Taxpayers’ cash designed to keep hard-pressed businesses afloat during the coronavirus pandemic is being used by some company bosses to buy themselves luxury supercars, claim motor-trade experts and dealers.
Supercar dealers across the UK say their business has boomed since the government began handing out the ‘Boucne Back Loans to company owners, according to reports in Car Dealer magazine.
It alleges some small business owners are using the state hand-out, capped at £50,000 per firm, as cash lump-sums for deposits on supercars such as a Ferraris, Lamborghinis, McLarens, Rolls-Royces and Bentleys.
State hand-outs used to buy supercars: Luxury car dealers claim their businesses have boomed since the Government introduced Bounce Back Loans for small businesses to cope with the impact of the coronavirus pandemic
Some are even alleged to have made a claim for a number of ‘dormant’ companies to fund most or all of the cost of a new supercar.
Tax chiefs at the Treasury have warned that misuse of the Bounce Back bail outs could result in prosecution for fraud.
Under the taxpayer-funded government aid scheme, small firms can borrow up to £50,000 per company under the Bounce Back Loan Scheme (BBLS) with the debt 100 per cent backed by the government, no repayments for a year and 2.5 per cent interest after that.
Car Dealer said: ‘That makes it cheaper than car finance and business owners are seemingly using the cash to boost the deposits for new supercars, costing as much as £300,000, instead of putting the money into their firms.’
Recent figures show the government has so far handed out around £24billion in funding to nearly 800,000 small companies under the Bounce Back scheme. There are no restrictions on what company directors can do with the cash once it is in their businesses.
Luxury car dealer Tom Hartley, director of Midlands-based Tom Hartley Cars, told the investigation that he had detected a definite trend in small company owners splashing out and has heard similar stories from across the motor trade.
Tom Hartley, director of Midlands-based luxury motor dealership, Tom Hartley Cars
Hartley told This is Money that the Bounce Back Loans are being used by businesses owners to ‘buy that car they’ve always wanted’. Hartley pictured here with a £2million-plus Bugatti Chiron
He also confirmed to This is Money: ‘It’s not right. The money is there to keep firms afloat, not to finance a new supercar.’
He said: ‘It’s the talk of the trade. For some people that extra £50,000 is just the deposit they need to put down on a new car. It’s allowed them to buy that car they’ve always wanted, but always ben short of the deposit. It’s good that the supercar market is buoyant. But I can’t condone it.’
It’s the talk of the trade. For some people that extra £50,000 is just the deposit they need to put down on a new car
Supercar dealer Tom Hartley
Saba Amari, of Amari Supercars told Car Dealer magazine that they had seen an increasing number of company directors using the Bounce Back Loans to fund new supercar purchases.
‘We absolutely have had customers who say they are using the Bounce Back Loan money to boost their deposits for supercar purchases but we have always advised them responsibly and suggested this is not the right thing to do with a government-backed loan.’
‘These Bounce Back Loans were not for this purpose and while it is up to the company directors what they do with their money we suggest they probably shouldn’t be spending this money that way.’
Some small business owners are being accused of using the state hand-out, capped at £50,000 per firm, as cash lump-sums for deposits on supercars such as a Ferraris
Andrew North, director of Alexanders Prestige, told the magazine he’d sold cars to clients who had used Bounce Back Loan cash to fund part of the deals and said he believed some businessmen had even used ‘dormant’ companies to raise cash at low rates to splash out.
He explained: ‘We have had a few clients using spare cash from bounce back, although the ones I’ve spoken to have been clients that have larger businesses, but in their words have the odd ‘sleeper’ companies that don’t trade much outside of their groups and have basically played the system.
‘A bit crazy isn’t it? But I guess any extra liquidity in the market at this current time is a good thing no matter where it comes from,’ he added.
Another leading supercar dealer, who didn’t want to be named, told Car Dealer they had seen a ‘definite spike’ in sales to small company owners too: ‘Three customers in a row told me they were using the Bounce Back Loans to put down deposits on the cars they’ve been wanting for years.
‘One said he would never have bought the car if it hadn’t been for the Bounce Back Loan scheme. That £50,000 is a healthy deposit and at the rate the government is offering the money is very cheap.’
A spokesman for HM Treasury said: ‘Our Bounce Back Loan Scheme is designed to keep businesses running during this difficult time and have so far helped more than 800,000 small firms.
‘We’ve been clear that the loans must be repaid and banks are undertaking appropriate precautions against fraud, including customer checks and the monitoring of transactions. Any fraudulent applications can be criminally prosecuted.’
James Baggott, editor of the specialist motor trade website Car Dealer said: ‘It is definitely happening. Dealers have given me examples of cars they have sold this way – including a £300,000 Lamborghini Aventador.
‘There are Porsches and Ferraris. It’s a very sensitive issue. Dealers have to abide by client confidentiality and data protection, so they can’t just name names and deals. But it’s happening. Every dealer I’ve spoken to says the same thing’
Car Dealer magazine claims that some customers are using the extra loan cash to buy a used luxury car outright
Mr Baggott continued: ‘The key thing is that most people buying cars, and especially supercars, do so on finance. Usually they may have a £10,000 deposit. But with the extra £50,000 they can bump that up to £60,000. That means their monthly finance repayments will be much less.’
Some customers are using the extra loan cash to buy a used car outright, he said: ‘Quite unconnected I spoke to one dealer this morning who had just sold a hi-spec used Porsche Macan for cash.
‘The dealer in the Portsmouth area is not a small independent, he’s part of a big group.
‘He said the customer was upfront that he’s got the cash from the bounce-back loan.’
‘Another dealer told me about a second hand Audi R8 sports car which you can pick up for around £45,000. Again, it was bought outright by a customer who told their dealer how they’d been able to afford it – thanks to the bounce -back loan.
‘This is not something that is being particularly hidden. It’s just the tip of the ice-berg. The whole industry is talking about it.’
The motor industry enjoyed a sales boost after the payment protection insurance (PPI) mis-selling scandal when the average £5,000 pay-out to bank customers equated almost exactly to the deposit required for a new car when bought on finance.
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