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Watchdog slams the breaks on car investment scheme

Emma Lunn
Written By:
Emma Lunn

The Financial Conduct Authority (FCA) has halted new business at Buy2LetCars, while the regulator investigates the company.

Buy2LetCars borrows money from investors, promising them annual returns of up to 11% for a three-year investment of a minimum of £7,000. It then uses the money to buy new cars and leases them to people with a poor credit history via another company called Wheels4Sure.

Investors receive their capital back via monthly payments over the term of the loan, with interest paid at the end of the term.

The FCA has imposed a number of restrictions on Buy2LetCars’ parent company Raedex Consortium Ltd. The restrictions require the firm to cease conducting regulated activities because of “concerns about its finances”.

The move means new car leases can no longer be issued by the firm – but payments on existing contracts will continue to be taken as usual.

How long Raedex will have restrictions imposed is not yet clear. Firms which are FCA authorised need to meet ‘threshold conditions’. If the firm can demonstrate to the FCA that it is meeting threshold conditions, then the restrictions can be removed and it can continue to trade.

The FCA has warned investors looking to invest in hire cars that they should not make investments through Buy2LetCars as the money can no longer be invested in cars which are then leased out.

Existing investors should talk to Buy2LetCars if they have any questions. It’s unlikely any worried investors will be able to get their money out of the scheme straight away as these investments are loan agreements as opposed to a liquid investment.

The type of investment offered by Buy2LetCars isn’t regulated, so investors don’t have recourse to the Financial Ombudsman. However, the FCA has the power to prevent the company from arranging new leases.

The FCA said it had had concerns about the company for some time.

A statement from Buy2LetCars said: “We are surprised at the FCA’s interpretation of accepted accounting standards and principles. 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.”