In recent weeks it’s become horribly apparent that we may be building up a nasty bubble of car finance. With rising sales of new cars, the values of used ones are bound, eventually, to slide somewhat and considering how overvalued some Irish cars have been of late (try comparing the prices being asked for, just as an example, a 2009 Lexus IS200d in Ireland and the UK. You might want to sit down before trying this…) that slide could be a sharp and steep one.
The worrying part is that many new car finance deals, especially those which are Personal Contract Purchases (PCPs) are founded on the value of the car being at a certain level at the end of the three-year agreement. It’s called the Guaranteed Minimum Future Value (GMFV) and while it’s a good thing (you know the day you buy how much your car will be worth, at minimum, in three years’ time and that value is guaranteed as part of the contract) it does mean that a serious change in market values could upset the apple cart. If cars are coming back worth less than their guaranteed value, then the cost of future PCP deals will have to rise to compensate for that fact. Worse still, writing off the lost value could be disastrous for any finance providers who have not been sufficiently prudent in estimating the future values, which could lead to a credit squeeze.
Opportunities with your car
So it’s more critical than ever now that you do your sums right at the time of purchase. More critical still, and certainly more helpful, would be if your car – normally a fast-depreciating asset (most cars will lose at least 50 per cent of their original value in the first three years) – could actually start earning you some money…
Don’t worry – we’re not talking about a spot of moonlight mini-cabbing (well, not yet…) but there are some relatively simple and painless ways in which your car can become some sort of car profit centre for you. It may not make up the purchase cost, nor will it even likely cover the final ‘bubble’ payment of your PCP but it might at least defray some of the cost – lunch money if not rent money, as an old boss of mine used to say.
In fact, in the first instance, forget about your car, what about your parking space? Do you have a driveway of your own, or a reserved space in an apartment block? Is it empty most of the time? Well then it could be making you money. There’s a new startup company in ireland called Spaceworks, and they reckon that an average suburban driveway can be let out for as much as €80 a month, or even €100 if you’re close to or in a city centre. That’s a significant chunk of your monthly repayments paid for and you can do it pretty much pain-free. It’s just a matter of setting up an online account and waiting for users to come to you.
More time on your hands?
Or you could try doing a bit of couriering. Do you know the city streets like a taxi driver, but don’t fancy becoming one? Well then courier work could be the answer. Just get in touch with delivery companies in your area and see if they have any work going. It would help if you have a full, clean licence and you’ll have to inform your insurer as you’ll be using the car for business purposes but with some couriers making as much as €400 a day, it could well be worth it.
Fancy something a bit more daring? What about renting your car to someone who needs it when you don’t? Perhaps you commute all week but hardly ever use your car at weekends, or vice-versa? Your car could be earning you lots when it would otherwise just be sitting on the driveway. Companies in the UK such as Whipcar specialise in this, and needless to say, even though all cars and users are thoroughly screened, you can decline any offers as and when you like. Think of it as AirBnB for your car.
Or you could go the full “Alan Partridge’ and sell advertising space on your car. Yes, this is a real thing – again, generally more available in the UK than it is here, but things inevitably work their way across the Irish Sea. Advertising agencies such as Comm-motion will sell the space on your car to advertisers and arrange for the stickers or a full vinyl wrap to be fitted. You never know, you might get a livery that actually makes your car look better, although sadly advertising regulations will prevent you getting that classic seventies Formula One cigarette pack look… Again, you’ll have to have a word with your insurer as turning your car into a mobile billboard could have consequences for your coverage.
Such schemes won’t be for everyone, but we do live in the era of personal rentals and the sharing society – of Uber, Lyft and eBay. And with the cost of buying a car going in one direction only, all could well be worth considering.
To find out tips on to find out how much you should pay for your next car, see our Value My Car post.