MGFV - how's it calculated?

Honest John Back Room » Motoring discussion
View Threaded
Mon 25 Aug 2003 20:57
MGFV - how's it calculated? - Choirboy
Can anyone help? I'm confident in haggling a decent price and a competitive APR on a new car, but I feel that dealers can still get one over on me in calculating the Minimum Guaranteed Future Value. Is it better to have a low one (more equity at the end) or a higher one (lower monthly repayments)? Bit stuck on this one...
Reply | Report as offensive | Link
Mon 25 Aug 2003 21:44
MGFV - how's it calculated? - LongDriver {P}
I would say a higher one was better, assuming the APR's were the same, as you would be borrowing LESS money and therefore paying LESS interest.

Personally, I would avoid financing through the dealer if possible - try borrowing from your mortgage lender, assuming you have sufficient equity in your property (which seems likely at present). Chhose your own repayment period and interest rate deal.

I actually managed to lower my repayments on my current mortgage by financing my (soon to be deliverd...7 days and counting) new Galaxy TDi Ghia via an additional mortgage through the same lender - thus effectively reducing the cost of my new vehicle.

Back to MGFV - I'd go for paying for thw whole car as a first choice - less opportunity for the dealer to get one over on you...
Reply | Report as offensive | Link
Mon 25 Aug 2003 22:08
MGFV - how's it calculated? - DavidHM
LongDriver - you're slightly wrong in the way you interpret MGFVs.

The higher the MGFV, the greater the amount outstanding is at any time. For instance, borrow £15k with an MGFV (or balloon) of £5k, at the last repayment you'll still be paying interest on £5k of the loan. A conventional loan will therefore always attract less interest. If you don't believe me, compare the total repaid under the Car Purchase Plan and conventional loan (at the same APR) at www.smartermotoring.com

Whether higher or lower is better depends on your personal circumstances. Most MGFVs will be calculated to cover the lender's back at the end of the loan, so the car can be disposed of for no loss, ideally with enough equity left in the car for the buyer to put down a deposit on a new finance plan.

As for the mortgage finance route - I'm not firmly for or against it, but with personal loan APRs as low as 6.3% I would be inclined not to give security over my property (if I had a mortgage!) and would want to get the loan out of the way as quickly as possible when purchasing a depreciating asset.
Reply | Report as offensive | Link
Tue 26 Aug 2003 00:54
MGFV - how's it calculated? - teabelly
I would pay most attention to the total cost of the deposit & payments. Whichever gives you the lowest final figure is the one to go for. If you start to wonder about part exchanges in a few years time then it gets tricky as it is hard to tell what the used and new car market will be like. You also may not like the car or the dealer so choosing a deal which some how gives you 'goodwill' with the dealer at some point in the future is a more risky option. Dealers are also very good at moving the terms of the deal to lower monthly payments so it appears to be better than it is because either the deposit is increased or the term has been increased. If you always refer to the total cost then it is harder for them to pull a fast one.

0% deals are usually worth going for unless the the total cost of ownership is more than a discounted car with a different apr.
teabelly
Reply | Report as offensive | Link

Our honest used car pricing is a little bit different to all the others. You can get to our values through make or model - you don’t have to follow a prescribed route. Plus, it’s live, which means we can react to changes in the market quicker than any printed price guide.

Honest Used Car Prices

From which small car to buy at which price point to the best UK-built cars, our Top 10s have the lot. Click now for your shortlist.

Unsure of what to buy? Our Top 10s are here to help you....