Mercedes residual values under agency model

[block59]

Since Mercedes have adopted the agency model, the likes of leasing companies aren't able to source Mercedes cars anymore which leaves the dealership as the only place that we can purchase or lease Mercedes from. The downside to this is that we aren't able to get discounts from other companies anymore since Mercedes sets the price and the dealerships are the only authorised sellers of these cars.

I was just wondering, if the dealerships will be the only authorised sellers of the cars and they will all be selling them at the same higher price, would this help our residual values? I am trying to calculate the approximate depreciation on a C-Class if I was to purchase it brand new and sell it after 3 years, but it's a little difficult comparing it against 3 year old cars right now (2020) as those cars were probably purchased with discounts which aren't available anymore.

 

[Dippo]

Given the size of the UK fleet market, I doubt whether MB UK will have removed themselves from it. The agency model means that dealers don't have a margin on the car, just a handling fee, but there's nothing to say that major leasing companies are not still getting 'support' from the manufacturer.

 

[block59]

I thought the same as yourself and hoped that the major leasing companies would be getting support from the manufacturer, I was told otherwise by a few leasing companies that I have used in the past. They just said the usual stuff about how dealerships are the only authorised agents now so they aren't getting any discounts and this was why they were still able to offer other brands at a good price while their Mercedes deals are nearly double the price of similar BMW/Audi's.

 

[Smart320]

I would guess that that situation will not continue for too long

 

[Teego]

Depreciation is governed by supply and demand not dealers invoice prices.
Look at 3 to 4 year old Bentleys

 

[E55BOF]

I thought the same as yourself and hoped that the major leasing companies would be getting support from the manufacturer, I was told otherwise by a few leasing companies that I have used in the past. They just said the usual stuff about how dealerships are the only authorised agents now so they aren't getting any discounts and this was why they were still able to offer other brands at a good price while their Mercedes deals are nearly double the price of similar BMW/Audi's.

If it is true that a high proportion of privately-'owned' new cars are not sold, but leased, and the cost per month to buyers is what clinches the deal, it seems to me as a layman that Mercedes have shot themselves in the foot, and an awful lot of buyers who might have leased a Mercedes previously will now look elsewhere for their flashy premium wheels. The result of this may well be stronger residuals for the MB models, because there will have been a lot fewer sold when they were new. I'm inclined to think that this may not have been what Mercedes intended.

 

[Mr E]

MB have a direct channel to lease and large fleet buyers, and have done for many years. This hasn't stopped with the new regime.
Not all lease companies met MB criteria tho, and those that didn't would source through the dealer network.

 

[block59]

That's good to hear, maybe the leasing companies that I previously used aren't the right ones to go to and get my information from. Can I ask if you would be able to private message me some leasing companies that you think may meet the MB criteria please? I will definitely go ahead with a lease with one of them.

 

[SamW]

The concept of leasing companies in recent years is to get excess stock registered and on the road. Now there isn’t excess stock.

Monthly payment led customers are now just getting priced out of the product and brand - and MB hearing that people will now be going elsewhere as the alternatives are cheaper, isn’t really of concern.

Regarding the original question, I can see the thought process, but 2/3/4 years is a long time with many chances of change. Get a GMFV on a pcp or similar and view any equity amount over at the end as a possible bonus.

 

[block59]

Thanks I see what you mean. It would have been ideal if Mercedes monthly prices had only had similar hikes to other brands but I guess the lack of excess stock combined with Mercedes's new agency model explains why a £400 per month C-Class has now jumped to £800.

You're suggestion of getting a GMFV on a PCP instead of a lease sounds ideal as I may benefit from any equity over the GMFV at the end.

 

[Bobby Dazzler]

If it is true that a high proportion of privately-'owned' new cars are not sold, but leased, and the cost per month to buyers is what clinches the deal,

I’m not sure that’s the case. Things may have changed in the last few years however when I took out a personal lease in 2014 then it was relatively unusual thing to do.

Lots of people drive leased cars, but they’ll typically be a business lease, either a genuine company car or a personal car “put through the books” for tax reasons.

In the personal market PCP (and to a lesser extent HP) tend to be the most popular. There aren’t many who can - or are willing to - pay cash in full for expensive cars.

 

[Dryce]

Thanks I see what you mean. It would have been ideal if Mercedes monthly prices had only had similar hikes to other brands but I guess the lack of excess stock combined with Mercedes's new agency model explains why a £400 per month C-Class has now jumped to £800.

You're suggestion of getting a GMFV on a PCP instead of a lease sounds ideal as I may benefit from any equity over the GMFV at the end.

The problem with GMFV on a PCP is that it is influenced by deliberate 'optimism' when times are good and so they can use that in combination with low interest rates to set a low monthly - win win for buyer and seller.

But we're in different times. Low confidence means that the seller's finance arm can't play games with the GMFV - this increased monthlies. High interest rates further increase monthlies. Lack of supply and money sloshing around in some parts of the economy mean that it doesn't take many buyers who are willing to cough at high prices to help sustain them.

Lease prices on some models (non MB from what I've seen) seem to be easing which suggests in some parts of the market that demand and a bit of over supply are being matched using lease deals.

In terms of GMFV - in the past there was the tendency towards 'optimism' which mean they were high. Meaning the chance of any 'equity' left at the end of the deal being lower. At the end of the day for those unwilling / unable to finance the GMFV the PCPs were in effect private leases.

If the GMFVs are now are more pessimistic then that means the value at the end of the deal may be positive - *BUT* - that will likely be offset by higher monthlies. So you pay one way or another ....

 

[block59]

Thanks that makes sense, I think the best way for me would be to buy the car and sell it after 3 years when I am done with it. Leasing companies want £700 per month on a C-Class which is £27k over 3 years incl deposit , I doubt I will lose £27k when I sell the car with the low mileage that I do.

 

[Bobby Dazzler]

Thanks that makes sense, I think the best way for me would be to buy the car and sell it after 3 years when I am done with it. Leasing companies want £700 per month on a C-Class which is £27k over 3 years incl deposit , I doubt I will lose £27k when I sell the car with the low mileage that I do.

I don’t think you’ve said which model you have in mind but assuming you have a C 300 in mind with AMG Line and Premium Plus, then the OTR cost is around £54k.

For buying brand new - and selling 3 years later - to cost meaningfully less than £27k would mean that the residual value would need to be significantly more than 50%.

The specifics of that may vary depending upon the model, the cost of borrowing or not investing cash, the way the market moves and a bucket full of luck.

When taking all that into account I would say that you’d be lucky for it to be sufficiently worthwhile to justify taking the downside risk which comes with upside potential.

 

[block59]

When you put it that way, the £700 quote does make a lot more sense. I was originally looking at the C220 AMG Line which was around £45k and my mileage would just be 4k-5k per year so I was aiming for 40% depreciation after 3 years, which means an £18k depreciation. However like you said, the cost of borrowing vs not investing cash plays a big factor.

 

[Bobby Dazzler]

Killer lease dealers used to happen when manufacturers, dealers and finance companies were all keen to incentivise a deal at the same time, and were happy to give away margins to achieve volume targets. We may not see deals like that for a while - or ever again - as the market may have permanently changed. Only time will tell.

 

[markjay]

The picture changes if you can get a business lease deal via a salary sacrifice scheme, and you opt for an EV - the BIK is 2% (plus the usual savings on running costs). However, this is obviously not applicable for everyone.