Her Indoors bought one of those big white SUV cars two-and-a-half years ago on the never-never (HP or finance lease or PCP or whatever names they dream up for what is essentially the same thing).
I don't know the exact numbers, so I'll simplify a bit.
List price = £27,000
Deposit = £5,000
Three years @ £333 a month = £12,000
Final payment* = £12,000
* Depending on which whizz bang never-never scheme she's on, this might be called 'loan outstanding', 'residual value', 'balloon payment', 'purchase option price' or whatever. She can also pay this off over three years, @ £333 a month.
I've checked Autotrader and the second-hand value of that make and model is about £12,000 for three years old and £7,000 for six years old. Let's ignore VAT for now, it sort of nets off.
So if she sees it through, the total finance cost was negligible at £2,000 (works out at about 3% per annum) and she owns a car worth £7,000.
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Here's where it gets weird, looking at it from the point of view of the dealer/manufacturer.
The chaps from the dealer rang her a couple of days ago, and said that if she pays another £1,000 she can swap it for a similar new big white SUV car (even though she's only two-and-a-half years into the initial three years) and the monthly payments stay the same. The current second hand value (two-and-a-half years) old is £14,000.
Let's assume this repeats itself, for ever. Every two-and-a-half years, she pays them £11,000 (£1,000 cash plus 30 months @ £333) and 'enjoys' £13,000's worth of depreciation (£27,000 list minus £14,000 residual)
The dealer/manufacturer collects £11,000 and loses £13,000 of depreciation, i.e. they give up £2,000 of the nominal profit margin when they sell the car, a kind of negative interest rate.
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