After over 8 years in operation, the Buy2letcars investment scheme has been closed to new investment by the FCA.
A “first supervisory notice” placed on Buy2letcars’ parent company, Raedex Consortium, prohibits the company from carrying out any regulated activities other than collecting payments on vehicle leases that were already in place.
Buy2letcars solicits investment from the public via social media, local news advertorials and radio ads. Their money was used to purchase a car to be leased out to a borrower. As the investment is unregulated, the FCA does not technically have the power to stop Buy2letcars taking in investment. However, FCA does have the power to stop Buy2letcars arranging new vehicle leases, and if Buy2letcars can’t arrange new vehicle leases, it can’t take in new investment as it can’t do anything with it.
In addition, Buy2letcars has been instructed “not to dispose of, withdraw, transfer, deal with or diminish the value of any assets it holds or receives on behalf of itself or another, otherwise than in the ordinary course of business”, effectively an asset freeze.
8 years in operation
I reviewed Buy2letcars in 2018, when the company had already been running for six years.
In its early years in 2012, Buy2letcars was advertising not just returns of 33% over three years but “a substantial six figure income”.
You keep your job and existing lifestyle and use our automated asset backed income generator system to a) realise 33% yield and b) develop a substantial six figure income.
The potential for “six figure income” appeared to rely on recommending others invest in Buy2letcars.
Once you are happy with our service and comfortable with the business you can recommend your peer groups and start earning a fortune. It is possible to replace or double your full time income within a short period of time.
buy2letcars will show you how to grow through the levels up to £250,000.
The “six figure income” claims were rowed back on shortly thereafter. The 2013 version of Buy2letcars’ website still contained details of “affiliate income” (i.e. earning commission by introducing investors to Buy2letcars) but no longer made claims about “six figure income”.
In my review of June 2018, I highlighted that Buy2letcars looked an awful lot like an unauthorised collective scheme. Investors did not just invest in a car but Buy2letcars itself, via a guarantee to return 85% of their money regardless of what happened to the car and the lease payments from it.
But until now the FCA was apparently happy for Buy2letcars to do its thang, so it’s not clear what has changed.
The FCA has stated that the reason for permissions being withdrawn was “concerns about its finances”. No further detail has been provided as yet.
In October 2018 I covered the Buy2letcars group’s 2017 accounts which showed significant losses and net liabilities. But that in itself doesn’t explain the FCA’s “concerns”, as the scheme has been posting net liabilities and losses since inception. In 2012 Raedex Consortium’s net liabilities were £172k and in 2013 £784k. Those net liabilities would only continue to mount.
In 2017 the net liabilities position improved from minus £6.8 million to minus £2.9 million, but only because the group managed to magic up £4.8 million of goodwill, representing “the expected future value of profits”. Where these profits were going to come from was unclear from the limited information disclosed in the accounts, given that the company continued to post losses.
The recently filed 2019 accounts showed more of the same – more losses and expanding net liabilities.
As at December 2019, Buy2letcars had taken in £34 million of investment, as far as we know from the “other creditors” line in its unaudited and limited accounts. How much it has taken in since is not yet known.
What happens now?
The FCA has emphasised to Buy2letcars’ existing borrowers that they should continue to make the lease payments on their vehicles.
So in theory, everything for existing Buy2letcars investors just carries on as before, and their interest will continue to be paid from the interest Buy2letcars receives from its borrowers.
But if the FCA has concerns about Buy2letcars’ finances, its a fair bet that investors will now share them, notwithstanding that Buy2letcars continues to claim on its website to be “protecting your assets
for peace of mind”.
Watch this space…
Buy2letcars owner Reginald Larry-Cole’s booky-wook, Compassionate Capitalism: How I Turned 150 Nos into 1 YES, had previously rocketed from 981,479th in October 2019 to the heady heights of 373,779th in January 2021.
In more bad news for Larry-Cole, the best-seller rating has since collapsed to #1,658,028. On the positive side, it retains its 5-star rating from 6 reviews.
Buy2letcars gave out “free” copies of Larry-Cole’s tome to new investors (if something that comes with a minimum investment of £7,000 can be accurately said to be free).
Hat tips to a pseudonymous contributor and Mark Taber who separately flagged the FCA’s shutdown.
Buy2letcars has hit back at the FCA shutdown, stating:
We are surprised at the FCA’s interpretation of accepted accounting standards and principles,” said the directors of Raedex Consortium, which owns the business.
Although our company is well financed with a strong cashflow and bank balance, the FCA is putting 24 jobs at risk with this bizarre decision.
We would like to reassure our customers that we fully intend to challenge this and will be in touch with them directly this week.
By “customers” they presumably mean “investors” as the customers hiring the cars have no particular reason to be fussed.
Fundamentally this is not an issue of accounting standards but whether Buy2letcars can demonstrate that it can consistently earn enough from leasing out its cars to pay investors 11% per year, on top of all their other costs, while meeting its guarantees to make good any losses to investors from the individual vehicles.