Buy2LetCars investors invested in cars which didn’t exist, administrators confirm

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The administrators of Buy2LetCars (comprising Raedex Consortium aka Wheels4Sure, Buy 2 Let Cars and Rent 2 Own Cars) have released their initial report.

The report reveals that of out of every 6 cars invested in by Buy2LetCars investors, 5 didn’t exist.

The total number of known loan agreements is 3,609, relating to 834 investors.. However, the number of vehicles held by the Group is 596, i.e. there are more loans than vehicles.

The prospect held out by Buy2LetCars was always that each investor would be investing in an individual car which would be leased out and used to pay their return, and could be sold if the lessee stopped paying.

A funder will simply loan us a lump sum of capital, and with that money we will purchase a brand new car and then lease it out through our sister company Wheels4Sure.

We also ensure your asset is protected by using state of the art tracking and immobilisation technology inside every car.

Buy2LetCars website in January 2021

According to the administrators, it seems that some cars were allocated to more than one investor. Other investors had no car allocated to them at all.

The Joint Administrators are undertaking an exercise to review B2L’s records and allocate each investment to a category based on the signed documentation within the records. This exercise has also revealed that some vehicle registration numbers have been referred to in more than one loan agreement.

Significant amounts of time have been spent on this exercise and it is clear therefore that a large proportion of investors do not have a vehicle allocated to their investment.

Investors who were unlucky enough to hand their money to Buy2LetCars after the FCA had already effectively shut down the scheme by removing their permission to lease new vehicles (although it turns out that this was only a symbolic gesture, as Buy2LetCars wasn’t leasing new vehicles for 5 out of 6 investments anyway) have “queried the treatment of those receipts” (i.e. asked if their money is ringfenced or lumped in with everyone else’s). The administrators will be taking legal advice on this point.

Recovery prospects

A total of £48 million was taken in from Buy2LetCars investors. (A small amount is also owed by B2L to the taxpayer and associated companies.)

£902,000 in cash has been recovered so far. The administrators expect to realise £4.2 million from selling the vehicles and around £400k from the lessees.

The B2L entity to which investors loaned money is in turn owed £31.3 million by Rent 2 Own Cars, also part of the administration. £24m is in turn owed by Raedex to Rent 2 Own Cars. (The administrators’ statements of affairs contain a typo in which R2O is said to be owed £24m by itself. The earlier summary states the correct position.) Prospects of a return from these intercompany debts are currently unclear.

The directors of Buy2LetCars (Reginald Larry-Cole and Scott Martin) owe a total of £804,000 to the group in directors’ loans. The administrators say it is unclear how much will be recovered.

The administrators are also trying to establish who owns a Rolls-Royce that somebody was apparently swanking around in. Even though a business with a couple of million in turnover at most and continual losses doesn’t exactly scream “Rolls Royce lifestyle”.

No figure has yet been put by the administrators on potential recoveries for investors.

Although the investment scheme was unregulated, Raedex was regulated by the FCA, as it had to be in order to lease vehicles to customers. The Financial Services Compensation Scheme is remaining tight-lipped on whether this is enough to dump yet another bill on the general public for the UK regulatory system’s failure to stop unregulated investment schemes being promoted to them. Following the recent bills for London Capital and Finance, Basset & Gold etc etc etc.

As at the date of the 2020 balance sheet, £40.4 million had been lent by investors, on which Buy2LetCars committed to pay 7 – 11%. That required B2LC to generate at least £2.8 million in annual earnings on top of the cost of running the business and bad debts, if it was to meet its obligations.

In that year, Raedex, which was the company responsible for leasing out the vehicles, generated a turnover of just £1.5 million (before any costs had been deducted). But this is hardly a surprise at this point given Buy2LetCars had only 596 cars across 3,609 investors.

This was naturally not disclosed to investors. Despite running an investment scheme promoted extensively to the public, and claiming “we are fully transparent about our business” on its website pitch to investors, UK company law allowed Buy2LetCars to withhold its profit and loss accounts from Companies House using “small company” exemptions. They have only now been published in the administrators’ report.

The administrators note that a Serious Fraud Office investigation is underway but that this is separate to their own attempts to maximise returns for creditors.

