How to Buy a Gas Guzzler

[SilverSaloon]

got to admit, for all i absolutely loved my 7 Series, i am pleased I sold it when I did and wouldnt buy another new/newish big luxury car if I was paying for it!

 

[hawk20]

But you don't have any safety net. Irrespective of whether we use my or Mark's figures, clearly PCP works out dearer over the whole term if you wish to keep your car.

Yes and No. You do have a safety net with PCP. You must be able to see that you have a guaranteed residual, a guaranteed final value, call it what you will, which guarantees that your car will not fall in value below this figure. On big cars that is a very valuable safety net these days when depreciation can be so large and so uncertain.

But you are right that PCP MAY work out a bit dearer than HP if you want to keep the car past 3 years. (But you cannot assert that this is always true unless you first get a quote for HP and you won’t get one at the low APR rates that the MB PCP deals now offer). But I have set out for you the relative costs and shown there is little in it even if you pay the same interest rate (refer to other thread I linked to earlier for detailed example).

But nowhere do you accept -even grudgingly- that the MB PCP offers a good deal at the moment if you like to change every three years (and may do so even if you wish to keep the car longer).

It also works out dearer if you wish to purchase a new car at that time, as you don't have any equity on your car if you have PCP'd it.

NO. You cannot say that. If you do HP you will pay a higher interest rate. But even ignore that; if you do HP instead, you will have full ownership of the car after 3 years, and it may be hard to sell or worth a lot less than the PCP guaranteed for you. But you are right that you have chosen not to buy equity in the car when doing the PCP deal. (Though you may be lucky and find the part ex price exceeds the GFV, which would give you some fortuitous equity).

At the end of the term, you have paid the interest on the full amount, you have deferred payment until the end of the term, and then you either walk away from something you have paid for but not benefitted from, or you fork out the money at the end, and by doing so it costs you more overall.

No and Yes. You keep believing there is no benefit and keep ignoring that you get full use of a new car, every 3 years if you wish, ( or you can keep it longer if you prefer by paying more), and during those 3 years you will only pay for the depreciation and the interest on capital borrowed. And they guarantee the Final Value in 3 years time so you have no worries about depreciation. Cars do depreciate. So you pay that, as you go, as it happens, year by year.

And borrowing money costs interest so you pay that too. Fair deal.

I am sorry, I do not yet see why this way makes it cheaper other than for the reasons I have already stated. That being you cannot afford this car any other way other than to offload a significant proportion of the cost. Cost that you cannot afford otherwise you would not follow this route.

I could easily have paid cash but the economics said it paid not to. I can earn as much on my money as they charge to lend me money. And they give a good discount if I take the PCP. And they guarantee the depreciation –which I am glad to let them do. Even if it cost a bit more I would still choose the PCP for the GFV alone.

And, I am sorry to bang on about this, where is the depreication in actual money terms. where can I actually see what it does to these deals to make them any different to what we have already said?

Here it is. In your £15k example you buy for £15k. Deposit £3,000. GFV £7,500. The depreciation is exactly £7,500. You pay this in two ways. Part of it with the deposit and the rest in monthly payments. That is the depreciation that you pay.

On top of that, (go back to my earlier worked example) you pay about £1000 in interest (£1,064). That is all it costs to borrow the money, and for you to have a guaranteed residual. You get massively lower payments than HP would give you.

Try this. Forget all the arithmetic that seems to confuse. Go to the MB website. E220cdi PCP offer. The discount they give you completely covers all the finance charges. Yes all of them. And some more. And they guarantee you a residual of close to 50% of the price you pay for the car. I cannot believe there exists anyone who cannot see that that is a pretty damn good deal in these uncertain times.

 

[st4]

I agree with your points ***. PCP suits another two categories though IMO. People who have savings and could pay cash, but who see that the current MB deals are so good that it is economic to do the PCP and keep your cash invested.

