PCP Falling Short

[mgooda]

If you had contracted the correct mileage band at the start of the deal, you would have been in a better position at the end. The price of the car stays the same, it's just the Final Payment which reduces, which in turn puts your monthly payment up, BUT, the excess mileage charge far, far outweighs the extra on your monthly payments.

In some respects I agree, should add in this case though the P/x offered was £2k below the GFV before the dealer realised I'd exceeded the contracted mileage. Furthermore this was a result of an office move mid contract, hence at the time of purchase the contracted mileage declared was correct. This private sale was better in all scenarios for me - possibly luck but for a £46.50 advert very well worth it.

 

[def90cars]

Am I reading this thread right? The OP is unhappy that his car is worth less than the GFV?

I hear you.... seems like a good outcome to me ... Merc took the hit not the owner.

If you had HP'd it or, god forbid, paid cash... the OP would have all the loss.

Some people are not astute.

 

[DSM10000]

Am I reading this thread right? The OP is unhappy that his car is worth less than the GFV?

It s not just me then!

 

[kentmerc]

Am I reading this thread right? The OP is unhappy that his car is worth less than the GFV?

Hi yes correct, for the reasons I stated.

Is there another angle whereby this may not be a bad situation ?

 

[Deleted member 37751]

Is there another angle whereby this may not be a bad situation ?

Quite an obvious one really; Mercedes are essentially buying the car back for more than it's worth and as such are taking a part of the depreciation hit.

 

[Paddcomp]

Interesting thread as a lease v PCP.

I've considered buying new on PCP few times but never quite got the MB idea of paying £5k deposit each time. Never heard of anyone having that much equity left, leaving you to top up between £3k & £5k for your next car.

Personal leasing seems so much cleaner, so long as you leave the options list alone.

Actual cost of ownership is what counts during your tenure. My 2007 E320 is costing more than I expected in both depreciation and maintenance. I purchased a 100k+ mileage car thinking that would be the bulk of depreciation done, wrongly. Add to this a high amount of deferred maintenance for a car with a full service history means it's costing me £3k pa.
I'm awaiting an A6 to arrive in September on a 3 year lease for £306 per month incl VAT, 10k pa. So not much in it between a 2007 car and a 2016 car, and much better than a PCP from MB or Audi.

 

[Steveml63]

Interesting thread as a lease v PCP.

I've considered buying new on PCP few times but never quite got the MB idea of paying £5k deposit each time. Never heard of anyone having that much equity left, leaving you to top up between £3k & £5k for your next car.

Personal leasing seems so much cleaner, so long as you leave the options list alone.

Actual cost of ownership is what counts during your tenure. My 2007 E320 is costing more than I expected in both depreciation and maintenance. I purchased a 100k+ mileage car thinking that would be the bulk of depreciation done, wrongly. Add to this a high amount of deferred maintenance for a car with a full service history means it's costing me £3k pa.
I'm awaiting an A6 to arrive in September on a 3 year lease for £306 per month incl VAT, 10k pa. So not much in it between a 2007 car and a 2016 car, and much better than a PCP from MB or Audi.

Hi,
No matter how we have financed a car - we have never been a fan of large deposits - especially on a PCP, where you are quite likely to be giving the car back at the end of the period.
Our last few cars have been bought on 5 year HP. Providing you buy carefully and get good interest rates - you are normally in equity about 2 1/2 years in.
You then sell the car and pay off HP and pocket the remainder.
You can always VT (voluntary terminate) an HP agreement - once you have paid 50% - and hand car back with no penalty.
The finance companies hate people doing this ( and it can affect your chances of getting another HP agreement, in the future).
At least with HP - mileage is irrelevant - unlike PCP and leases.
Cheers
Steve

 

[mike_es]

In some respects I agree, should add in this case though the P/x offered was £2k below the GFV before the dealer realised I'd exceeded the contracted mileage. Furthermore this was a result of an office move mid contract, hence at the time of purchase the contracted mileage declared was correct. This private sale was better in all scenarios for me - possibly luck but for a £46.50 advert very well worth it.

What you need to realise is the GFV is NOT what the car will be worth at the end of the term regardless of market value, it is the outstanding finance that is due on the vehicle which needs to be settled in order to either own the car outright or put in part exchange against a new vehicle.
Theis is the reason that many manfacturers are now changing the name of the final payment from "Guaranteed Future Value" or similar to "Optional Final Payment" (or similar) because it removes the implication that the car's value is guaranteed, regardless of market forces.

 

[mike_es]

Is this general, or Mercedes specific?

You couldn't link to contract or post an extract that details this, could you?

