car leasing as a sales option? (PCP)

[D7neo 5]

I trade part time, the rest of my time I work within the construction industry. For that, I use LinkedIn quite regularly. I have started growing my vehicle sales 'connections'.

I have noticed that a lot of sales companies are now just advertising their cars as lease options (PCP). These aren't brand new vehicles. Typically 2-3 year old, usually evoques, 1 series 3 series etc. These are independent companies too, not the likes of BMW used cars or a nationwide chain. 

How does it work? Does the sales company buy in the vehicle, then rely on the customer taking it on a lease deal via a finance company? They are always advertised at '£349' a month, then at the bottom the actual price of the car if they ever own it. Never any mention of miles on the vehicle or service history etc as you would typically find on a sales add.

What then happens at the end of the 3 year term when the customer doesn't wish to buy the car? Does the finance company then throw it to auction?

Does anyone operate this way?

To be fair, from the finance royalties of 5-10% that was banded about on here recently it seems a good way to make money, if what I am imagining to happen is in fact true....

Edited July 16, 2018 by D7neo

[david gott 58]

I've only ever had one car on finance and it lasted one month, I suppose I needed to get it out of my system, I bought a 12 month old Mini cooper S, when the first payment came out plus the sky high insurance I thought bugger this, theres no way Im spending all that money a month on something thats going down in value and went back my Ford Focus, is it just me that thinks like this? surely these pcp deals cant be that good? I understand your only paying the depreciation but, if your buying a 20k car after 3 years you going to have paid between 6k and 8k depreciation, surely its better to just buy a half decent car at 10k car and only lose a couple of grand but hey ho what do I know! 

Yes they throw them into auction, just have a look online at Bca and Manheim, hundreds of them!!

[D7neo 5]

I have the exact same opinion as you. I don't like the idea of paying a good chunk of money for something that isn't yours or never will be. Along with the fact your tied in to a vehicle for 2-3-4 years. However, it appears to be working very well for some people. One that seems to be doing very well from it to us an example is DB Automotive.

I'll be honest, I don't look at cars at the auction, I currently focus on one company owner 3 year old stuff. Rightly or wrongly, with the mindset that if nothing else it should of been serviced regularly and not really old enough/enough miles to have major problems. Touch wood.

However, when I get the FCA approval for finance and try and grow the business, look into getting a unit, I think I'm going to have to offer cars as well as vans.

[david gott 58]

Before you start thinking about selling finance on your cars or vans, personally I'd just concentrate on selling them first, build your business up and then the finance will slot into place, once your established, give close finance a call, they can help you with all your FCA Approval applications and will make it really easy, I sell stuff between 2k and 7k so I don't get a great deal of finance but if your looking to sell stuff above that bracket and have a stock of 15 - 20 you should get at least 2 -3 finance deals a month.