byzantine mysteries of MB Agility

[travelininstyle]

Dear members,please can someone help me penetrate the Byzantine mysteries of MB Agility and GFV.

In May 2014 my Agility agreement comes to an en,so I am exploring some options and would like some clarity on some issues.Car is a CLK 220Cdi 2009 Reg - with 41k milage

1. Firstly,what is GFV (Guaranteed Future Value) and how does this work - my understanding is that when I come to hand the vehicle back - that is the agreed (guaranteed) value,irrespective of its true depreciated value ?

2. If there is a difference, between the GFV and the actual value - then it may be possible to use this difference when part exchanging - is this correct ? - or why provide a GFV in the first place

3. MB have stated that they would not offer finance to buy the car on the £9k baloon payment remaining - but I think this is because they would be offering more finance than the vehicle is worth,according to their valuation,not the GFV - is this a correct analysis ?

4. My only incentive to buy - though nearly no one bothers,is the clean condition of the car,low millage and been finance free after two years - and that might be worth paying 2k over the dealers valuation - which I think is paltry at around £7k +

Please help me,as I do not have long to decide what to do and I am sceptical of the dealers impartiality.


Thanks

MrT

 

[Rory]

I think everything you've written is correct.

The basic idea is to get people to change their cars every 3 yrs so they're geared up with that assumption. Think of it as renting the car for that period.

You must have bought your's at 2yrs old? They don't work so well on used cars and, as you've found, the GFV is far higher than the car is really worth.

 

[RKC-benz]

You either pay that final value or give the car back. Quite simple really. The car is effectively owned by you and MB finance who are totally separate from your dealer who have no stake in the car at all.

The only way you could realise any value in the car if it was worth more than that final payment would be to sell it privately and use the finds to pay down the final agreed valuation figure.

If you perceive there to be added worth above book value in knowing the car, then get a car loan or use your own cash to just buy it.

I have had a couple of agility deals...

 

[RKC-benz]

^^ what is more, after a couple of agility deals I have decided that I've had enough of that route... Although I may end up back in the showroom again one day...

 

[travelininstyle]

I think everything you've written is correct.

The basic idea is to get people to change their cars every 3 yrs so they're geared up with that assumption. Think of it as renting the car for that period.

You must have bought your's at 2yrs old? They don't work so well on used cars and, as you've found, the GFV is far higher than the car is really worth.

As ever,the Forums collective wisdom is very helpful

 

[travelininstyle]

^^ what is more, after a couple of agility deals I have decided that I've had enough of that route... Although I may end up back in the showroom again one day...

Horrible isn't it - and to think 3 years ago,I owned my car - albeit it was 6 years old at the time

 

[RKC-benz]

Horrible isn't it - and to think 3 years ago,I owned my car - albeit it was 6 years old at the time

I bought a 17 yr old Toyota camper van 18 months before signing the last agility deal on a C350cdi estate ... The Merc is going back in two weeks having devalued (and therefore me paying for) by more than the cost of the campervan (which I paid £14k for)... If I sold the van next spring - four years, many hassle free cheap moles, several holidays later, I would now get about £12-3k for it. Makes the Merc look like very bad business!

Have just bought a modern-classic 1995 E280 estate that will cost me less to keep
Immaculate over the next five years than a new car, has kudos for its retro qualities, and will have proper residual value at the end. I'm hooked on the old ones again - which how I bought cars for years...

 

[RKC-benz]

^^

*There's no such thing as "cheap moles" ... I meant miles!

 

[grober]

As I understand it the purpose of the GVF is that you pay the interest on the difference in value between the purchase price and the GVF rather than on the whole value of the car. A higher GVF means a lower interest paid since you have effectively borrowed less money although still more than a direct cash outright purchase obviously. One of the advantages is that you avoid any uncertainty in getting your car sold after 3 years as anyone who has had to put up with sharp intake of salesman's breath through clenched teeth and the following:-
5 year's old - we wouldn't retail that I'm afraid-------?
There's not much call for that colour any more----?
Now if you had the command option I might have been able------
Pity its the old/pre facelift model-----?
It's the economy------?
Have you seen the number of second hand cars we have on the forecourt?
Out of manufacturer warranty a couple of years I'm afraid------?
There's just no profit on these nowadays-----?
Seem to be few gaps in the service history with Mercedes-----?
These tyres havn't much left on them what's the exhaust like---?

etc etc etc

 

[Rory]

Horrible isn't it - and to think 3 years ago,I owned my car - albeit it was 6 years old at the time

I've said this before, and some people disagreed with me, but I think PCP deals are not much short of a scam.

People are enticed into them with deposit contributions and low monthly payments which aren't available on other purchase methods.

Sure, at the end of the term you have choices, but often the choice which makes sense is to hand the car back and start another PCP - and so it continues. You get into it using your previous car as the deposit and at the end of it you walk away with nothing.

