Guaranteed Future Value Explained

Posted by Motorama in Buyer Advice

It almost sounds too good to be true: a guarantee your car will have a certain value at the end of your lease period. Yet more and more manufacturers are offering this peace of mind. It's called Guaranteed Future Value, though some manufacturers might call it simply Future Value or Guaranteed Value. They all work the same, yet all have slightly different terms and conditions. One thing is always the same though: you have to lease a new or demonstrator vehicle, because it doesn't work for pre-owned vehicles or if you pay in cash.

Three steps

Usually there are three steps after you've chosen the vehicle you want to buy to get the whole process of Guaranteed Future Value rolling:

  • You have to estimate you many kilometers you'll be driving each year. Of course, the more kilometers you drive the lower the value of your car will be at the end of your period.
  • Select your payment term. Shorter term means higher periodic repayments, but you'll be done with your lease faster.
  • Choose if you want to make a deposit. Bigger deposit means less to repay.

After this the manufacturer will be able to tell you what the Guaranteed Future Value of your vehicle will be. Easy and clear, with peace of mind your car will be worth a certain amount at the end of your lease period.

What comes next?

After the pre-determined period - and if you kept to the agreed kilometres - most manufacturers offer you three options:

  • Upgrade to a new car. In this case you can use the trade-in amount to pay off your loan. If the trade-in valuation is higher than the Guaranteed Future Value, you can put the balance towards your new car.
  • If you want to keep the car at the end of your contract it's the Guaranteed Future Value that you need to pay to the dealer. This amount can either be refinanced or paid in cash.
  • Or you can choose to return your vehicle to the dealer. Provided the vehicle meets the set out condition guidelines and the kilometre allowance has been met, you have no further obligations and walk home.

The catch

Like we said, the system of Guaranteed Future Value almost seems too good to be true. So is there a catch? Well, no really, but you have to stick to the rules. Only buy the car with a finance deal from the manufacturer for example. Stick to the limited kilometers, service it according to the log book within the manufacturers network and everything is subject to 'fair wear and tear'.

Because the Guaranteed Future Value is pre-determined, you don't have the advantage of paying a lump sum or balloon figure at the end of your lease that might be less than what the car is worth - making you a profit. At the same time though, the opposite can happen, in which case you're happy this figure isn't more than the car is worth - making you a loss. With GFV you know what you get, without surprises

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