Serious Fraud Office raids Buy2letcars, alleges “fraudulent scheme”

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The Serious Fraud Office announced last week that it is investigating “suspected fraud in relation to the activities of the Raedex Consortium, including the companies Buy2Let Cars, PayGo Cars, Raedex trading as Wheels4Sure and Rent2Own Cars”.

One individual has been arrested and another interviewed. Two residential properties were searched.

The identity of the individual arrested, and why the SFO suspects fraud may have occurred, is yet to be revealed.

Having closed to new investment in February, gone bust in March, and been raided by the Serious Fraud Office in April, Buy2letcars is shaping up to be the most dramatic collapse of an unregulated investment scheme since London Capital and Finance collapsed in 2019.

The speed of developments stands in marked contrast to the 8-year period in which Buy2letcars was allowed to market itself to investors as a “recession inflation and stagnation proof” investment (2012 website copy).

As late as May 2020 it was promoting itself in Peer2Peer Finance News with a two page spread, claiming a “zero per cent default rate” and that the scheme should be considered by “investors who have been frustrated by low savings rates and stock market volatility”, despite the reality that anyone who can’t put up with the volatility of mainstream stockmarket investments certainly doesn’t have the risk tolerance for investing in obscure unlisted loss-making nano-cap companies.

Buy2letcars goes into administration

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Things have gone from bad to worse for Buy2letcars investors, after the Financial Conduct Authority revealed yesterday that the whole scheme has gone into administration, less than a month after the FCA effectively stopped the scheme from taking in new investor money.

All three of Buy2letcars’ constituent companies: Buy 2 Let Cars Ltd, Rent 2 Own Cars Ltd, and the holding company Raedex Consortium, went into administration on Tuesday 15 March, with RSM Restructuring Advisory appointed as the administrators.

Buy2letcars’ investment scheme is unregulated, but the FCA does regulate the side of the business where it leases the cars bought using investor money to borrowers, who in turn pay the interest that supposedly funds returns to investors. On 19 February, the FCA stopped Buy2letcars from making new vehicle leases; this effectively stopped Buy2letcars from taking in new money as it couldn’t use it to lease new cars for the time being.

If history is any guide, the decision of Buy2letcars’ directors to appoint administrators is to be followed by individuals claiming to be investors and blaming the FCA for the collapse of the business.

Prior to the FCA shutdown, Buy2letcars claimed that its finances were sound and its accounts showed continual losses and substantial net liabilities only because its accountants were “lazy”.

Even after the shutdown, apparent investors swamped Trustpilot with 5 star reviews defending the company. Unfortunately their attempts to defend the company only demonstrated how Buy2letcars’ misleading advertising ensnared investors who were clearly not sophisticated investors only investing money they can afford to lose.

The question remains: if Buy2letcars was in such a good state of health, why has it gone into administration only a month after being prevented from taking in new investment? Note that its borrowers were instructed to carry on making the lease payments on their vehicles, so the FCA shutdown should not have affected its ability to service its debt to investors.

The appointment of administrators seems to have put an end to investors’ bout of Tirana Syndrome (a variant of Stockholm Syndrome where investors in a collapsed investment scheme side with the people who took their money against regulators, administrators and other outside agencies), if the Trustpilot reviews over the last couple of days are any indication.

I reviewed Buy2LetCars in June 2018 and noted that, despite its attempts to portray itself as an alternative to a savings account and a “safer investment”, it was in reality an inherently high risk unregulated investment scheme. I also noted that the scheme gave off a distinct whiff of being an unauthorised collective investment scheme, which is illegal.

Whether Buy2LetCars did in fact pool investors’ money to pay their returns, which would make it an illegal collective investment scheme, has yet to be confirmed by the FCA or administrators. How it managed to continually maintain a 100% payment record up to the FCA shutdown without pooling investor money, bearing in mind the inherent risks of leasing cars (depreciating assets) to subprime borrowers, is likewise not clear.

Up until the FCA shutdown, Buy2letcars spent 2020 exploiting the pandemic, claiming to provide an “ethical investment” that provided key workers with cars, despite the fact that there is nothing ethical about renting cars to key workers at sufficiently high interest rates to allow it to pay 11% annual returns to investors on top of accounting for bad debts, depreciation on cars and all its other costs.

More to follow when the administrators release their initial report.

