DRIVING FORCE

AS THE appeal of ISAs declines and investors look for alternative investments, where can they turn? What about investing in leased cars? A survey of UK personal investors has highlighted a demand for “alternative investments”, offering returns that outperform traditional investments such as ISAs, as low interest rates and three per cent inflation continue to bite.

The survey of 500 personal investors reveals 56 per cent of those surveyed were attracted only to those investment opportunities guaranteed to deliver a minimum return of six per cent per annum.

As traditional investments such as ISAs, fixed bonds or deposit accounts no longer produce sufficient results and the buy-to-let property market has become unpredictable and sometimes time-consuming and complicated, investors are increasingly turning to alternatives, with the expectation of achieving higher returns.

Alternative investments made by those surveyed with the intention of delivering their targeted minimum six per cent return included fine wine, solar energy, mining, peer-to-peer lending and — cars.

Prior to 2012, the only parties that enjoyed the leading rates on investing in the car-funding process were banks and car-finance institutions, using the deposits and savings of the populace, while the latter got nowhere near the returns that can be achieved by funding cars.

So lucrative is this industry that one of the biggest insurance giants — Admiral — has joined the car-funding business in December 2017. Why? It wants the money gained from selling insurance to grow at market-leading rates. The booming car-finance market has also reportedly earned Black Horse finance its strongest performance, up 20 per cent to £10.9 billion.

One company that encourages individuals to invest in cars that are then leased is Buy2LetCars.com. The business asks investors to hand over £14,000, which it says is enough to fund a new car. That car is then leased out and the investor receives £250 a month from the lease payments for the next three years, adding up to £9,000. At that point, with the lease expiring, the investor is sent an £8,080 lump sum. It is these figures that allow Buy2LetCars to claim that the return to investors is 27 per cent IRR (internal rate of return) over three years, or nine per cent IRR a year.

Investors in Buy2LetCars have seen returns of from seven per cent per annum to eleven per cent, based on their contribution. The Buy2LetCars investment model essentially replaces banks with individual funding for car purchases. This involves loaning Buy2LetCars a lump sum to fully fund the purchase of a new car, then arranges to lease the car through the sister company Wheels4sure.

With traditional investments such as ISAs losing their appeal because of comparatively low returns, it is no surprise we now have more than 500 personal investors in Buy2LetCars. It means minimal involvement for the investor but, crucially, the returns are between seven and 11 per cent per annum return; inflation-busting and well in excess of the returns currently delivered by bank savings accounts.

IS As lose out to wine, P2P, solar energy and cars’