How to deal with the Mercedes dealership. W211 2007 E280 CDI

[hawk20]

I think I get it now, thanks.
So in effect,say on a £40k Mercedes you put down £5k deposit and the dealer guarantees it will be worth £20k after 3 years, your payments are £500x 36= £18k+ your £5k deposit= £23k leaving you with £3k equity in the car?

Not quite. The payments cover depreciation down to the GFV plus the finance charges (i.e. interest on capital plus any admin fees).

You only get equity towards the next car, at the end of the three years, if the part-ex price is higher than the GFV. That is why I keep stressing the need to ask for a part-ex figure.

If you want to leave early, you need the Part-ex figure to exceed the settlement figure, if you want a surplus towards the next deal. Or if selling privately you need to sell for more than the settlement figure to have a surplus towards the next car.

 

[gIzzE]

You only get equity towards the next car, at the end of the three years, if the part-ex price is higher than the GFV. That is why I keep stressing the need to ask for a part-ex figure.

No you don't only get equity towards a new car.
I now understand why you keep saying you need a part ex price.

At any point in the agreement you can purchase that car using a pcp/mercedes agility/bmw select or whatever they want to call it. You only know what you owe on the last month of the agreement, if you want to pay off the finance before the end of the term you simply call them and ask for a settlement figure, they will then work out what you owe up to that point taking into account a discount in charges for the months you are not keeping the car for.

Once you have the settlement figure you can clear the finance and start again or simply not bother and pocket any equity.
Of course the dealers rely heavily on people thinking they have to hand the keys back or on people thinking they have to buy a new car from them, but it simply isn't the case.


The only time you can't do the above is if you are doing a contract hire, so renting the car from them, but usually the deposit for this is tiny as they get the deposit back when they sell the car on at the end of the term, so they can't afford to sell it to you unless you pay full retail for it.

 

[Rory]

I think I get it now, thanks.
So in effect,say on a £40k Mercedes you put down £5k deposit and the dealer guarantees it will be worth £20k after 3 years, your payments are £500x 36= £18k+ your £5k deposit= £23k leaving you with £3k equity in the car?

Please don't take this personally, but your post perfectly illustrates my oft mentioned contention that PCPs are designed as a trap for the unwary.

You normally pay cash for cars in the low £20Ks, but suddenly you think that using a PCP means you can look at £40K cars. And you don't understand how PCPs work. A perfect storm for the car manufacturers and their finance arms.

If you know what you're getting into then PCPs can be a useful tool, particularly, as hawk20 mentions, on Mercedes as Mercedes often subsidise them on certain models and certain times with deposit contributions and low interest rates.

 

[A210AMG]

Think for me its the fact you never feel you 'Own' the car.

I like the fact ours sit on the drive and are paid for, think it's worth looking at I agree depends what you want.

Even leasing if you budget xxx over 2 or 3 years and just swap wach time for what ever else comes along.

 

[gIzzE]

If you know what you're getting into then PCPs can be a useful tool, particularly, as hawk20 mentions, on Mercedes as Mercedes often subsidise them on certain models and certain times with deposit contributions and low interest rates.

You have to look at it all properly, and weigh up what is best for you, not what is best for the dealer.

Renting tends to give the best deals of all, the cheapest overall motoring, yet......

Think for me its the fact you never feel you 'Own' the car.

I like the fact ours sit on the drive and are paid for, think it's worth looking at I agree depends what you want.

Even leasing if you budget xxx over 2 or 3 years and just swap wach time for what ever else comes along.

I never get attached to a depreciating asset like that, I couldn't care less, in fact, the cars I buy outright I tend to worry about too much, when they are just another monthly outgoing I tend to enjoy them far more.
I guess we are all different.


Having said that, I am now coming to the conclusion that even owning your house is a waste of time, in the grand scheme of things and when you work out what you can rent for compared with what you pay on a mortgage to own it. So probably not the best person to talk to about whether you should own a car outright!

 

[Rory]

Big snags with leasing are that if your circumstances change it's pretty well hard luck - you're stuck with the car for the term.
Also options bump the price up a lot which is particualrly an issue with MB (or BMW etc).
End of lease charges for damage can be a nasty surprise.

Big advantage of a PCP over lease is you have a choice at the end of whether to buy the car or walk away. With a lease the car normally has to go back.