That exact option was there with the GL class PCP deal that was being offered 2-3 months ago. When I was frequenting my X5 forum a regular PCPer nearly went for the GL420cdi but he negociated a similar deal with a BMW X5 3.0sd

And people who want to buy a large engined car, or just a large car, but think as I do that the residuals will be awful and so want the safety of a guaranteed residual.

But they need to be secure in income and meet your other requirements too.

The crucial part is that guaranteed residual, and the security it offers. I'd PCP an S600 Biturbo just because its value is a massive unknown in 3 years and a PCP takes that away.

I mad no trouble getting past the credit checks for HP, are the PCP ones more rigerous/stringent due to the issues that arise if you can't make the payments?

BTW has anyone checked whether we are all right in assuming the offers are mainly on diesel cars. I see it says on the website that similar offers are available across the E class range.

When I bought the A's the examples on the website were just the A150 but I discovered you could do similar deals on all A's. Might be worth checking if someone wants a petrol version.

The deals on the diesels were the most advertised. TBH there's got to be something in it for them. Dieselman pointed out CO2 quota's and I reckon from the salesmans/dealership angle it secures a nice, low milliage diesel car, which will sell easily and make them a profit come end of agreement. Everyone wins, salesman gets a nice resellable car, owner gets piece of mind.

 

[Shude]

In fact, in many ways the PCP is more flexible.

The most flexible of all has to be cash, surely? If you fall on hard times then the ability to very quickly realise the equity in the car and have the cash, or indeed upgrade or downsize if you suddenly discover that your family is increasing in number etc is lost if your car is purchased with PCP. Even if you just fancied a change of car after a year or 18 months you'd be pretty much stuffed.

 

[Rory]

Try this. Forget all the arithmetic that seems to confuse. Go to the MB website. E220cdi PCP offer. The discount they give you completely covers all the finance charges. Yes all of them. And some more. And they guarantee you a residual of close to 50% of the price you pay for the car. I cannot believe there exists anyone who cannot see that that is a pretty damn good deal in these uncertain times.

How can having a basic version of a car that's about to be end-of-lifed foisted upon you be described as a "good deal".

If your reference point is list price, then of course it looks good. Why don't they put all the prices up and then knock 30% off? Would you be posting they were "good deals" too.

 

[st4]

The most flexible of all has to be cash, surely? If you fall on hard times then the ability to very quickly realise the equity in the car and have the cash, or indeed upgrade or downsize if you suddenly discover that your family is increasing in number etc is lost if your car is purchased with PCP. Even if you just fancied a change of car after a year or 18 months you'd be pretty much stuffed.

Thats why you must be very sure of your ability:

a) to keep the payments (i.e. very secure employment and/or safe level of income)
b) your motoring circumstances won't change so your not over the agreed milliage and you are happy to keep that car for the whole financial term (i.e. no midlife crisis and bye bye E class and time for an SLK)
c) your personal circumstances won't change to the extent your car requirements need changing (PCP an SLK and then have triplets on the way)

In truth I meet none of these criteria so I didn't finance a car via PCP (otherwise I'd be stuffed right now)

 

[hawk20]

The most flexible of all has to be cash, surely? If you fall on hard times then the ability to very quickly realise the equity in the car and have the cash, or indeed upgrade or downsize if you suddenly discover that your family is increasing in number etc is lost if your car is purchased with PCP. Even if you just fancied a change of car after a year or 18 months you'd be pretty much stuffed.

But could be less flexible after 3 years when the PCP ends. (Some are 2 years BTW). You could find if you buy the car for cash that no dealer will take it in part exchnage or that the market price is so low that you cannot face selling. That why I say it is a good way to buy a gas guzzler. removes that risk.

What I don't know is how easy it is to come out of a PCP before the time is up. My dealer said 'don't worry, if you want a change, we'll find a way' and I guess they would. I think basically they look at what the car is worth and if it pays off what should be charged to settle early. May try and find more detail. But I'm rather hoping it will stop me changing too often! So I haven't asked.