If you read the terms and conditions on lease agreements it is clearly stated. "
How are termination fees on car leases calculated?
This depends on the type of contract you have made and details will be explained in the small print, so it’s important to check this carefully before signing to confirm that you’ve understood and agreed to them.
With contract hire, you can expect to pay about 50% of the outstanding payments, providing no less than 6 months remain on the contract.
Pcp arrangements are easier to escape as you may be able to sell the car to help meet the settlement"

Source: How can I get out of a car leasing agreement? - What Car? Leasing

 

[mike_es]

In some respects I agree, should add in this case though the P/x offered was £2k below the GFV before the dealer realised I'd exceeded the contracted mileage. Furthermore this was a result of an office move mid contract, hence at the time of purchase the contracted mileage declared was correct. This private sale was better in all scenarios for me - possibly luck but for a £46.50 advert very well worth it.

The price the dealer quoted you does not take into account your GFV because it has no relevance to the value of the car.
The manufacturer I work for has recently reassessed the Final payments downwards drastically in order to realign the market. Many manufacturers, such as Mercedes are swallowing VERY large losses on the pcp deals due to artificially high "GFV's". In fact we have heard the there are large fields full of MB pcp returns sitting there doing nothing because if they flood the market, it will destroy their "Prestige" and supposedly firm residuals.
There is a whole ****storm ready to blow up in the pcp return market so anyone that actually has taken finance to own a car outright will at some point be left with a frightening amount of negative equity on their purchase.

These are my own opinions, but I have to say they are based on what I have seen over the last 2 years in my job with a very, very big player in the market.

 

[mike_es]

Interesting thread as a lease v PCP.

I've considered buying new on PCP few times but never quite got the MB idea of paying £5k deposit each time. Never heard of anyone having that much equity left, leaving you to top up between £3k & £5k for your next car.

Personal leasing seems so much cleaner, so long as you leave the options list alone.

Actual cost of ownership is what counts during your tenure. My 2007 E320 is costing more than I expected in both depreciation and maintenance. I purchased a 100k+ mileage car thinking that would be the bulk of depreciation done, wrongly. Add to this a high amount of deferred maintenance for a car with a full service history means it's costing me £3k pa.
I'm awaiting an A6 to arrive in September on a 3 year lease for £306 per month incl VAT, 10k pa. So not much in it between a 2007 car and a 2016 car, and much better than a PCP from MB or Audi.

The main point you need to bear in mind with regards to pcp deals is; the bigger deposit you pay the lower your payment. That's it.
You do not get any benefit at the end of the agreement with regards to equity you simply position yourself for needing to pay the same deposit next time to keep a similar payment. You are buying the low payment.
In fact, the only benefit is if you decide to change early, then you have made an advance payment on the negative equity. (Imagine the size of that if you didn't pay £5k up front!)

Also, the deposits are calculated in order to get the cars to a particular price point on monthly payments, that's why the ads on the radio have the T's&C's read out at 100mph, so you miss the bit about the ridiculously large deposit but only hear the low payment.

 

[Rory]

In fact we have heard the there are large fields full of MB pcp returns sitting there doing nothing because if they flood the market, it will destroy their "Prestige" and supposedly firm residuals.

Yet they're still churning these deals (and cheap leases) out.

I think far too many new cars are being sold in the new UK - we've ended up with a situation where cars are virtually worthless after just a few years.

 

[mike_es]

Yet they're still churning these deals (and cheap leases) out.

I think far too many new cars are being sold in the new UK - we've ended up with a situation where cars are virtually worthless after just a few years.

This is the disposable society we live in.
It's only going to get worse, which is why you should never buy a car to own outright unless it is at the bottom of its price curve, just like my SAAB 9-3 Turbo Cabrio which I bought for £500 and the SLK320 I've just bought for the wife as an investment.

 

[Rory]

If you read the terms and conditions on lease agreements it is clearly stated. "
How are termination fees on car leases calculated?
This depends on the type of contract you have made and details will be explained in the small print, so it’s important to check this carefully before signing to confirm that you’ve understood and agreed to them.
With contract hire, you can expect to pay about 50% of the outstanding payments, providing no less than 6 months remain on the contract.
Pcp arrangements are easier to escape as you may be able to sell the car to help meet the settlement"

Source: How can I get out of a car leasing agreement? - What Car? Leasing

Thanks - So your comment "Incorrect. If you wish to exit a lease deal then you are required to pay 50% of outstanding payments." was wrong then.

 

[mike_es]

Thanks - So your comment "Incorrect. If you wish to exit a lease deal then you are required to pay 50% of outstanding payments." was wrong then.

With contract hire, you can expect to pay about 50% of the outstanding payments, providing no less than 6 months remain on the contract.

