My Funding Societies peer to peer lending p2p lending strategy for 2021 to 2022 - Car Dealer Financing - Referral Code to join

I've been an early user of Funding Societies peer to peer lending app since it started operations in Malaysia. For those who don’t know what Funding Societies is, it is a peer to peer crowdfunding platform connecting lenders and borrowers. There’s already a few licensed platforms besides Funding Societies like Fundaztic, Capbay, Finpalb2b.

I came into the world of p2p financing as a naïve newbie. I was very eager to find new investment avenues which were relatively safe and could get returns above fixed deposit rates. I thought notes which had good ratings would have good repayment but actually the correlation between good rated notes and repayment capability is minuscule. As such, I did hit a few defaults here and there. This was quite a painful experience for me. Some of the defaults were restructured while others had to be written off.

I noticed small SMEs seemed to have higher risk and are the ones most prone to defaults. Notes (eg less than RM150k) which are small in value seem to have the highest defaults.

I’ve since modified a bit my investment strategy into p2p financing for the year 2021. I cannot say whether this strategy is good or not but in my opinion is quite solid for now. I have to give credit to a banker friend of mine for this idea. This banker friend of mines just happen to be in the financing line in the bank and has some insights into this industry.

For the year 2021, I’ve switched strategy to only invest in car dealer financing notes only. In car dealer financing you are basically borrowing money to the car dealer to buy a 2nd hand car from an owner. Car dealer financing notes are typically quite short, around 90 days and the amount requires for financing are quite low so the default risks are smaller. Funding RM20,000 for a dealer is safer than funding an ecommerce business.

To the car dealer, they want cash as cash flow to buy the used car and then resell it in the market. I am in the opinion the risk is manageable as 2nd hand car sales are still quite healthy as new car sales are also booming due to government incentives during Covid19 (eg sales tax exemption). It's also reported here used car sales have increased during the Covid19 period here.

Funding Societies has an existing partnership with Carsome, the largest used car platform in Asean to provide financing to the car dealers on Carsome. This partnership is where Funding Societies get all their car dealer financing notes.

The car dealer financing notes which I choose to finance are all the popular badge ones like Proton Saga, Proton Preve, Perodua Bezza, Perodua Axia, Produa Myvi, Toyota Vios, Nissan Almera, Honda Civic and Honda City.

My theory is that these cars would technically be the easiest to be sold in the open market. I'm avoiding financing hybrid cars (e.g. Honda Jazz Hybrid, Toyota Prius), European and luxury cars (e.g. Audi, BMW, Peugeot, Mercedes, Volkswagon, Lexus etc), China cars, manual transmission cars as in my opinion these types of cars would be the harder ones to get sold off compared to the popular ones I just listed.

I'm also not investing in top end executive cars like Toyota Camry and Honda Accord as I feel the demand for these cars are lesser to a extend as the high road tax for such models are a put off.

My favourite car to fund is the Perodua Myvi. This car's in high demand for many years among the Malaysian masses, it's economical and reliable. The 1st hand car sales for this model is very good and this also drives the 2nd hand car sales. This car's also what most parents buy for their children when they get their driving license.

Coming in close my 2nd most favourite car to fund would be Perodua Axia. Lots of Grab ride hailing drivers looking for this car and Perodua Bezza. I also like to fund Perodua Bezzas but I've not seen many Perodua Bezza notes.

I don't have used car sales experience but another of my used car friends told me certain 4x4s/4WD like Ford Ranger are in high demand in East coast states in Malaysia (Kelantan, Terengganu and Pahang). I presume it would be they have a lot of undeveloped roads and also the yearly flooding situation there.

Below is a note I would not invest.

Amount is above RM 30,000
Car Model is Lexus, a luxury car

Below is a note I would also not invest for the fact it is a hybrid vehicle (electric and petrol). I also noticed the price of hybrid vehicles have fallen tremendously. In recent years, hybrid vehicles have gone

down in popularity and fully electric vehicles from are more in favor globally.

