be an average of £4,141 simply for purchasing a vehicle. If the monthly lease payment of around £299 is missed one month we are still in a very healthy financial position. We deposit those funds into the business as working capital and a buffer for the future should any vehicle get into a non-revenue situation.
Second revenue stream – The initial rental
Our other revenue stream is when we lease the vehicle out. Our customers pay an initial rental up front to start the agreement, this is not a deposit so is not returned at the end of the agreement. This can range from £299 to £1000 with an average of around £749 depending on the type of vehicle they lease.
Our third revenue stream – The monthly rentals
We then start the lease for 36 months which is the same term as your investment. On average our customers pay around £299 per month with the option to extend at the end.
Our fourth revenue stream – The disposal of the vehicle
The final piece of the jigsaw is the question…
“What’s in it for us as a company?”
At the end of the 3 year investment period when our investors are happy with their monthly payments and their final repayment is in their account , we shake hands and the vehicle is handed over to us at Buy2LetCars. We now have a used vehicle which we can sell or continue to lease out.
This is where our sister company Pay Go Cars come in to play. By the time the car finishes its 3 year lease, it doesn’t owe us a penny; meaning anything we sell it for is additional profit. We sell these vehicles to the public and that’s what generates our 4th revenue stream.
Our fifth revenue stream – Finance commissions
According to the fleet leasing association 91% of new car registrations in the UK are purchased on some form of vehicle finance package. The same is true when customers come to us at Pay Go cars. As a result, we are a registered finance broker and we arrange finance for the disposal of our used fleet. We are paid commissions for arranging this which is often a simple process of filling a form and collecting a customer’s ID. We earn an average of £1000 extra per vehicle sold.
Here is an example of a Nissan Juke which we purchased in March 2015 and leased out to a customer for 3 years. This customer chose to extend for a full 4 years and then went on to purchase the vehicle on finance arranged by us.
Our funder in this example invested £14,000 and made a hands-free profit of £3,033 at the end of 3 years with a total return of £17,033. All this with the security of knowing that if we were to struggle to collect payments at any stage, there is a substantial pot which we like to call “working capital” in the background to cover any non-revenue situations.
In our tradition of; Our investor’s success must come before ours, the vehicle is sold and that’s when we make our profit.
This is the point when our investors say …
“I wish I had thought of that!”
R.Greenland – Funding Consultant.
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