 

[st4]

How can having a basic version of a car that's about to be end-of-lifed foisted upon you be described as a "good deal".

If your reference point is list price, then of course it looks good. Why don't they put all the prices up and then knock 30% off? Would you be posting they were "good deals" too.

Its not a basic version, its an AG with automatic gears. It also what cars pick of the E class range.

You can still haggle with the salesman to knock more off the RRP. In truth you might get some options thrown in. Again if your not that confident a haggler the PCP takes that onus away from you as it looks okay to me. The interest rate is very low- I saved £3k on my HP just by haggling over the APR.

50% isn't a bad residual either, would a new W204 fare that much better. The w211 is an excellent car, near or end of model life.

 

[Shude]

You could find if you buy the car for cash that no dealer will take it in part exchnage...

Has this ever actually happened?

 

[hawk20]

Has this ever actually happened?

Yes. Happened to me with a Honda Accord once. And later with a Honda CRV becuase the new model had come out.

Somewhere in this thread or in another one (i'll hunt) there is a link saying lots of people with big 4x4s are finding they cannot get dealers to take them.

Two dealers I know have said that the 5 litre Mercs are now virtually unsaleable.

Here's the link. What service!
http://www.dailymail.co.uk/news/arti...lunges-12.html

 

[st4]

But could be less flexible after 3 years when the PCP ends. (Some are 2 years BTW). You could find if you buy the car for cash that no dealer will take it in part exchnage or that the market price is so low that you cannot face selling. That why I say it is a good way to buy a gas guzzler. removes that risk.

Its a cracking way to buy a guzzler, my example of the E220 wasn't really suitable but the deals on these GL420cdi's did make me think I could do it, but my circumstances are just too volitile due to my age (or lack of it)

What I don't know is how easy it is to come out of a PCP before the time is up. My dealer said 'don't worry, if you want a change, we'll find a way' and I guess they would. I think basically they look at what the car is worth and if it pays off what should be charged to settle early. May try and find more detail. But I'm rather hoping it will stop me changing too often! So I haven't asked.

Depends on the dealer wanting to sell you a different car, the T&C's, and the desirability of your car.

My old man wants an Sl but is half way into a 4 year PCP with a boxster S. I think he will find it very hard, and costly to get out of. I imagine he'll have to settle the remaining monthly payments in a oner, hand the car back, and because its worth more than the GMFV (or it should be) there may be some cash back....naturally there will be early settlement fines etc.

We'll see how he copes and I will report back if he does manage.

Bottom line, if you PCP (C=contract) you do your utmost to fulfil your end of the contract.

 

[Shude]

Yes. Happened to me with a Honda Accord once. And later with a Honda CRV becuase the new model had come out.

You had a 2 or 3 year old honda accord with average mileage and in reasonable condition and they refused to part exchange it, at a Honda dealer?

 

[hawk20]

Yes but all finance deals have get out clauses. And you should only pay interest up to early settlement day (plus some penalty) and not all interest to the end.

 

[hawk20]

You had a 2 or 3 year old honda accord with average mileage and in reasonable condition and they refused to part exchange it, at a Honda dealer?

Excellent condition, but above book mileage. It was 18 months old with about 25-30k on the clock.

The CRV was bookish miles, good nick, no scratches or bumps but the local dealer siad he had already taken too many in part ex against new model and Southampton said the same.

I went back to Mercedes who took it in against a C180Classic SE IIRC. Good car. Nice 2 litre petrol engine with no Kompressor but very smooth.

 

[hawk20]

Is that Scumbag's calculator I can hear still cranking away somewhere?

 

[Rory]

If you can live with the T's & C's (and I strongly suspect that if hawk20 had to buy his way out of his A180CDi for some reason then he could do that with his spare change) then a PCP deal buys you certainty of final value. That certainty has value.