 

[SamW]

I've said this before, and some people disagreed with me, but I think PCP deals are not much short of a scam.

People are enticed into them with deposit contributions and low monthly payments which aren't available on other purchase methods.

Sure, at the end of the term you have choices, but often the choice which makes sense is to hand the car back and start another PCP - and so it continues. You get into it using your previous car as the deposit and at the end of it you walk away with nothing.

This is the mind set of someone who doesn't understand the scheme.

Yes, it costs you money... but we're talking about brand new £20k-£100k cars.

If it retains 50% of its value in 3 yrs... The car would have cost you 50% regardless of how you cut it (cash,hp,pcp)

They're the best way to fund new cars IF you like buying new cars often.

If you like running cars into the ground and starting fresh each time it's not for you... but it doesn't mean it's a scam.

 

[SamW]

Also, the thread starter should feel grateful that the dealer prompted this scheme to purchase the car on....

Currently you can hand it back, meaning the value is currently £9k hypothetically. Therefore that car has cost you the purchase price minus the 9k residual.

If you had bought it cash and wanted to change it now, it would have cost you the purchase price minus the assumed trade in of £7k so you're £2k better off now IF you decide to change the car.

This is where one of the benefit of a balloon / pcp scheme lies.

 

[Rory]

This is the mind set of someone who doesn't understand the scheme.

In case that was aimed at me let me assure you that I understand PCP perfectly. I've come across many people who don't and are dismayed to find they get to the end of the term and have nothing to show for it. The salesman has assured them they'll get their deposit back as the car will worth more than the GFV.

Yes, it costs you money... but we're talking about brand new £20k-£100k cars.

If it retains 50% of its value in 3 yrs... The car would have cost you 50% regardless of how you cut it (cash,hp,pcp)

The reality is (particularly with Mercedes) that PCP would often be the cheapest way of running the car over 3yrs. That's the "scam" part to me - people ore offered an inducement to get on the PCP treadmill as once on, it's a big step to get off again.

 

[Sp!ke]

Not sure what the issue is. If you want to keep the car you simply pay the balance.

The problem isnt the pcp, its the massive hit you take on deprecistion when you buy a new car.

I now have 11 months left on the Smart pcp. The balance to pay at the end is 4k which I'll probably take advantage of. Total cost of car to own it outright will be purchase price plus interest of 5% apr on the bit that I borrowed. Seems an ok deal to me.

If I were to not take advantage of paying the balance and start again then yes, there probably wouldnt be much equity in the car so I would have to stump up some deposit money and this route would indeed have a cost overhead for electing to start again with a new pcp. That cost is part and parcel with wanting a new car every three years.

If you do change your car for a new one every three years then the same overhead occurs however you fund it.

 

[Dryce]

The reality is (particularly with Mercedes) that PCP would often be the cheapest way of running the car over 3yrs. That's the "scam" part to me - people ore offered an inducement to get on the PCP treadmill as once on, it's a big step to get off again.

People just see monthlies. And then they cry when they realise that they put in some capital and end up with nothing - and they have no savings for their next deposit.

Is it a scam?

Well plenty of bright educated people signed up for endowment mortgages.

Plenty of bright educated people just let their monthly dirct debits roll over into insurance and service renewals..

Working out whether a PCP is the right deal is just basic arithmetic and bit of thought.

So I'd turn it around. It's not a scam. It's about personal responsibility.

 

[travelininstyle]

I agree with Sambo's reply entirely and it is a fantastic parallel to draw,against endowment mortgages - in reality the GFV is really a complete red herring and sales guys will often state that the car may actually be valued more at the end of the term - realistically for that to happen,you would have to drive 1000 miles a year,with full MB services (which they are anyway) and be in showroom condition - so I guess that has virtually never happened in the history of (MB) PCPs - What should be explained to customers is that there is no chance of the former ever happening and when we see you in three years time,you will need to stump up another 3k deposit to drive a similar spec./age car - basically the 3-4k deposit means you get to drive a nice car for low monthly payments - forget the GFV - its a distraction - so in a way I can see the side of people whom support the arguments for PCP's - they allow you to drive a decent car,that you would otherwise not be able to afford - if you are happy to chuck away 3/4k as part of the deal - to that ends,these deals only make sense if there is no warranty/service costs - so that means it has/should be a new car - towards the end of my PCP because of the age of the car,I had to pay for extended warranty and Service Plus !

So in conclusion,I could ask myself that if I saw my CLK 220Cdi on a forecourt for 9k in May 2014 - knowing its service history,condition and 44k miles - would I buy that car - probably yes ! - though it would take a loan of 5-6k - but at least after two years it would be mine - but a 7 years old car with 60k miles on it - and guess what - you drive to a dealership,its worth 3k tops - but it is some equity and in the two years you pay the loan off - you are closer to ownership than in a PCP - Thanks guys for your input.