 

[gIzzE]

PCP is a lease, it is a lease purchase with a balloon, Contract Hire is renting and has the problems you mention.

I would only ever do a contract hire though a company, if the company goes **** up they just come and collect the car, doing a contract hire personally does put pressure on you if circumstances change for the worse.

 

[Deleted member 37751]

Please don't take this personally, but your post perfectly illustrates my oft mentioned contention that PCPs are designed as a trap for the unwary.

You normally pay cash for cars in the low £20Ks, but suddenly you think that using a PCP means you can look at £40K cars. And you don't understand how PCPs work. A perfect storm for the car manufacturers and their finance arms.

If you know what you're getting into then PCPs can be a useful tool, particularly, as hawk20 mentions, on Mercedes as Mercedes often subsidise them on certain models and certain times with deposit contributions and low interest rates.

Please don't misunderstand me- I used those figures as examples.

The reason why I asked the question is because I like to know how things work in these matters and I am pretty certain that people don't wake up one day knowing what HP and PCPs are; they learn over a period of time. And that's what I'm doing.

Personally, I was brought up to pay 'cash' for everything, so leasing etc probably wouldn't be a road I would go down. If you can't afford it don't buy it, a mantra that has served me well I might add.
But Like gizze says- it's a personal preference thing.

 

[kwakdonut]

Please don't misunderstand me- I used those figures as examples.

The reason why I asked the question is because I like to know how things work in these matters and I am pretty certain that people don't wake up one day knowing what HP and PCPs are; they learn over a period of time. And that's what I'm doing.

Personally, I was brought up to pay 'cash' for everything, so leasing etc probably wouldn't be a road I would go down. If you can't afford it don't buy it, a mantra that has served me well I might add.
But Like gizze says- it's a personal preference thing.

I wish more people felt that way Lee! People wouldn't get into so many financial problems....

 

[Rory]

PCP is a lease, it is a lease purchase with a balloon,

Except that with lease purchase the balloon isn't a fixed amount - the residual risk rests with the buyer, hence it should be a bit cheaper.

In practice PCP GFVs are estimated very much on the low side now - too much so, really, as the deals don't look so good as they did with stupidly high GFVs.

 

[Rory]

Please don't misunderstand me- I used those figures as examples.

Fair enough.

There's a £40K E250CDI estate offer on the MB website and your figures are there or thereabouts, except that the amount you pay is to cover interest for the whole term on the GFV as you've borrowed that amount for 3 years, plus you have to pay off the capital and interest on the difference between the purchase price and the GFV.

It's not impossible, but it's unlikely, that you build up equity in the car - the deals are cut pretty tight to make them look as attractive as possible upfront.

One thing that frequently happens with PCPs is that people use their existing car as the deposit, are thrilled at the low monthly payments, then they get to end and find the car is worth the same as the GFV so they've got nothing. Three years ago they owned a car, now they have nothing.

 

[ukcodger]

Im finding these posts very interesting.
I've only ever paid cash for a car, a couple of times in the early £20k,and all this gfv and pcp talk baffles me and I've always wanted to know the benefits etc into getting a lease/ financed car.

So please, continue to talk amongst yourselves....

I heartily second that....Please continue.

My situation is that I'm on Agility, having used my old CLK as deposit and have had 2 years out of 3 years of very reasonable monthly payments with a big balloon coming up in exactly 1 years time.

I love the car (320 CLK) and intend to keep it for at least a further year or so afterwards the Agility ends. (Only do 5000 miles a year). I am fortunate in being able to pay the balloon but I don't want to loose all my (our) savings by so doing. I'm hoping MB Finance will extend the deal with a reasonable ongoing interest rate but I guess they won't (reasonable rate I mean). Then of course you visit the dealer to see what's the crack and before you know it.....'Pride and Joy' is on their forecourt and another new car leaves the showroom.

So what's the question? I guess there isn't one, except anyone know of how to raise the balloon payment cheaply if one is able to secure the loan with say a cash bond?

Regards and keep up the Agility explanations, it is a complicated concept to get your head around.

 

[gIzzE]

So what's the question? I guess there isn't one, except anyone know of how to raise the balloon payment cheaply if one is able to secure the loan with say a cash bond?