Nobody can predict with any certainty what their car's going to be worth in 3yrs. And the more expensive the car is, and the bigger the engine, then the more uncertain that projection is going to be. The manufacturers know that, but they can throw money at PCP deals because there are huge gross margins in the cars. Sure, MB isn't making loads of money, but, like any volume manufacturer, it has to keep those production facilities fully utilised or it's in deep trouble.

If you intend to keep the car for 5-6 years then PCP isn't the best way to buy *all things being equal*. However, MB is making it unequal by subsiding the PCP deals. Why? Because they know that in 3yrs the buyers will be back and chances are they will take another new car.

If you truly want to amortise your annual costs, then you could do a Personal Lease - that's how many people buy in the US where personal leasing is very low cost as the cars are realistically priced in the first place yet, for some unfathomable reason, still hold their residual value better than in the UK.

 

[hawk20]

If you intend to keep the car for 5-6 years then PCP isn't the best way to buy *all things being equal*. However, MB is making it unequal by subsiding the PCP deals. Why? Because they know that in 3yrs the buyers will be back and chances are they will take another new car.

If you truly want to amortise your annual costs, then you could do a Personal Lease - that's how many people buy in the US where personal leasing is very low cost as the cars are realistically priced in the first place yet, for some unfathomable reason, still hold their residual value better than in the UK.

Where can you get a personal lease and how do they work?

If you want to keep a car for 5-6 years (I intend to keep at least one of my A's longer term) then at the moment you pay so much less interest on a PCP that it pays to do that for the first 3 years and then decide whether to pay cash or refinance or whatever in 3 years time.

 

[hawk20]

Personal leases I've seen are a form of contract hiring and are really only economic for businesses who can claim the VAT back.

For private buyers the PCP is better.

 

[scumbag]

I have given up. I am off to buy a flat.

MB may be offering a better rate than HP at present, and thats fine! The thing I find difficult to see is at the end of the term, you have nothing to show for it on PCP. The idea that MB are taking the risk and you are not is a pointless argument. You are paying interest on the whole amount, and they get the car at the end of it. In other words, they could borrow the money for the car, and have you pay the interest in it while they stick it in the bank and earn interest on it.

I just don't see how this works out better.

Unless you genuinely believe that they will be stung come the end of the term. And that really is a big ask!

Thanks for the input, and the calculations and the huge amount of reposts, but its not happening my end. Sorry and all that but I think my brain logged off a few weeks back and I am working offline at present.

And for those in uncertain times, might i suggest you don't buy a car until it becomes a certainty, that way, nobody is at risk.

 

[hawk20]

The thing I find difficult to see is at the end of the term, you have nothing to show for it on PCP.
.

Don't give up. This is CORRECT. (PROBABLY).
As you rightly say, You have nothing to show for it after three years; you have no equity (probably). Why? Because you have paid for no equity. That is why the payments are less than on an HP deal where you buy all the equity.

All you have paid for is the depreciation on the car for the three years you owned it. And the interest on the capital that was tied up in the car while you owned it.

It is just like renting a car for three years -in a way.

Now the probably bit. May have some equity if the part ex value after 3 years exceeds the GFV. Unlikely in most cases. Best ignore and treat as bonus if it happens.

My question to you Scumbag would be: since the discount (retailers contribution) Mercedes will give you exceeds all the interest you pay and some more, how can it not be a good deal?

Here are some really simple figures all from the MB website.
E220cdi Avantgarde saloon (metallic and auto) £33,625
Guaranteed residual ('optional Purchase Payment') £15,000
Depreciation over three years therefore is £18,625
How much do you pay for the PCP deal.
36 payments at £329 equals a total of £11,844
And the deposit you pay is £5499
TOTAL YOU PAY OVER 3 YEARS IS £17,343 plus 180 admin equals £17,523

Your payments do not even cover the depreciation over the three years.
Some deal.