In normal circumstances you work on a 2-4% annual increase. If you suddenly find that inflation hits something as monstrous as 10%, you’ll probably find your costs going up equally, so it won’t become all additional profit.
The simple answer is that we agree to pay the full amount regardless of what it is, if inflation is really high, then what they get goes up by lots but staff will expect pay rises, electricity and other property costs will also go up, we’ve seen what insurance has done over the last year or so, with some cars being very difficult and expensive to insure as parts are incredibly slow to appear. If inflation is minimal, then cost increases are equally minimal.
For them, they have the main risk. If the customer (who they don’t necessarily know) goes out and does 59,000 miles in 3 years, they have a slightly high mileage car to sell. If the customer only does 2,000 a year, then they reap the benefits of an extremely low mileage car to sell. Then there’s all the add ons that are paid for by the customer with no support from Motability, so you could have a top of the range car with a sound pack, comfort pack and family pack that cost you £3,000 over the AP. When they sell that car, that will make it much more attractive and, therefore, valuable.
All that said, it’s a lease arrangement and we’re paying to use a car for 3-5 years (if extensions are allowable) with a guarantee of no residual value to us at the end. However, we’re paying for the convenience of a car we, possibly, couldn’t afford otherwise and has a level of reliability (hopefully) that we wouldn’t get on the very used car we could afford.
If we’re worried about the cost and asset levels, then either the scheme isn’t for us or we’re worrying too much about things we can’t change.
I'm Autistic, if I say something you find offensive, please let me know, I can guarantee it was unintentional.
I'll try to give my honest opinion but am always open to learning.
Mark