Vehicle financing that caters for the depreciation of your car is gaining popularity as consumers seek more affordable monthly repayments that avoid a balloon payment that could exceed the value of the car at the end of the contract.
The newest type of finance is Guaranteed Future Value, also known as GFV or any number of brand-specific titles, which is becoming an increasingly popular form of vehicle finance in SA, says Wesbank executive head of motor Ghana Msibi.
He says a vehicle begins depreciating (losing monetary value) the moment it leaves the showroom floor. In line with this depreciation, a GFV plan calculates the future monetary value of a vehicle considering certain criteria such as vehicle condition, mileage and maintenance are met. This future value is guaranteed at the start of the agreement.
Alex Parker, manager of business communications at BMW Group, says unlike traditional vehicle financing, with GFV-based products you do not carry the risk of depreciation-related losses at the end of the finance term, because you can return the vehicle to the dealer.
He says GFV has become very popular not only due to the product’s flexibility and risk-free nature, but also because it offers you the opportunity to easily and seamlessly trade into a newer vehicle.
Thato Mntambo, corporate affairs manager at Mercedes-Benz SA, which claims to be the first to have introduced GFV in SA, says there has been a good uptake of this type of finance.
Msibi says the temptation of a new car can sometimes lure a buyer into a commitment that isn’t an ideal fit for their budget. “Fortunately, there are flexible finance options for buyers to choose from.”..