Here’s a business idea, a loan product that covers the cost of your car MOT and any fixes it needs and allows you to pay it off over 12 months until your next MOT!

Before we jump into the details of this business idea. Know that this is the first idea of many….

This is the first idea to be published in the new MoneyCortex business ideas section. What better way can there be to improve your finances than starting up a new business and making it flourish? Easier said than done obviously! Put simply, the art of coming up with ideas to fill gaps in the market is fun. That’s why this new section for this website has been created.

There’s no plan to start these companies up. But it’s better to share these ideas with the world than simply put them in the digital recycle bin!

Make no mistake, a lot of these thoughts and ideas will be damn bad ideas. I don’t care, the creativity and challenging the brain is a fun process. Who knows, maybe one day it will trigger something in someone’s head and they start up something and become a millionaire from it, I would love to say I planted that seed!

Here’s the first business idea. It is…

Financial Solutions For MOT’s And Repairs

The basic thought process here: Car tax can be paid monthly, car insurance can be paid monthly, why not annual mot+fixes?

In a nutshell, the business idea is to create a finance company specific to car MOT’s. Not with huge rates like Wonga type firms. With fair low-interest rates that are cheaper than overdrafts and credit cards.

The consumer would never see the money, it would go direct from the financial company to the company who performed the MOT and repairs.

It would be for people who need to pay for their cars MOT and subsequent fixes (when it fails MOT) but they don’t want to splash out the lump sum. Instead, they can spread the cost over the next 12 months.

This idea is specific to the UK market.

This financial product could also give garages a tool to attract new customers.

How The Company Would Operate

You’re probably thinking this is just a normal loan company, except all the loans have to be 12 months long. But my thinking is that customers apply before they have their MOT to check their credit history. Then they can be pre-approved ahead of time for fixes up to a maximum amount and they’re told what the interest rate will be.

This would work well because older cars are known for their unpredictability when it comes to MOT time!

The car owner then takes their vehicle for the MOT as normal. On occasions, it fails they get it fixed where they choose. Once the new MOT has been issued they upload invoice screenshots from the mechanic direct to the finance company. The finance company pays the mechanic directly and the customer pays back the finance company an agreed monthly amount over the next year until their next MOT.

Explanation of business model
How the car repairs financing idea works

Financial Example

Imagine your MOT and repairs cost £400, you agree to a 12% interest rate. The total to pay would be £448. Spread over 12 months that’s only £36 per month.

If you’re having cash flow issues then the idea of £37.30 per month for 12 months may seem very appealing compared to forking out £400 upfront.

Is This Idea New?

I’ve had a quick look at British companies like Halfords and KwikFit. They don’t offer this exact type of service.

At Halfords, if your car repairs are over £200 you can get free credit but you have to put down a 25% deposit and pay off the balance over the following 3 months. That doesn’t give you much time.

At Kwikfit they don’t seem to have anything like it for MOT and repairs. For services they have ServiceCare. Your car has a full service and you spread the cost over 10 months. But that’s a service. Nothing to do with the MOT or repairs. It’s also limited, your car must be under 10 years old and done under 100,000 miles.

Both of the above things are correct at the time of writing this blog post.

What Are The Alternatives?

In the format I’ve described the business idea, it doesn’t appear anyone does it. Of course, as an alternative, you could just go and get a traditional bank loan. But that would require time to apply for it and get it approved. Then you have to pay the mechanic yourself. Using a bank loan would be a long-winded way to go about it.

A credit card is always an option. But most credit cards would have a higher interest rate meaning it would cost more. Plus with a credit card, you’d run the risk of not paying it back and only paying off the minimum balance if you’re not disciplined.

Is there a market for this? I would’ve thought so. As somebody who drives a 15-year-old car myself, I’d certainly be interested in this type of thing as long as the interest rate was fair. You can easily spread out your car insurance and car tax costs, why not the MOT+repairs too!

Critical Elements That Would Affect Success:

  • Fair interest rates, slightly lower than credit cards.
  • Low minimum bill value, perhaps £150.
  • Start with only a select number of large companies to partner with, perhaps Halfords and Kwik Fit (but long-term customers should be able to pick themselves which mechanic they use)
  • Quick uploads of invoices via app or PC would be critical to user experience.
  • Fast payments to mechanics would be critical for their trust.

That’s it, a simple idea but there could be a market for it. If you’re reading this then at least you read all the way down. Do you think this has any legs? Or would customers not be interested?

October 12, 2018