The note below, while the amount is very attractive and meets my criteria, the car's also a popular in demand car, it is a manual transmission car. Therefore I will stay away from these type of notes.

For each of the car dealer financing notes I'm only putting in RM100 and keep the issuer (borrower) exposure to minimum of RM200. This means for a single car dealer I will only loan out a max of RM200. This should reduce the risk of losing large sums of money if a single car dealer defaults and same as the adage of not putting all eggs in 1 basket. The note/loan I'm looking for are notes which are below RM20,000 as I believe for such a small amount, the car dealer won't have trouble selling off these cars. However, I'm also mindful that car dealers can default but logically it won't make any sense to run off with a RM10K, RM20K loan with the car as a collateral and getting blacklisted in CTOS, CCRIS.

Funding Societies notes announcement always come at around 12PM everyday, so I'll cut my lunch short daily and analyze the notes during this time and jot down which notes I would like to invest in and then set an alarm when the note goes live so I get a chance to participate as sometimes the notes get filled up fast by other investors. I can't enable the Auto Invest feature as my criteria is quite narrow and specific so all investments are done manually. The notes mostly go live at 04:00PM or 7:30PM daily

I'm putting in more funds to borrow out to car dealers via car dealer financing and as such my monthly repayments from the notes/loans have increased significantly. So far I don't have defaults on car dealer financing but only the future can tell if this would be a correct financing strategy. Let's see how it goes and I will update this post when there are more further progress.

Do note that so far I yet to get defaulted dealer financing notes, only late payment whereby Funding Societies gave a moratorium extension to the car dealer.

Updates 20211127

I've been doubling down on my car dealer financing strategy, so far returns have improve 0.1% from 10.3% to 10.4%. Let's see the resiliency of this strategy.

Updates 2021210

My returns has further improved nearer to 11%, it is now at 10.48% using this strategy.

I did some reading and found an article on the cars with the best resale values in Malaysia. These car models financing will be in my radar also as it also means that demand is there for these 2nd hand cars.

The car models are :

Perodua Myvi
Honda Civic FC
Honda City
Toyota Vios
Perodua Alza

I'm quite surprised Perodua Alza is in the list so put in some money to finance car dealer financing deals with Perodua Alza models.

Updates 2021216

As expected, performance still inching up towards the 11% mark. I will continue to use car dealer financing and avoid lending to SME.

Updates 20220101

Finally I end the year 2021 with 10.61 % returns. It's not my 11% target but I'm getting close.

Updates 20220130

My returns have rebounded to 10.71% using this strategy (Car Dealer Financing).

However, I'm improvising further to avoid car dealer notes from outside KL, Selangor, Johor and Penang. This is just a risk mitigation measure as I feel dealers from major cities in Malaysia (KL, Selangor, Johor and Penang) will have less problems selling off the cars as there's plentiful of customers. The 2nd improvising that I will be doing is to go through all the car dealing financing notes to look for credit redflags which I previously did not do, to look at SME score and any existing litigation against existing borrower (car dealer).

Updates 20220210

I'm keeping up with this strategy.

Updates 20220306

Maintain current strategy amid Russia invasion of Ukraine. At the moment , 2nd hand cars are in high demand as economy still not good enough for people to go for new cars.

(Disclaimer) I have to put up a disclaimer here that this is not financial advice, just strictly my opinion and sharing my investment strategies.

📍 Funding Societies Referral Sign Up Link - j6a79nam

If you’re interesting in signing up for p2p investing via Funding Societies or have some spare cash that can take higher risk in investing, you can consider using Funding Societies. Funding Societies has a referral program where we will both get RM30 if you sign up using my referral code 👉 : j6a79nam or my referral link. Do note that p2p financing is considered higher risk than normal fixed deposits, the risk also is not comparable but if you're selective enough hopefully can make a better than fixed deposit returns over the long run.