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Drive-a-new-car - has it devolved into a pyramid scheme?

05 May 2014, 19:15

Definition of a pyramid scheme: A pyramid scheme is an unsustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public. (Source: Wikipedia.org)

When the business model was first created, it was under the assumption that they could get all sorts of companies to advertise on the back of people’s vehicles.  Unfortunately this fell flat and there were too few companies willing to take part.  At first I did occasionally see vehicles with adverts OTHER than advertising themselves, but in the past year it’s declined to such an extent that I’ve seen only one! 

To be clear – this company does have 2 options available to buyers.  The one is where you’re paid monthly for advertising and the other is where you only get paid something when someone else buys a vehicle using your code.  The latter option is sustainable – because each car sold generates a profit which is used to pay participants.  The first option however is not – because participants are supposed to be paid each month whether anyone bought cars through their advert or not.

This is why I think that they’ve recently been forced to reduce the amount they pay out to participants who bought using the unsustainable option – using a loophole they seem to have put into their contracts to allow them to do so.  They can simply no longer afford to repay what they used to since it seems that their sole source of income is derived from the profit of the sale of cars to participants.  Is this a signal that the scheme is close to crashing? 

If you’re currently a participant, I advise you to start preparing your financial situation so that you can afford the entire car repayment amount on your own – or run the danger of having your car repossessed…

Disclaimer: This article is an opinion piece and as such I welcome anyone to try and change my mind!  But please – emotive responses won’t do it, verifiable facts might.

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