New car buyers are often concerned about buying a new car that depreciates the moment it leaves the showroom floor. One possible solution to this dilemma lies in Guaranteed Future Value (GFV) agreements offered by some car dealerships. These agreements promise buyers the final value of their car, provided they stick to the conditions outlined in the agreement. Before diving into this financial commitment, it's crucial for buyers to understand the ins and outs of GFV and whether it's the right choice for them.

Understanding GFV

GFV, also known as Guaranteed Minimum Future Value, is a financial arrangement offered by some car dealerships in Australia. It guarantees the future value of a new car at the end of a finance term, regardless of its actual depreciation. Essentially, it provides buyers with assurance that they won't be left with a car worth significantly less than what they paid for it.

How GFV Works

In a GFV agreement, the dealership calculates the guaranteed value of the car at the end of the loan term based on factors such as expected annual mileage, payment term, and deposit amount. At the end of the term, buyers have several options. They can:

• Upgrade to a new car by trading in their current car,
• Keep the car by paying the guaranteed future value as a balloon payment, or
• Return the car with no further obligations, provided it meets specified conditions

Pitfalls to Watch Out For

While GFV agreements offer peace of mind, buyers should be aware of potential drawbacks. One significant consideration is that GFV agreements typically lock buyers into an arrangement with one dealer, limiting their flexibility and choice of vehicles in the future. Additionally, buyers must carefully scrutinise the costs, benefits, and potential risks associated with GFV before deciding to go ahead with this agreement.

Financial Advice to Make Informed Choices

Getting advice from a finance consultant, such as those at Mortgage Express, can provide invaluable assistance to new car buyers. Finance consultants offer buyers access to a wider range of car finance options, ensuring they explore all available avenues before committing to a GFV agreement.

Furthermore, finance consultants can provide crucial insights into the financial implications of GFV agreements, helping buyers make informed decisions that align with their long-term financial goals.

While Guaranteed Future Value agreements can offer peace of mind to new car buyers worried about depreciation, it's essential for buyers to thoroughly understand the terms and implications of GFV agreements before entering into these types of agreements.

Contact a finance consultant at Mortgage Express and get the expertise and guidance needed to navigate the complexities of car finance and make informed decisions that best suit your individual needs and circumstances.

While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.

Finservice Pty Ltd (Mortgage Express) is authorised as a corporate credit representative (Corporate Credit Representative Number 397386) to engage in credit activities on behalf of BLSSA Pty Ltd (Australian Credit Licence number 391237) ACN 123 600 000 | Full member of MFAA | Member of Australian Financial Complaints Authority (AFCA) | Member of Choice Aggregation Services.