 

[mike_es]

Thanks - So your comment "Incorrect. If you wish to exit a lease deal then you are required to pay 50% of outstanding payments." was wrong then.

You seem confused with the type of agreements.

PCH (Personal Contract Hire) is also known as leasing. You are effectively hiring the car for an extended period. If you have 18 months left you pay 9 months to exit. If you have 5 months left you pay the full 5 months.

PCP (Personal Contract Purchase) is hire purchase. You are effectively paying for the depreciation on the vehicle without the financial implications of owning it outright, (i.e. negative equity at the end of the term)

 

[Rory]

You seem confused with the type of agreements.

PCH (Personal Contract Hire) is also known as leasing. You are effectively hiring the car for an extended period. If you have 18 months left you pay 9 months to exit. If you have 5 months left you pay the full 5 months.

I'm sorry but this is nonsense. As your further posts pointed out, you have to look at the contract, you can't assume anything.

ETA: The link below is 3yrs old but it chimes with my current understanding that VW is being pretty helpful as they're putting a lot of cars out on leases. BMW and Mercedes are generally noted as not being co-operative if you have a problem:
http://www.stablevehiclecontracts.co.uk/blog/how-much-does-it-cost-to-break-a-lease/

 

[mike_es]

I'm sorry but this is nonsense. As your further posts pointed out, you have to look at the contract, you can't assume anything.

ETA: The link below is 3yrs old but it chimes with my current understanding that VW is being pretty helpful as they're putting a lot of cars out on leases. BMW and Mercedes are generally noted as not being co-operative if you have a problem:
How Much Does It Cost To Break A Lease Agreement - Stable Vehicle Contracts

The first bullet points........(on the webiste you linked to)

• Audi Financial Services – 50/60% of the remaining installments
• Volkswagen Financial Services – 50/60% of the remaining installments
• Mercedes Benz Finance – 95% of the remaining installments
• BMW Finance – 100% of the remaining installments
• Lex Autolease – 50% of the remaining installments

Now, I don't know if you are being deliberately obtuse, but I posted the information you requested , then you replied saying I was wrong and after that you then posted a link to a site which actually confirms what I have been saying.


Are you unhappy because you are not getting the answers you want to or are you just trying to provoke an argument?


Your statement "my current understanding that VW is being pretty helpful as they're putting a lot of cars out on leases." beggars belief.
Indeed how friendly it is of VW, a multinational corporation currently being investigated and prosecuted for misleading consumers regarding emissions, to be putting out very reasonable lease terms on their cars in order to maintain the level of sales they have come to depend on in the UK. Their magnanamism is astonishing. Such a phlianthropic attitude is to be applauded.

Are you not aware that these are legally binding financial commitments that should only be entered into if you are fully aware of the consequences of non payment? If you fall into arrears on a lease or hp agreement, the finance companies will pursue payment via repossession and/or CCJ's, IT IS WRITTEN INTO THE CONTRACTS. You sign one of those contracts you are acknowledging your debt and responsibility to pay.
The only reason (and I am highly doubtful of the veracity and widespread nature of your assertion that VW is just being helpful) that VW would be helpful in respect to existing leases is that they are in a very grey area regarding the emissions and are looking to minimise problems, so if it involves effectively bribing customers with "problematic" cars on lease deals then that is what they will do, if they can get away with it. Actually I have heard rumours that once the car is returned to VW there are no grounds for compensation for the customer.
Which would corroborate what is happening, according to you.


I despair, I really do.

 

[PenelopePitstop]

The first bullet points........(on the webiste you linked to)

• Audi Financial Services – 50/60% of the remaining installments
• Volkswagen Financial Services – 50/60% of the remaining installments
• Mercedes Benz Finance – 95% of the remaining installments
• BMW Finance – 100% of the remaining installments
• Lex Autolease – 50% of the remaining installments

I can confirm that for MB and VW.

 

[Rory]

The first bullet points........(on the webiste you linked to)

• Audi Financial Services – 50/60% of the remaining installments
• Volkswagen Financial Services – 50/60% of the remaining installments
• Mercedes Benz Finance – 95% of the remaining installments
• BMW Finance – 100% of the remaining installments
• Lex Autolease – 50% of the remaining installments

Now, I don't know if you are being deliberately obtuse, but I posted the information you requested , then you replied saying I was wrong and after that you then posted a link to a site which actually confirms what I have been saying.

Nope – what you said was:

Incorrect. If you wish to exit a lease deal then you are required to pay 50% of outstanding payments.

I despair, I really do.

Don’t despair – you said something which might mislead people. It would better if you just stopped digging your hole now.