One only needs to open a newspaper and see that Cryptocurrency is high on the list of topics under discussion amongst all Financial Experts. Banks are fearful but only have themselves to blame as a result of the bad reputation that they have contributed to over the years.
Top Accounting Firm KPMG have a dedicated division set up in Switzerland, this is what they say on their website:
As blockchain technology disrupts business models across industry and commerce, it’s also redefining the way investors view virtual property. Start-ups and tech firms are increasingly discovering this new potential to turn digital assets into real-world capital.
Another top Accounting practice, Ernst & Young issued a press release in July of this year as follows:
NEW YORK, July 19, 2018 /PRNewswire/ — Ernst & Young LLP announced today its acquisition of certain technology assets and related patents from Elevated Consciousness, Inc., a San Francisco, CA-based startup focused on developing unique solutions for the crypto-asset ecosystem. The Andy Crypto-Asset Accounting and Tax (“CAAT”) tool methodically connects with multiple cryptocurrency exchanges and wallets, allowing for better visibility into cryptocurrency transactions and inventory.
The acquisition is part of EY strategy to expand blockchain-related capabilities and services worldwide.
When International Accounting firms are prepared to make this level of investment we can all rest assured that Cryptocurrency is here to stay and is the way that financial transaction will be carried out in future.
Having A Product
Bitcoin was the original cryptocurrency and took a while to take off but once it had shrugged off the early criticisms of security and ‘money laundering’ it has now become more widely accepted, not only as an investment, as one would do with stocks and shares, but as an alternative to cash or debit cards.
One of the largest on-line travel agents, Expedia, will now take Bitcoin for hotel bookings and will soon take them for flights and other services such as car rental and activities. But whilst small and medium-sized businesses readily embrace cryptocurrency it has been slow to gain traction with large stores and chains and large e-commerce sites. However, this may all change soon as it is heavily rumoured that Amazon, having bought a number of cryptocurrency related domain names, is working on means and methods of accepting crypto. Issues such as returns are being looked into but it looks highly likely that they will be accepting crypto sometime very soon.
We quickly realised that there was one sector of the automotive industry that would lend itself to blockchain technology and that was vehicle valuations. The three main valuation platforms are CAP-HPI, Glasses and for consumers – Parkers Guide. For many years the industry has felt that prices have been influenced by major manufacturers and fleet owners but nothing could be proven because of a lack of transparency.
Our technical team have delivered an International solution to create more accurate and ‘Real World’ vehicle valuations. Armed with the ability to accurately value cars through our blockchain solution we then addressed the problem of vehicle purchase, especially when cross-border transactions are involved. These can prove to be costly and time consuming complicated further by exchange rates.
Autocoin & Car Purchase
In the US Bitcoins are already being used for car purchases. Back in January a Lamborghini dealer in Orange County sold their first car for 91.4BTC. This was quickly followed by a second purchase by the same customer.
A Ford Main Dealer in Dallas also started to take Bitcoins not only for new cars but also pre-owned cars.
Overland Park Jeep, Dodge, Ram & Chrysler in Kansas accepts Bitcoin and Bitpremier.com has been selling top end cars such as Ferrari’s, Bentleys and other premium brands for quite a while in exchange for Bitcoins.
These are just a few examples in the US and the number of car dealers is growing. Dealers in the UK are understanding the need to take cryptocurrency. Every dealer approached has shown a keen interest.
In terms of the UK market there are about 2.5 million new car registrations each year of which just over 1 million cars are for private drivers whilst about 1.4 million are for business use. The vast majority of these cars are financed but more on this shortly.
There are about 8.1 million used cars changing hands every year. According to data company Statista 57% of used cars changing hands are sold through car dealers. This equates to 4.6 million cars.
In terms of outlets there are 5,000 main dealers according to the SMMT and could be north of 15,000 used car dealers. More important than these figures are the number of main dealers and used car dealers advertising on the UK’s number one platform, Auto Trader as these are as likely to advertise on our platform, especially as the advertising will be free as long as they are willing to accept Autocoin.
There are 3,830 main dealers advertising on the platform along with 13,000 used car dealers.
Graham Hill is the UK’s leading expert on Motor Finance and has commented as follows:
‘New car sales have continued to struggle throughout 2018. Manufacturers pulled back on production as current models struggled to meet the new emissions tests, known as the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). Any cars not meeting the new emissions standards by the end of August 2018 could, in theory, be scrapped so in order to avoid this situation some manufacturers such as the VW group pulled back on production whilst Jaguar Landrover closed down their order book completely for 3 months.
This means that many car dealers have seriously struggled to meet their targets for this year and are embarking on a push to the end of this year. This difficult situation for dealers followed on from the UK’s biggest dealership group, Pendragon, issuing a profits warning last October, which was quickly followed by International dealer group Inchcape, a FTSE 250 company operating in 29 countries, warning of difficulties ahead especially in the UK market that represents 15% of its total profits.
With the backdrop of diminished sales and increased competition, it isn’t surprising that dealers are taking a particular interest in alternative ways to finance cars in order to increase registrations. In another twist as with a drop in supply of new cars the demand for used cars has increased which, in turn has increased the average price of used cars being sold through auction houses according to British Car Auction’s Pulse Report. Again main dealers and used car dealers are very anxious to move more vehicles so an alternative to current finance methods and cash (fiat) payments can only add to their selling opportunities.