Thanks to a pseudonymous reader for flagging the FCA announcement.

Smith & Williamson dumps Buy2LetCars founder from Entrepreneurs’ Hall of Fame

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Following last week’s FCA shutdown of new investment into Buy2LetCars, Smith & Williamson has unceremoniously dumped CEO and owner Reginald Larry-Cole from an “Entrepreneur’s Hall Of Fame”.

Google’s cache shows that on Friday 19th, the day of the FCA’s intervention, the hall of fame entry was still up. At some point after it was quietly removed and now returns a dead link.

Until its disappearance, the Hall of Fame entry largely repeated Buy2LetCars’ origin story which may be familiar from a very similar 2019 hagiography in The Sun:

  • the original leasing business, Creditlab, founded in 2003 when the markets were awash with easy credit
  • the credit crunch induced collapse of Creditlab in 2008
  • the wilderness years including benefits and working for a Range Rover showroom
  • and finally the triumphant return in 2012 thanks to an angel investor recruited via an advert in the Sunday Times, which resulted in the founding of Buy2letcars.
  • (And then lots more investors recruited via radio ads, and local papers, and Facebook, etc etc.)

The Smith & Williamson story does however noticeably differ from the Sun version (which was printed about a year before). Larry-Cole’s rejection by 150 different professional and institutional investors was such a key point in his life story that it forms the title of his book: Compassionate Capitalism: How I Turned 150 Nos into 1 YES.

And yet the Sun and Smith & Williamson biographies differ significantly in what those 150 Nos were actually saying No to.

In the 2019 Sun version, the 150 nos came in 2010, when Larry-Cole was trying to get the new business that would become Buy2letcars off the ground.

“Range Rover was a source of inspiration where I would check my bank account to see if I could meet the electricity bill this month but then had someone buying one or two Range Rovers in cash. It gave me the evidence I needed that people are going about their business and that the world hasn’t ended.”

So in his spare time, Reg started to reach out to business angels – investors willing to take a chance by funding small businesses – and investment capitalists. Over four years, Reg had 150 such meetings.

2019 Sun article

But in the Smith & Williamson hall of fame entry, posted a year later, the 150 “nos” had suddenly travelled through time to two years earlier, when Larry-Cole was trying to save Creditlab from the credit crunch.

That all changed in April 2008, when he got a call out of the blue saying the bank was now refusing to underwrite the company’s credit. The business had no funding, overnight. Reginald tried to hold everything together: he spent the next few years speaking to 150 sources including banks, business angels and venture capitalists, getting 150 nos.

2020 Smith & Williamson “Entrepreneur’s Hall of Fame entry”

To be fair this was all 8/10/something years ago and Larry-Cole’s been very busy since. And it’s possible that around 150 investors rejected bailing out his old business and funding the new one. Some people are haunted by certain numbers. Sigmund Freud was haunted by the numbers 61 and 62 (so badly that at one point they cunningly disguised themselves as the number 31).

Anyway, now that one version of the story has been scrubbed from the Internet, in one sense the inconsistency no longer exists.

According to Smith & Williamson,

the profile was removed promptly so that there would be no possibility of confusion or a mistaken perception that we validate any of these company’s activities

It is worth noting at this point that as it stands, notwithstanding the FCA’s “concerns” over Buy2LetCars’ finances, the company is still trading. Comments on Bond Review allege that the company has had its accounts frozen and has stopped paying interest. At time of writing, whether Buy2LetCars is actually unable to pay interest is unclear. The FCA’s restrictions allow the firm to continue making payments “in the ordinary course of business” which would seem to cover existing obligations to investors.

At time of writing, there’s been no public statement from Buy2LetCars other than a minscule small-print notice at the bottom of (the website for leasing customers) – which defies the FCA’s edict that the company must announce the shutdown “in a prominent place on all its websites” by 22 February. (I.e. the Monday after last Friday’s shutdown of new investment.) On the website (aimed at investors) and social media channels there is deafening silence.

That means there’s as yet no public statement by Buy2letcars confirming that it has suspended interest to existing investors, and if so why. The FCA has been asked to comment.

