returning a pcp

[runju26]

When returning a pcp. Do mercedes undervalue the car so they can sell it for more?
Just curious on how pcp actually benefits them when the term comes to an end.

 

[MrRight]

is this a car that has reached the end of the contract period or one that you are terminating the PCP contract early ?

If you're taking out a pcp and they are quoting the residual value for you , depending on the mileage agreed , they take a floor value estimate of the vehicle and it is likely the vehicle would be worth a fair bit more than that balloon payment value at the end of the deal. they will ofcourse charge extra for any damage etc

 

[runju26]

My brothers PCP is coming to an end and just thinking if it’s worth making the ballon payment or returning.

 

[Bobby Dazzler]

My brothers PCP is coming to an end and just thinking if it’s worth making the ballon payment or returning.

If he likes the car, and wants to keep it, then pay the balloon.

If he doesn’t want to keep it, then find out what the balloon payment is (it will be in the finance agreement) and then check market value on eBay, Autotrader, WeBuyAnyCar, etc. If it’s worth more than the balloon, then buy it and sell it on, to pocket the difference. If not, hand it back and start again.

Make sure the difference in value is enough to make it worthwhile taking on the risk. Remember to factor in advertising costs, haggling, insurance, etc.

 

[Dryce]

When returning a pcp. Do mercedes undervalue the car so they can sell it for more?
Just curious on how pcp actually benefits them when the term comes to an end.

Chances are they will over value it slightly.

This has a couple of advantages - it makes the PCP seem cheaper while maintaining the list price fiction. And it makes the customer more likely to enter into a new agreement to 'buy' a new car.

Internally on their books they will have factored in a discount on the stated value of the car to cover them taking the car back and putting it through a reception centre and then back out to the retailers as an approved used. The supply of cars to the dealers for their used car sections gives them a second bite of the market.

The risk to them is that the market shifts dramatically. If buyers stop purchasing used cars then they are left with taking a real loss on the car - and the prioportion of owners who might have kept tyhe car drops because they peerceive that as being expensive. Conversely if used car prices were to rise significantly then customers will be more inclined to keep the cars at the end of the PCP - either to actually own or to sell privately at a profit. The recycling of cars through the approved used retail pipelines would dry up and that would hurt the dealer networks because of lack of stock to sell and profit from the margin on the sale, finance, and add ons.