If I were Autocoin I would see the vulnerability of the major dealer groups as a positive. Shares in Pendragon, Lookers and Vertu Motors have dropped over the last 12 months with Pendragon down 25% from a year ago. At the end of last year major hedge funds were shorting shares in the above as well as Autotrader which relies heavily on income from the dealer groups.
In order to strengthen share prices, an announcement that one of the main dealer groups was to start taking Cryptocurrency would not only improve their share price it could give a massive boost to Autocoin as the only specialist cryptocurrency in this sector’.
It is our intention to approach not only main dealers and used car dealers but also the major dealer groups playing one off against the other. The belief is that once one group bites the others will be keen to follow.
The Finance Model
Initially, it is our intention to facilitate new and used car sales in exchange for autocoins and/or a mixture of Autocoins and fiat currency.
However, it has quickly become clear that if new car sales are down so is the income derived through the addition of finance to both the dealer, by way of finance commission, and the finance companies that provide Personal Contract Purchase (PCP) and Personal Contract Hire (PCH).
Latest figures show that the financing of cars to private individuals is now split 80% PCP to around 14% PCH with the rest funded by various types of loans and HP. The view is that within 10 years PCH will overtake PCP. We will explain the reasons later.
Our challenge was to find a way of integrating Autocoins with finance repayments. We have the solution.
The monthly payments can be taken from the client’s wallet with safeguards in place to ensure that the monthly payments are made to the lender. But why fund a finance arrangement with Autocoins? Graham Hill explains:
‘There are two principal reasons why you should use Autocoins for monthly PCP or PCH payments when acquiring a new car in particular.
The first is what us Cost and Mangement Accountants would call ‘Acquisition Cost’. For example, a company has the option of buying a car for cash or financing on some sort of period (say 3 years) agreement. Pay cash and you avoid interest charges that you would pay in any sort of finance arrangement. However, you would lose any interest that you would have earned had you placed your cash in a deposit account and paid monthly. That’s the simple answer but what you are actually doing is losing the use of the cash to invest further in the business that could return 10% or more in profit, far outweighing the interest incorporated into the finance payments.
That’s the business model but from an individual’s point of view they could use the retained cash to buy more Autocoins if the value fluctuates or use it for emergencies in the family etc. You have greater flexibility and security.
The second and most important reason is cost. Walk into a main dealer and offer to buy a car for cash and the salesman’s heart sinks. As a result, the discount you will receive will be minimal as he won’t be receiving any finance commission. However, express a desire to finance the car on a PCP (the most popular way for consumers to fund a car) and they’ll throw all but the kitchen sink into the deal.
You will be offered a good discount as a starter and if you have a part exchange they will offer a good figure for that. The funder will provide a further deposit contribution and you’ll probably be offered even more off the car as a contribution from the manufacturer. The final icing on the cake could be subsidised or zero APR.
So you receive all this saving, sometimes representing as much as 20% off the retail price of the car, just for taking out the finance. Even better news is that if you invest further in Autocoin and you see some substantial growth you can still ‘settle’ the finance thereby paying no more in interest charges (if there are any) and still retaining all of the front end discounts and bonuses’.
Personal Contract Hire (PCH)
Manufacturers use PCH as a means to move cars quickly. They can apply substantial discounts to cars, over and above the discounts available on PCP, because the customer doesn’t see the price paid by the leasing company, all he sees is the initial and monthly rental costs. As Graham Hill Explains:
‘It’s not an expression I like but the UK has become a ‘dumping ground’ for end of model cars, over produced cars and to increase sales as a means to keep the auto production lines running. They can also make use of cheap business and personal contract hire rates to encourage more drivers to take a brand new model if not enough are being seen on the roads. The best PR is to physically see cars on the road.
In the UK we have embraced contract hire for businesses and now we are seeing massive growth in PCH as a result of consumers understanding the product and often seeing the total lease cost of a PCH over 3 years slightly more than the normal first year’s depreciation of the car if bought for cash.
As an example, I have had a brand new car, supplied by a main dealer and delivered to the customer with a list price of £22,000 and an invoice price of £11,250 provided it is only invoiced to a contract hire company. That way customers don’t know how much the car is being sold for by the dealer. Cars provided to contract hire companies can have applied discounts and bonuses of up to 45% of list price.
Had the same car been supplied on PCP the best discount would probably only take the price down to £18,000. That way the discounted price wouldn’t affect greatly any 12-month-old used cars on offer for say £16,995 on the dealer’s forecourt. So whilst PCP is still the most popular product amongst consumers PCH is set to take over. Using a cryptocurrency to make the monthly payments makes a lot of sense and once one PCH provider bites the bullet it will be quickly followed by others very keen to not miss the boat’.
So, in summary, we already have the ability to make monthly payments using Autocoin that will meet the needs of both finance company and the consumers whilst drivers benefit from the various discounts and bonuses available.
Sub – Prime
One final point to be made on finance. Sub – Prime means that the customer doesn’t meet the minimum lending criteria for Prime rates (cheapest). However, this doesn’t mean that because the client has poor credit that he couldn’t easily manage to meet his financial commitments. Especially if his lease repayments will be met out of ring-fenced coins thus protecting the lender.
This could result in clients achieving prime rates which would normally be unachievable opening up a whole new sector.