Just had a long discussion with my salesman with regards to impact of the £3k drop in GFV offered, he seemed to have time on his hands, so we were chatting quite a bit about the ins and outs of it all.
I asked whether I was eligible to be on the £18576 GFV system (as I’d done some sums that’ll be below). He said basically that finance quotes are valid for 30 days and are based on quarterly finance campaigns, so officially it’s a no for the likes of me and some others here ordering in Q3 of 2014 and expecting our cars for the middle/end of Q1 of 2015.
He assured me (I’m not all that assured, but he tried) that my expectations for p/x will still be realistic, but the old days of getting £1000/1500 “equity” for p/x will be gone and on an R in 3 years time, expect to have more like £4000 when you’ve done a £15576 GFV financial deal (This is more how Audi works, so I’ve been told – a very low/conservative GFV quite distanced from p/x value reality). You pay more upfront, incur less interest as a result and get a larger deposit on your next car – strongly encouraging you to come back for another VW. He said the GFVs were set so high on the Rs that there’ll be little to no equity in them at trade-in, but people on the new GFVs will see a decent deposit. Reality is though that they’ll be paying approx. £95 a month more on their Rs than they thought they were going to.
I said that given the choices of buying outright and hoping for £19k p/x after 3 years (1), buying on finance at £18576 GFV and potentially walking away with nothing (2), or buying on finance at £15576 GFV and hoping for £19k p/x (3), I’d prefer the sure thing of option 2, putting the monetary monthly difference between options 2 and 3 in the bank and banking my purchase money (£22k needed) for my next deposit. He said I could write a letter to VWFS to request that they honour the financial prices I’d taken as a given when considering a purchase. Legally they can say no (finance quote valid for 30 days), but they’ll likely say yes, especially if a sale hinges on it. If I could rely on p/x to be around the £18-19k mark because these were up on the forecourt for £23/24k at 3 years old then I would be doing option 1 to eliminate interest.
The biggest risk with these low GFV deals is that they use the higher equity given as leverage to beat down discount on the new one, like your R is worth £18k p/x there, but against a BMW it’ll only be worth £15k etc, it would keep brand loyalty up if that were the case – who is going to walk away from £4k equity?
Between equity in my GTD and discount I need £22k for my R.
Option 1 above was going to see me take £22k cash to pay it off and return it to the bank at £320 a month (earning 3% interest), with the car assumed to be worth £19k in p/x at 3 years old. I would’ve paid back £12040 of my £22k, leaving me £6960 up, minus £1440 interest I would’ve had by leaving the money in the bank leaves me £5520 up for equity, but reliance on VW perhaps to achieve that p/x.
Option 2 sees me leaving my money in the bank, paying £205 a month to VWFS, chucking the £115 difference in the bank every month, earning interest that will amount to £4326 over the term + potentially £400 p/x allowance (trying to keep everything at £19k expected p/x here) to end up with £4726 equity, or £4326 cash that doesn’t rely on me returning to VW to spend it.
Option 3 sees me leaving my money in the bank, paying £288 a month to VWFS, chucking the £32 difference in the bank every month, earning interest that will amount to £1203 over the term + potentially £3424 p/x allowance (trying to keep everything at £19k expected p/x here) to end up with £4627 equity, but relies on me returning to VW to spend ¾ of it.
So assuming actual p/x values aren’t spoilt by the low GFV and it doesn’t affect your ability to negotiate a discount, Option 1 is marginally better for me. My money is on the sure fire option 2 (but relies on me keeping the car 36 months if I don’t buy a VW next time.
With these sums in mind, if I can get the guaranteed finance figures previously posted (£18576) I’m going to stick with the R, taking option 2.
He says that in the grand scheme of things, the number of leases out there are small potatoes, and the p/x price and GFV price being so far apart will prevent future spates of cheap leases.
If £4k equity in p/x is the future of R owners, i'm surprised how little there is in it between the 3 options.
