Would it not be a good idea, as advanced payments are getting higher for Motability to be able to offer us lower payment on 5 year lease or the higher price on a 3 year lease especially as electric cars are more expensive and “ longer living”. What are members views
Whilst Motability currently (and often) permit customers to extend standard 3-year vehicle leases to five years, If I have read your post correctly, I take it you are in effect asking about amortising the Advance Payment over 5 years rather than 3 years? Thus ‘spreading out’ the AP over 5 years rather than 3 years? Yet still retaining 3-year leases with a higher AP due to the shorter amortisation?
From a pure business perspective, I think Motability would baulk at this. For starters you are adding an extra two layers of structural financial complexity, with four parallel pricing streams running concurrently (3-year PIP/DLA/AFIP, 5-year PIP/DLA/AFIP, 3-year WPMS and 5-year WPMS).
Yes, I know they operate 5-year leases for WAV’s but they are relatively low in numbers and a specialised market as opposed to volume/mainstream. Also, they don’t run a parallel 3-year WAV lease stream (other than ‘nearly new WAV’s’ which are akin to rocking horse droppings).
Also, from a financial perspective, most vehicles on the scheme (barring Kia/Hyundai etc with their 7/5 year warranties) have a 3 year warranty – thus ‘absolving’ Motability of any repair costs during the traditional 3 year lease. Between years 3 and 5 Motability become liable for these costs and they would need to be factored into the ‘5-year AP’, along with 2 years extra insurance, say another set of tyres, and extra service (or maybe two if annually), 2 years extra RAC cover etc etc.
Then there is the lower residuals of selling a 5 year old car vs a 3 year old car at lease end which also needs factoring in.
Interesting that you mention electric vehicles. As this technology is still relatively immature and not many ‘new electrics’ have reached the 5-year point yet – would, for example uncertainty over the life of the main battery affect the residual value of a 5 year old vehicle versus a 3 year old electric vehicle? I don’t think anyone knows the answer to that, so a risk/cost to be factored in.
Then from a practical point of view, who can predict how their disability will be in the future 3 years, let alone 5 years? This may result in an increase of costly early terminations (more costly as the AP is still being amortised) during years 3-5 as vehicles become unsuitable.
The above are all risks, and these risks would need to be factored into the cost of the ‘5 year AP’ over the standard ‘3 year AP’. It would not be a linear equation either as some of these risks would increase exponentially. So, for example if a vehicle has a standard 3 year AP of £3k, it would not simply be case of amortising £3k over 5 years. The extra risks and costs would have to be factored into the five-year AP. So, for example the 5 year AP maybe in the region of £2.4k to £2.7k – not exactly a great saving for the customer driving a five year old vehicle!
However, in saying the above, providing the extra risks are properly costed in, it should not be beyond the bounds of Motability Operation’s resources to at least explore the possibility of a 5-year amortised lease (whether they have previously explored it, I know not).