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Waynetwigg
 
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R699 car deal implodes

08 July 2014, 18:30

 “Drive a R699 car typical Ponzi Scheme – Wesbank”[1]

“R699 car deal implodes”[2]

Over the last couple of days the “Drive a new car for R699” company has been reported extensively in the media with headlines quoted above.

In terms of the scheme, the Satinsky Group offered new cars for R699 per month.  The scheme consisted of Satinsky sourcing a vehicle for the budding owner, arranging finance, and then offering a monthly advertising fee if certain conditions were met (mileage travelled being one of them) which potentially reduced the overall cost of the new car to R699 per month.  The scheme was an attractive prospect for those who could otherwise not have afforded a new car. 

Lesson 1 : All is not what you expect

In 2012, I spent a couple of days in Las Vegas and left there very disappointed by what proved to be a town with no ethical or moral fibre.  It was not that everyone lied and cheated, it was just the gap that existed between your expectation and reality.  

An example : Anywhere else [in the world?] where you hire a self-catering apartment that advertises itself as equipped with fridge, stove, microwave and dishwasher, you would find utensils.  Not in Vegas, where these are paid for extras.  A closer look at the brochure shows that nowhere do they state that the apartment comes with these utensils, so they are not being dishonest, but they certainly are not meeting or managing the perspective guest’s reasonable expectations.

The R699 car falls into the same category.  The scheme, if you read the website documentation carefully (the website has incidentally been removed), shows that Satinsky is not offering the owner a car at R699, merely the potential to reduce their overall cost to that figure.  The fact that there are two sets of documentation – one with the financier and one with the advertising company supports this, but Satinsky does not address the expectation gap created by the “drive a new car for R699” slogan, rather it capitalises on this misconception.

When concluding an agreement, don’t think you will get what you expect, you will only get what you contract for.

Lesson 2 : Read and understand what you sign

In 2013, I was admitted to the emergency room in the early hours of the morning with gallbladder stones.  Anyone who has experienced this will know that this is not something you wish on anyone (not even a Satinsky Group executive!).  While I was writhing on the gurney, my wife and I were presented with hospital admission papers that needed to be signed – a lengthy document in fine print.  My words ”Just sign it, I need morphine” while understandable were not acceptable.

In the euphoria of getting a new car one could otherwise not afford, how many Satinsky customers read the contracts AND understood what they were signing.  Judging by the 97 unhappy comments on Hello Peter, I would guess there are at least some that did not.

When signing documentation, always read AND confirm your understanding of the documents before signing.  If need be, ask someone to assist you.

Lesson 3 : Supplier due diligence – know who you are dealing with

The first part of the agreements was the finance agreement with the bank.  This part is easy, most Satinsky clients would be familiar with the financiers and could easily find out the details of the selected lender.  The same cannot be said of Blue Lakes Trading and Promotions which is a Hong Kong based company.  While I have not seen the agreements entered into with this company, it is likely that any legal action taken against them in South Africa would have little effect as they would not be subject to our legal system.   It is therefore likely that any litigation against Blue Lakes would be far too onerous for Satinsky’s customers to undertake.

A few questions regarding Blue Lakes prior to signing a contract with them may have alerted potential customers to the risk that there is little that can be done in the case of a default by Blue Lakes.

Consumers need to be cautious about high pressure sales pitches or promises of unusually attractive offerings.  If a product or scheme sounds too good to be true, it probably is.  Don’t be afraid to ask for help in working through documentation and agreements.  Your attorney or accountant is a good place to start.



[1] http://www.fin24.com/Companies/Advertising/Drive-a-R699-car-typical-Ponzi-Scheme-WesBank-20140705

[2] http://www.iol.co.za/motoring/industry-news/r699-car-deal-implodes-1.1714079

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