Smith & Williamson declined to comment on why Larry-Cole was recognised with a spot in its Hall of Fame in the first place. Building a profitable business or achieving a successful exit for investors would be worthy of praise. Taking in investor money for 8 years while continually posting losses and net liablities in published accounts is not. S&W’s decision to add Larry-Cole to its Hall of Fame in March 2020 therefore seems premature at best.

Smith & Williamson confirmed that Buy2letcars and Larry-Cole are not clients of the firm.

Breaking: Buy2letcars closed to new investment by FCA, assets frozen

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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…

Literary Review

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.

Addendum 22.02.21

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.

Buy2letcars group posts 2019 accounts, group now £10.9 million in the red

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The Buy2Letcars group of companies, consisting of Buy 2 Let Cars Limited (which borrows money from investors promising returns of up to 11% per year), Wheels 4 Sure (which uses the money to lease cars) and Raedex Consortium Limited (parent holding company) have all filed their accounts for the year ending December 2019.

The accounts have been filed using small company exemptions and did not include profit and loss accounts, and were unaudited. They therefore contain limited information.

What little we do know includes that the overall group has continued to lose money (as it did in 2018 and 2017). Raedex Limited shows net liabilities expanding from £9.5 million in 2018 to £10.9 million in 2019, while the “retained profits” line fell from minus £14.1 million to minus £18.1 million (suggesting losses of around £4 million over the year).

The group would be even deeper in red ink if it hadn’t revalued “goodwill” upwards by £2.3 million, an increase of 80% on 2018. This “goodwill” represents “the expected future value of profits derived from existing contracts at the balance sheet date”.

Meanwhile Buy2letcars Limited now has £34.1 million of “other creditors” on its balance sheet, up from £29.5 million in 2018, suggesting that the company has taken in another £4.5 million odd of investor money.

Over the past few months Buy2letcars has exploited the Covid pandemic to promote itself to investors via its Facebook page. Its adverts say that investors can “over a 3 year period earn up to 27% ROI, whilst helping key and essential workers get into brand new vehicles”.

The pandemic isn’t mentioned explicitly in the adverts but we all know where they’re going with “key and essential workers”. From where I’m standing, leasing vehicles to key workers, charging them high enough interest to cover up to 11%pa returns to investors on top of Buy2letcars’ own costs, is a personal business transaction no different from selling a nurse a hamburger. They may need it but it’s not some kind of charitable activity.

Buy2letcars has taken to posting videos from key workers who thank Wheels4sure “and their investors” for leasing them vehicles. In one frankly bizarre example, a car-borrower sits in her car alternately speaking out of the window to the camera and looking down at the script in her lap, like someone who’s been strapped to a wall at a 90 degree angle to a tennis match.

Buy2letcars continues to misleadingly promote itself by comparing returns from its high risk unregulated investment scheme to minimal-risk cash interest rates. The company has run video adverts claiming “protection for every scenario” in voiceover.

In reality, while the information in its accounts is limited, its continuing losses and widening net liabilities demonstrate the inherent risk of investing in unregulated investment schemes, whether or not Buy2letcars goes on to turn itself around and repay investors’ capital and interest in full.

Raedex Consortium is an FCA-regulated company, as it has to be to run its vehicle leasing business. Its collective investment scheme is however unregulated.

Other news in Larry-Cole-land

Buy2letcars’ CEO Reginald Larry-Cole’s other business, “reverse auction” lottery Lifestyle Bids (aka Triple R Lifestyles Limited), shut its doors in April 2020 due to the Covid pandemic (no more luxury holiday prizes).

It’s not all bad news for Larry-Cole though in 2020. Since we last looked, his book “Compassionate Capitalism: How I Turned 150 Nos into 1 YES” has rocketed up the Amazon charts from 981,479th to the heady heights of 373,779th. The book is published by another one of Larry-Cole’s companies, Regnata Dreams Limited, which appears to have made around £100k in 2019 (again we’re relying on the movement in the “retained earnings” line due to the lack of a profit and loss account). Whether this is all book sales isn’t known.

Buy2LetCars increases to £25 million in funds; company hits road with misleading adverts

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Buy2LetCars has released its accounts for December 2018.

The figures for Raedex Consortium Limited, the group holding company, show limited information as the company used small company exemptions and did not release a profit and loss statement, or have the accounts audited.

