Motorcabs and Easy Payments.
Page 13
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By Henry Sturmey.
During the past few months, and especially since the holding of the Commercial Vehicle Exhibition in March, we have been hearing a great deal front time to time anent the opportunity there exists to-day for the motor cabman to become his own master, and it has been suggested that he may be able to do this by buying his cab on the hirepurchase system. The idea has certainly caught on amongst the motor cabmen, ninny of whom have been going into the question : some of them, I believe, have succeeded in getting sonic firms with cabs on hand to supply then" On the face of it, this is a very commendable idea, and, at the present time, is an opportunity which, if there were no obstacles in the way, ought, to be taken advantage of, and no doubt would be taken advantage of, by a considerable number... Unfortunately, however, there are rocks in the way—and serious rocks—which do not appear on the face of things at. first sight.
The Risk of Hire Determination.
have myself been giving this matter close attention for some months, in consequence of numerous applications to my own company from individual cabmen, jobmasters, and combinations, or syndicates, of cabmen desirous of purchasing motorcabs on as easy terms as possible. When first approached by these teen, the problem seemed a simple one : if more business were offered than a company could itself carry, it would appear to be an easy matter to get it done through financial houses, whose especial province it is to finance easy-payment transactions. Investigations, however, showed that it was neither possible for the manufacturing company to do this business itself with safety, nor to do it through other parties, and for the following reasons :—The motor -cabman is not, as a rule, a man of any substance ; he would have, in any case, to make a deposit upon the purchase of the vehicle, which deposit would be a substantial sum to him, and, although there are a number of careful men who have saved sufficient to pay this deposit, the matter of security stands in the way of, and recent legislation prevents, further business. To supply a c.ali upon any extendedpayment system, the business must be done upon either of two bases : the transaction must be either a hire-purchase contract, or a deferred-payment purchase. The former system has been the one which has been put forward mostly, the idea being that, until the cab is paid for, the vendor could recover possession of it, as, until payment is complete, ownership does not pass. Up to a certain point, this is all right, but, as a result of recent decisions in the Law Courts, the hire feature of the transaction cuts both ways, and it cannot be looked upon as a fixed deal. In entering into any such agreement, the supplier of the vehicle must consent to a clause which permits the return of the vehicle at any time. And, with a motorcab, this is awkward, because, as everyone knows, much of the successful handling of the vehicle depends upon the driver. Now, if the driver be unable to-get on with his vehicle, if it be a constant source of expense to him, and if he fail to do satisfactory work with it, he would sacrifice his deposit and the instalments already paid and return it. So, also, might he do if his vehicle became out of date before payments had been completed, and, as I think most men in the trade Will agree, a secondhand motorcab is not a very saleable piece of property. It is not like a
second-hand pleasure car even, because, without very considerable body alteration, it could be used for little else but
cab work, and, of course, if the cab itself turned out weak or unsatisfactory in any way, the hirer would he equally ready to return it.
The Uncertain Risks of Retained Ownership.
Up to this point, perhaps, the manufacturer, having full confidence in the stability of his goods, might be prepared to take the risk of any possible return, hut then is presented another difficulty. The ownership' in the cab does not pass to the purchaser until payment is complete, and the supplier of the vehicle is, in law, its owner; as such, he is responsible for all happenings to it, that is'-to say, for damage to the vehicle, and for third-party riSks, Which may be considered serious, and it is largely upon 'this point that the easy-term
financing houses turn the business down. It is all very well financing hire business with a piano, for instance; that cannot run into anything, or knock anybody down. A motorcab is different, and it will thus be seen that the hirepurchase system of supply bristles with difficulties.
Security in Neither Case.
The other system, namely, that of easy payment, Or extended payment, is little better. It is true that in this case it becomes a definite transaction—the vehicle is sold, and ownership passes to the purchaser, who becomes responsible for it in its entirety ; but the very fact of ownership's passing, robs the vendor of his security, and, as I have written earlier, the motor cabman, as a rule, is not the sort of man to be able to give any tangible security. The transaction, moreover, becomes one of open credit : the purchaser has bought the .c.alo, and the vendor has consented to wait for payment, but the cab belongs to the purchaser, and he is at liberty, if he so elects, to sell the vehicle the next day—for what it will fetch—and to vanish, which is not altogether a cheering prospect for the vendor ! So much for the deal with the individual.
The Difficulty of a Tangible Lien.
When it comes to combinations of individuals, matters again are little better. It has been suggested that if, say, half a dozen or a dozen cabmen combine to purchase a similar number of vehicles, they can register themselves as a joint-stock company with limited liability, and issue debentures as security; but, here again, the security is only to be found in the cabs themselves, so that, if interest is not paid and the repayment of debentures is not effected, the vendor is little better off than if supplying on the hire system, whilst he only has his own cabs as security. Even this course seems scarcely possible, in view of the latest Act relating to Limited Liability Companies, which makes the issuing of debentures a difficult matter. A company is debarred from issuing debentures unless it is in a solvent condition, and the legal mind—which drafted the Act in the first place— has not yet decided when a company ceases to be solvent ; until it is proved otherwise, the opinion is held that a company which cannot pay for the goods it has purchased cannot be considered in a solvent condition, so that it would seem that the issue of debentures under such circumstances would be a risky or legally impossible proceeding.
Outright Purchase the Best Course.
From the above, I think it will be seen that, unless a cabman can find some substantial person' to act as security for him, his only way of setting up for himself is to wait until he has saved up sufficient money to buy his cab outright, and, of course, this is the most business-like thing for him to do, because whoever supplies a vehicle on the extendedpayment or the hire-purchase system has to be paid for doing so, in order to balance the risks and interest on the money outstanding. The purchaser, under sctch terms, often times " pays through the nose," as the saying has it. It is unfortunate that it is so, but there are the facts, and I fancy some in the trade are finding them out.