When you have been researching the variety of finance plans that are available and their different terms and conditions, you may have come across the term Guaranteed Future Value, or GFV, and wondered what this meant in relation to a finance deal, in particular a Personal Contract Purchase (PCP) agreement.
In a nutshell, the Guaranteed Future Value of a car represents the amount that a financer or dealership can ensure your vehicle of choice would be worth at the very end of a plan, regardless of its actual loss in value (which could be based on several factors). This would be confirmed prior to the beginning of an agreement being given the go-ahead, because it is possible that the GFV could influence a decision one way or another.
As we alluded to, the GFV may be a little lower, or even slightly higher, than the actual worth of the vehicle when a deal reaches its finality. This is important should you look to exit the finance plan at an earlier date via a voluntary termination point for two reasons: firstly, you may deduce that you could make more on the car if you allow the deal to reach its expiry date as opposed to seeking an exit prior to that date, and secondly, the inclusion of a GFV within the T&Cs would mean that the day when you can apply for voluntary termination is later than it would be under an alternative finance plan.
Though the second of these points is valuable to know if you are considering voluntary termination in the future, the first one is the sticking point for those who decide to request a GFV as a part of the deal, because let’s say that the GFV for a vehicle is £2,000, but due to depreciation, the car is actually worth £1,500. Your GFV would not drop, as it would be the finance company that would make up the £500 difference in lost value. Even though your car is worth more than it really is, you would have nothing more to pay if you returned it, and if you kept it, the vehicle has a GFV for future buyers to consider.
So, as you can see, there are key aspects of Guaranteed Future Value that make this something you should be more than aware of before agreeing to your PCP finance plan. Find out more here www.pcpmissold.co.uk.