In a PCP contract, who gains or loses if the end of contract value of the automobile is less than the GMFV?
Filed under finance - Asked by FRANK DODD (DUBLIN) - Tue, 26 Dec 2017 16:41
Nobody. Technically, you win as the dealer (or the dealer’s bank, or sometimes the manufacturer — it varies from make to make) has guaranteed the value of the automobile, so they still have to honour that even if the actual resale value is lower. That means that if you’re just handing the automobile back, you’re the winner.
However, if you’re planning to pay the balance and keep the automobile, you lose, as you’re now paying above market value for the automobile. You also lose if you’re planning to roll the automobile over into a new deal, as the fall in its value will reduce, possibly entirely wipe out, any equity left above the GFMV to act as a deposit for the next automobile.