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The Anatomy of A Financial Scam

Why Should You Not  Invest In Car Leasing?

“Any investment relies on a couple of things, effectively you are taking a bet on the future value of something or hoping that the income promised, plus the return of your capital is more than the money you handed over at the start”  Richard Smith – Moneytrainers.

Investments vary in the level of risk of which there are many different types. Putting your money in a bank or building society account should be regarded as pretty low risk, backing the favourite in the 2.30 at Newbury races this Saturday could be regarded as high risk – but also with the potential for high reward. 

Investing cash in a building society will provide a very low return at the moment.

Interest rates have been low for some years. 

To you it’s regarded as a low to no risk investment. 

  1. It’s on the high street  been there for years.
  2. The Government will step in should it fail.
  3. Your  dad had an account there

None of these are a  good reason to invest.

But note, banks and other ‘high street firms’ make money by borrowing from you and paying a return and then lending that same money to a third party. The interest charged to  the third party is normally around  8 – 10 times more than the interest it pays you. 

Of course it could be more. 

Those offices and uniforms have to be paid for. 

For the lender, it benefits from the margin it makes on your money and the fact that it can lend your more than once. Provided only a few of it’s many investors  ask for their money back at any one time then every one is safe. When many people ask for their money back – we end up with a ‘run on the bank’  – Northern Rock springs to mind, that was the last one.

Now this over simplifies things massively but is exactly how the high street lenders manage their businesses or at least how they should. With that short explanation of why the interest rate on your cash is so low – lets look at the more exotic end. 


So there you are one happy Tuesday morning, sitting in the office, two cuppa’s in and you think to yourself ‘I wonder if I could get a higher return on my savings’ off you go to Google that  and immediately an ad appears 

11% PA Guaranteed

Short Term Low Risk Investment

1 to 5 Years  – Satisfied Customers

Off you click, and you find a convincing page that covers all you need to know.

We invest in cars that people want to lease. 

We do all the ground work and administration and you provide the working capital (they won’t be that honest – be called FSCS Protected Bonds or summat), or  you can be ‘the bank’ low risk, no administration, no fees. 

3 year fixed interest – paid monthly – 11.25%. Your capital returned at month 37. 

Even – fully FSCS protected bonds. We are an FCA Approved Introducer, authorised by the appropriate authority under Great Britain Financial Regulations (or some other word salad) 

You know nothing about this business and you don’t bother checking because, well it’s approved and well, we have regulators and the Police – and Google wouldn’t allow it if it was a fraud. 

You of course have no idea that  the company was only set up last week, has one or two shareholders – who also have thirty or forty other limited companies. But they do indeed provide car leasing services but haven’t actually leased any cars yet as the bank wouldn’t lend them the money. So they turned to the retail market – that’s you. 

The documentation for your loans – your investment certificates were created from existing documents by a freelancer on for $5 and their bank account was simple to open. 

Car Lease Company is now in business.

One of the directors has a source of ‘Cat S’ salvage, these are high end cars damaged in major accidents and are practically valueless in a normal market. But they can be repaired at relatively low cost. 

The director buys in a £50k (but damaged)  car for around £15k, spends £3k getting it repaired and sells it to his own company for £30k (slightly inflated price) he pays no capital gains on the vehicle sale as there is none. An example of this a 2019 Merc C class. Go search for current prices. Roughly £30k top end dealer – £5 – £10k insurance write off.

Profit £12k  to him personally.

No money has changed hands yet, because the company doesn’t have the money. But once it has sold the investment to you it will have.

This car is then leased to a local restaurant owner or other good cash business at a cost of £450 per month, new keeper is well pleased, gets to drive a £50k car for next to nothing. All the lease company needs to do is collect the money.

The 11% it pays to the investor, is £300 per month, so it keeps £150 per month profit for administration, and to cover the cost of further ads on Google.  

The investor provides the upfront cost of the vehicle. In this case he invests in an asset with a book value of at least £30k with an income attached of £450 per month, well according to the papers. Fact is…

True value of the ‘book’ is nothing – high end Cat S cars are valueless – for all practical purposes – the quality of the lease is questionable as there would be little that could be done if the local restaurant owner decides not to pay or returns the car. Or maybe doesn’t even return the car – just trashes it or it is impounded  by the Police for ‘dealing drugs from it’s boot’.

The £150 per month profit pays for the office, and administrator, and the Google Adwords, the profit on the sale of the car goes directly to the seller personally. Whilst the restaurant owner is paying, some money may well be returned – but for how long depends on how much money the scammer can make – could be months or years but often not for long. Once they’ve made their money – off they go.

The whole scam relies on the greed of the investor who wants a return of many times the current deposit rate, the desire for local business owners to own ‘flash cars’ on the cheap and the greed of some people with a source of dodgy cars.

Is this illegal, probably. But there are very few prosecutions for this kind of fraud, it’s layered with many things that can be used as defence. But consumers are sucked in like this all of the time. If it’s not cars, it’s consumer lending. Or holiday lets or buy to let fractional investments. There are hundreds of ways to extract money from consumers who don’t know any better. 

The only thing you can do is check and verify everything you are told on a website and certainly don’t believe a single  word of anything you are told – yup – the world of investment is that bad at the moment. 

  • If an investment is offering 20 or 30 times the rate on deposits – it’s probably a scam or at least ultra high risk – 2.30 at Windsor style
  • If you’ve checked at companies house and the firm has only been trading for five minutes and the directors own more than a few limited companies – it’s a swerve
  • If the financial services register doesn’t show up positive
  • If it’s not a licensed deposit taker
  • If it looks to good to be true – it is – there is no magic solution to high rates of return