The figures are however clear that the overall company remains loss-making, with the profit and loss account falling from minus £9.3m to minus £14.1m. Net assets decreased from an already negative £2.3 million to minus £9.5 million.

According to a February 2019 Sun article, Raedex has a total turnover of £4.3 million (profit is not mentioned) and has raised £25 million in total from investors.

The Raedex Consortium accounts say that the directors consider it to be a going concern as it will continue to receive support from group undertakings.

Those group undertakings are listed as Buy 2 Let Cars and Rent 2 Own Cars, which in the same year to December 2018 made a profit of £305k and a loss of £599k respectively.

There is therefore a clear risk that Raedex’s group undertakings will not continue to provide sufficient funds to keep the company afloat.

There is another company, PayGo Cars Limited, which according to the Sun article sells Buy2LetCars’ cars after the three year investment term is up.

PayGo Cars Limited is however wholly owned by Buy2LetCars head Reginald Larry-Cole rather than being a subsidiary of Raedex.

Promotional activities

Buy2LetCars is currently on a tour of the UK promoting its investments in hotels up and down the country.

The Leeds leg of its tour was recently promoted in local paper Leeds Live. Despite being clearly an advertorial, the promotion is not marked as such and is described as a “special feature”.

The piece is a blatantly misleading financial promotion, containing no mention of the inherent risks of investing in a small company offering returns of 7 to 11% per year, and repeatedly exhorting investors to invest money currently on deposit.

If you’re tired of seeing your savings tied up in the bank earning low interest rates and are looking to invest your money wisely, Buy2LetCars are hosting a free seminar event in Leeds on Thursday October 24.

Inflation is eating into your hard-earned savings or capital by virtue of low interest rates and loss of buying power. Now is the time to find out how you can change the negative growth on your money and deliver proven returns of up to 11 per cent per annum.

Since our launch in 2012, Buy2LetCars has delivered the expected returns to 100 per cent of our clients with zero percent default.

Misleadingly comparing high-risk investments with FSCS-guaranteed savings accounts was singled out by the FCA as an example of bad practice after the collapse of London Capital & Finance.

On its website Buy2LetCars states that if an investor invests in one of its buy-to-let cars and Buy2LetCars was unable to repay the investor from leasing it (e.g. because the hirer stopped paying fees and Buy2LetCars could not find another end-user), it will make up any shortfall up to 85% of the investment.

Buy2LetCars goes beyond this in the LeedsLive promotion, saying that it has a 100% repayment record.

There are only two possibilities:

  • Either Buy2LetCars has, despite lending cars to people with poor credit, never failed to recover investors’ money from the people it lends cars to;
  • or it pools investors’ money in order to repay investors on those occasions where the end-user has failed to pay sufficient fees to allow it to repay the investor from their car alone.

The first is implausible, especially given the company’s ongoing losses reported in its accounts.

The second means that Buy2LetCars is running an unauthorised collective investment scheme.

Buy2LetCars has no authorisation from the Financial Conduct Authority to run a collective investment scheme, nor to issue financial promotions.

Holiday reading

For those looking for inspirational Christmas gifts, Buy2LetCars CEO Reginald Larry-Cole has released a memoir, Compassionate Capitalism – How I Turned 150 Nos into 1 YES, detailing his rags-to-riches story about how he went from being rejected by 150 venture capitalists to founding a £25m unauthorised collective investment scheme.

The self-published book is optimistically on sale for £25 (current Amazon bestseller ranking #981,479) but Larry-Cole is handing out free copies to the first 10 people who turn up to Buy2LetCars’ seminars.

Larry-Cole has also recently launched a penny-auctions gambling company called Lifestyle Bids.

Penny auctions are a form of lottery where players pay fees (£1.99 to £4.99 in Lifestyle Bids’ case) to place very low bids for expensive items. Only one player wins the item, with all other players losing the fees they paid to place the bids.

The winner therefore gets an expensive item for almost nothing (allowing the lottery to be promoted as “You could buy a luxury holiday for £3.74!”) but the cost of the item is covered by the fees paid by the losing players. This contrasts with a normal auction where fees are paid by the buyer and seller and the failed bidders lose nothing. Simple maths means that the majority of players will lose more in fees than they gain in won items.

