Do you see anything wrong with this business and if yes, please specify?

Question

Upon verification of a company you receive information from the applicant regarding the Nature of their business. You understand that the company works in the field of vehicle leasing and that they use profits with which every year they sell some of the vehicles and buy new ones to freshen up the entourage. The company has a wonderful website with pictures and different options along with successful social media accounts with more than 60K followers and numerous outstanding reviews and the applicant assures you that the business is reliable and safe when it comes to losses and expenses as all vehicles are ensured with the deposits held from clients. The leasing scheme is constructed on holding a minimum amount of 10 - 20% of the value of the vehicle during the leasing period. Do you see anything wrong with this business and if yes, please specify?

Answer 1

Hello Neha, Below is my analysis based on the information provided. Let me know if this is helpful.

I see an opportunity in one of the business models and some risks(wouldn't call them problems) in the main business model. The business operates on two business models,

1. Leasing out vehicles - I would want to understand the lease payment terms and how these compare to the wear and tear of the vehicle. In addition, I would seek to know who is responsible for servicing the vehicles once the time comes. Apart from having a deposit from the client, are the vehicles fitted with any tracking devices and do they have an insurance cover in place in the name of the business?
2. The second business model is vehicle sale - This provides an opportunity. Seeing that the business is able to make profits from the sale of motor vehicles, this looks like a recurring business and the business should possibly explore bringing in a few more units for continuous sale throughout the year and not just at the end of the year seeing that they already have a ready market for their second-hand cars.

Let me know if this helps. Thanks