Author: Matt Morton
Depreciation is often the killer factor on new cars – the amount a car costs new and the amount it then loses value once it leaves the shiny showroom.
But businesses and company owners are increasingly turning to finance to avoid the worst effects of depreciation on vehicles, according to specialist car finance business Bridford.
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Bridford says it is increasingly seeing its clients buying vehicles – for both personal use and their business car fleets – and linking three and four-year finance terms into the car’s depreciation curve to avoid paying into an asset that is losing its value.
Some leading luxury executive cars costing between £60,000 to £80,000 can depreciate by close to half their value in the first year or so, says Bridford.
“We are seeing leading executive models with delivery miles losing up to £20,000 and others that are a year old dropping by half their value,” said Tim Marlow, owner of Bridford.
“Clients tell us flexibility is the key detail they are now looking for when it comes to financing their cars. The agreements we have with our lenders means we can offer tailored packages to meet their requirements – such as the amount of deposit paid, the length of the agreement and the size of the balloon.
“It helps cash flow and keeps the purchase cost off their balance sheets so they can make their money work elsewhere
“People want to avoid depreciation levels but still have the ability to change their vehicles regularly so they are able to enjoy the latest cars coming onto the market.
“From a business perspective, driving the newest models presents a very positive image and finance packages allow this to happen without having to suffer losses in depreciation.”
Marlow said he was also seeing a demand for more prestige car finance as high net worth clients scrutinised a car’s potential residual value in more detail.
“Many of our clients are high net worth business owners who enjoy driving some of the best cars in the world.
“Our finance packages gives them the option of assessing their vehicle and the car market in general.
“For example, they may choose to finance a Ferrari or a Bentley and then make a decision towards the end of the term to see if their model is likely to increase in price in years to come.
“If they are sat on a potential modern day classic or it’s retaining its value, they will settle the finance term and take ownership because they know they have a good investment or they will simply swap for a new model.
“So by linking the facility to the depreciation curve via business car finance they can avoid paying into an asset that is losing its value and give themselves far more options by not tying up their capital.”
Bridford also reported that clients were negotiating healthy discounts of up to £20,000 on top end business cars as dealers looked to clinch sales.