Regards and keep up the Agility explanations, it is a complicated concept to get your head around.

At the moment loans are running at around 7-8% apr with the main high street lenders for loans between £7500-14999 and a little less for loans above this amount and below £24999.

I would look into that, you could always settle your agreement with Mercedes now if you wanted to and start a new load with someone else.

You could do this over whatever period you wanted, but most lenders would prefer a maximum of 60 months on a car.

 

[gIzzE]

I wish more people felt that way Lee! People wouldn't get into so many financial problems....

Yeah but it is not always about 'affording it' is it? And that is my point.

Sometimes it can cost you less to lease, contract hire or even rent it than it costs you to buy it, that is just a case of being financially astute.

Buying a depreciating asset is not always the sensible option.


If I can rent a car for less than the depreciation on one I buy I would be an idiot to buy it.
I can keep the money tucked away so if circumstances change I can still buy a car if need be.

 

[Dryce]

Sometimes it can cost you less to lease, contract hire or even rent it than it costs you to buy it, that is just a case of being financially astute.

But the reality is it usually doesn't.

How many people sit down and actually work out all the numbers on the deal?

Most simply look at what they put down and the monthly. And that's it.

 

[tagnut]

But the reality is it usually doesn't.

How many people sit down and actually work out all the numbers on the deal?

Most simply look at what they put down and the monthly. And that's it.

From what I've seen the higher costs of PCP's over ownership outright have been largely due to higher finance costs. I briefly cast my eye over them a few years ago but with figures like 17.9% APR didn't bother investigating properly.

If you can get these deals on 6 - 8% then on the face of it it isn't any dearer than buying outright with a personal loan. Or have I missed something?

There is also the increased affordability of only paying down the capital associated with depreciation plus interest rather than the full value to consider.

The trap seems to be, as already mentioned, at the end of the agreement you have no deposit to put down for the next car so you need to consider making provision for this during the period of the lease

 

[gIzzE]

But the reality is it usually doesn't.

I wouldn't agree with that, unless you buy something that is really cheap of course.

How many people sit down and actually work out all the numbers on the deal?

But buying a car is a big purchase and I think you need to spend a bit of time doing some sums. A couple of hours one evening can be well worth it.

Most simply look at what they put down and the monthly. And that's it.

To be fair though, a lot of people are paid a monthly amount from work so all they are concerned about is how much a car costs each month.
If employers started paying you £20,000, £30,000, £40,000 etc. lump sums then I guess things would be different, but when you are paid £400, £500, £600 net to purchase a car with, you will look at it on a month by month basis.





I bought my W211 E320cdi at 4 years old and with 55k miles on it, I was being sensible for once. It cost me £17,000. A 2009 W211 was still £26000, and a 59 plate W212 E350cdi was £35,000.

However, I would say that if I had bought the £35k W212 I would be no worse off and I would have the benefits of being in a newer car. I reckon my now 5 year old car has lost as much as the £35k car.

 

[Richard Elliot]

When making any major purchase like this, a good idea is to go FIRST to a dealer where you don't really intend to buy - there you can make all the mistakes, get some figures and if necessary walk away without losing anything. If they happen to make you a good offer, all the better!

 

[Dryce]

From what I've seen the higher costs of PCP's over ownership outright have been largely due to higher finance costs. I briefly cast my eye over them a few years ago but with figures like 17.9% APR didn't bother investigating properly.

The trap seems to be, as already mentioned, at the end of the agreement you have no deposit to put down for the next car so you need to consider making provision for this during the period of the lease

As I said. Most people look at the down payment and the monthly.

I'm not saying that all deals are bad - and within a given context the margin between bad/good may vary according to individual cases.

But many people don't work the numbers. The back end of the deal is often completely overlooked. As in "I got a great deal - I only had to put down £XXXX and it's just £YYY per month." That doesn't tell the full story.

Everything has a cost - and that includes leasing and finance - and has a value.

Where there is finance or leasing there is a service being provided and you pay for that somewhere. If that cost matches the value *to you* then fine.

 

[Dryce]

When making any major purchase like this, a good idea is to go FIRST to a dealer where you don't really intend to buy - there you can make all the mistakes, get some figures and if necessary walk away without losing anything. If they happen to make you a good offer, all the better!

And we wonder why the staff in dealers are so cynical .....