In a traditional penny auction the highest bid wins, while Lifestyle Bids works in reverse, with the highest unique bid winning. (I.e. if five people bid 1p, one person bids 2p and one person bids 5p, the 2p player wins the item.) The underlying lottery mechanism is however identical.

Penny auctions are currently unregulated in the UK as the Gambling Commission can’t be bothered does not consider it gambling.

Lifestyle Bids does not appear to solicit investment (though it does pay 20% commission to affiliates who introduce players who place bids). Its 2018 accounts show net liabilities of £784k.

Larry-Cole’s concept of “compassionate capitalism” comprises a heavily loss-making unauthorised collective investment scheme and an unregulated lottery. Surely a political career can’t be far behind?

Buy2LetCars files 2017 accounts

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Buy2LetCars, which offers unregulated investment in cars paying up to 11% per annum, has filed its accounts for the period ending December 2017.

There are three companies in the Buy2LetCars group: Buy 2 Let Cars Limited, Rent 2 Own Cars Limited and Raedex Limited. Raedex Limited is the holding company for the first two.

Due to its small size, the companies’ accounts were exempt from independent auditing, and the information that can be obtained from them is limited.

At the balance sheet date of 31 December 2017, the liabilities of the holding company exceeded its assets by £2.9 million. This was an improvement from December 2016 when net liabilities were £6.8 million. A large contribution to this improvement was £4.8 million of goodwill which was put on the books in the 2017 financial year, described as “the expected value of future profits dervied from existing contracts”.

Again due to its small size, the three companies did not have to file a profit and loss account. However, the profit and loss position is briefly referred to in the notes to the Raedex Limited accounts, which state that Buy 2 Let Cars Limited made a net profit of £261k while Rent 2 Own Cars Limited made a £3.6 million net loss. In 2016 Buy 2 Let Cars made a net profit of £191k while Rent 2 Own Cars Limited made a £2.8 million net loss.

The 2018 accounts will be due for filing in September 2019.

Buy 2 Let Cars – unregulated investment in rented cars offering 7-11% per annum

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Buy 2 Let Cars Limited offers the opportunity to invest in lease cars over a term of three years as follows:

  • Level 1: invest £7,000-£10,000 and receive a return of 7% per year
  • Level 2: invest £14,000 to fund “one unit” and receive a return of 9% per year
  • Level 3: invest to fund “two to six new units” (presumably £28,000 – £84,000) and receive a return of 10% per year
  • Level 4: invest to fund “7 or more units” (£98,000 or more) and receive a return of 11% per year

Investors’ funds are used to purchase a lease car (or multiple cars) which is then leased out to a borrower. The borrower’s lease payments are used to generate the promised return.

If the borrower defaults on their payments, and Buy 2 Let Cars is unable to find another borrower, Buy 2 Let Cars will attempt to sell the car to return investor’s capital. If the amount realised is less than the investor invested, Buy 2 Let Cars promises to make up any shortfall up to a maximum of 85% of the amount invested.

Buy 2 Let Cars consists of three companies: Buy 2 Let Cars Ltd, Rent 2 Own Cars Ltd (trading as Wheels 4 Sure) and the parent company Raedex Consortium Limited. For the remainder of this article, Buy 2 Let Cars (which is the name the group uses most often) refers to the whole group or investment, unless otherwise specified.

Raedex Consortium Limited is regulated by the FCA for its car leasing activities, but the investment opportunity is unregulated.

Who is Buy 2 Let Cars?

buy 2 let cars directors
L: CEO Reginald Larry-Cole. R: Operations Director Scott Martin.

Buy 2 Let Cars was incorporated in 2012.

The parent company, Raedex Consortium Limited, is 90% owned by the founder and CEO Reginald Larry-Cole. The remaining 10% is owned by Operations Director Scott Martin.

How safe is the investment?

This is an unregulated investment into lease cars (and, in terms of the promise to return at least 85% of your capital, Buy 2 Let Cars itself) and you risk losing up to 100% of your money if Buy 2 Let Cars:

  • fails to generate sufficient returns from its car leasing agreements to sustain returns of 7-11% per annum,
  • and runs out of money to compensate investors up to the promised 85%.

As investors are relying on Buy 2 Let Cars to make up any shortfall if the lease payments are insufficient to pay returns of 7-11% per annum, this is not just an investment into a car, but into Buy 2 Let Cars as a company.

Buy 2 Let Cars Limited’ last accounts (up to December 2016) show net assets of £1.3m, comprising roughly £19.5m in debtors, £1.5m of cash in the bank, and £19.7m of creditors (predominantly investors’ money). Note that these accounts are unaudited (due to Buy 2 Let Cars Limited’ small size) and are from a year and a half ago.

Buy 2 Let Cars Limited did not file a profit and loss account (again due to its small size), but note 1.2 in the accounts under “Going Concern” shows that the company was loss-making at the time.

As a result of the delay and in anticipation of lower volumes and margins than planned in respect of used car activities, the earlier projections of positive Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) throughout 2017 and profitability achieved from activities in the last quarter of the year will not be realised.

The Directors have therefore conducted a further review of the underlying private customer leasing business model which culminated in a new marketing strategy and rebranding of the businesses at the end of the first quarter of 2017…

…The directors are confident that the business will yield positive EBITDA in the final quarter of 2017 and become profitable at a pre-tax level from the beginning of 2019.

Investors should ensure they do full due diligence on Buy 2 Let Cars, including obtaining details from the company of its up to date funding position, before investing.

Potential collective investment

Under the Financial Services and Markets Act, it is illegal to run a collective investment scheme without authorisation from the Financial Conduct Authority. Raedex Consortium Limited is an FCA authorised company, but is not authorised to run a collective investment scheme (its authorisations relate to the vehicle leasing side).

Buy 2 Let Cars represents to investors that they are investing in individual cars. Investment in individual assets (such as shares, flats, hotel rooms, store pods, etc etc) is in itself not a regulated activity, whereas a collective investment is. (We don’t make the rules.)

So if Buy 2 Let Cars investors were purely investing in individual cars, with each investor receiving only the returns attributable to their individual car, Buy 2 Let Cars’ investment scheme would not be considered collective and they would not require authorisation to run the investment.

However, Buy 2 Let Cars promises that all investors will receive at least 85% of their capital back, even if the car they invest in is completely written off.

pooled investment

Under UK legislation, there are three prongs to the definition of a collective investment scheme: a) the investor must not exercise day-to-day control of the investment, and either b) “the contributions of the participants and the profits or income out of which payments are to be made to them are pooled” or c) the property is managed as a whole by or on behalf of the operator of the scheme.

A) is quite clearly the case with Buy 2 Let Cars; Buy 2 Let Cars openly promotes the fact that its investment is “hands-free”.

Buy 2 Let Cars testimonial

There is a risk that Buy 2 Let Cars’ promise to return at least 85% of investors’ capital to investors may be deemed by the FCA to represent B), pooling of contributions and profits.

This is however not a certainty, as Buy 2 Let Cars could argue that the funds it uses to fulfill its 85% promise come from elsewhere.

Whether or not Buy 2 Let Cars is deemed by the FCA to be running a collective investment scheme without authorisation, investing with a company that is not authorised to operate collective investments represents a regulatory risk. Investors will need to ensure they are happy with this regulatory risk before they proceed.

Should I invest with Buy 2 Let Cars?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any individual investment security, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment offering up to 11% per annum yields should be considered very high risk. As an individual security with a risk of total and permanent loss, Buy 2 Let Cars is higher risk than a mainstream diversified stockmarket fund.

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted, the sale of the security failed to raise enough money to compensate all investors, and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?

Buy 2 Let Cars runs adverts on Sky and on Twitter that urge potential investors to consider Buy 2 Let Cars as an alternative to a savings account, and refer to their product as a “safer investment”.

twitter adverts.png

Novice investors who have previously only invested in deposit accounts, are unhappy with the returns, and want to start taking some risk, should first consider a regulated diversified portfolio of conventional stockmarket investments. While these will go up and down in the short term, a diversified portfolio of regulated investments has minimal risk of loss in the long term provided the investor doesn’t panic and cash it in.

This investment by contrast is unregulated and has a risk of permanent and total loss due to the risk that Buy 2 Let Cars does not generate sufficient returns from your car, and runs out of money to meet its promise to pay investors up to 85% of their investment.

If you are looking for a “safer investment”, you should not invest in unregulated investments with a risk of total and permanent loss.