W212 Residuals

[mbenz76]

Has anyone got any real-world data on W212 residuals?

I am not planning on getting rid of my car, not at all - still loving it, but after a conversation with someone at work it got me thinking.

My E350 was purchased in March 2010 (new factory order) on a 10 plate. At the time there was only speculation on what the residuals might hold.

I am just curious as to whether the estimates are beginning to be proved right or wrong.

 

[gIzzE]

I don't think anyone really knows yet.

Lombard are giving around 40% balloon after 3 years and 36k miles, and said this is what Mercedes are predicting, they are offering 35% over 48 months and 48k miles btw.

I think you tend to find that the contract hire prices predict what the residuals are going to be, if you look at what it costs to hire one it will give you an idea on how much these cars are going to be dumped onto the used market for after the 3 year hire period, and right now that 35 and 40% looks about right.

Off the top of my head, I will have to double check, Lombard said they would give me a balloon of £16000 after 48 months and 60k miles on an E350cdi sport estate with Nav, it had other options but Nav is all they will build into the purchase price for residuals, everything else has to be paid for over the period as it adds nothing to resale.

This worked at at £44000 and a £8000 deposit, however, I had got the car down to £40000 and putting in £4000, but it was borrowing £36000 basically.
This was £550 a month at 6.3% apr.

So I would expect if loads of cars are coming back into trade at £16k that is about the price you would expect. Looking at 4 year old E320cdi sport estates they are retailing around £18k, so about right.

It is all a guessing game really.

 

[mbenz76]

My balloon is something like £20k. Car was £50k and I put about £6k down. So around 45% I guess.

I have a lot of options, and I know you can never recover the full cost of these so am expecting to lose.

My worry is that at 3 years the car "could" be worth less than the balloon and force me to have to hand back - which at the moment is not what I intend to do.

 

[gIzzE]

I don't see that being a problem really, you can still buy it and pay the balloon if you want to keep it, but if it is worth less then you could throw the keys back and buy something else for less, or something newer for around the same.


The thing that annoys me these days is many of the manufacturers like Mercedes, Audi and BMW won't let you buy the car outright over say 5 or 6 years, they make you do it over 2 or 4 years with a balloon, or maybe 4 years outright but that make it too expensive. They have you tied into them and no way of refinancing the car again, that is why I use Lombard, at the end of the 36 or 48 months you can refinance the car.

 

[mbenz76]

I know MB will let you extend the finance agreement if you want to at the end, and recalculate the balloon etc. so you can take it longer if you want to but you have to do the extension close to 3 years.

The only reason I imagine for doing this though would be if you got to 3 years and were struggling to find the balloon but wanted to keep the car (maybe a change in personal circumstances) - it could buy you another year or two at lower payments and with a lower balloon at the end.

How many people will be happy still paying for a 5 year old car though?

 

[gIzzE]

That must be a new thing then, I know with the S320cdi when we wanted to refinance it they wouldn't allow it, said it would have to go back into the dealer network and then we could buy it. But this meant dealer getting their margin too, which was a no go.

I don't think many people take out finance with a balloon thinking they will actually pay the final month at £20,000, £30,000 or whatever it is. I know I certainly don't have that sort of money sat around available, if I did I probably wouldn't be using finance in the first place.

I am in a 56 plate car at the moment, it is just over 4 years old.
I bought it with 58,000 miles on it in May as a family wagon to replace the wifes 123d M-Sport, I expected to do 10,000 miles a year in it and so bought it over 48 months so I would own it at the end, it would be 8 years old and just under 100k on it, and should still have been worth around £8-10k I would guess.
It is well specced with Comand etc.

However, since May I have done 27,000 as I keep using it myself, in fact I didn't bother getting another M3 and bought a new Toyota Aygo for the odd occasion we need a second car and for nipping round town in.

Problem with that is I now need to rethink the finance or what to do. I probably owe £14k on that car, I guess I should change the finance and pay it off over 2 years, which would cost around £620 a month??

But then I think for £620 a month I may as well just go and get an E350cdi sport estate, I can hire one for that amount doing 30k miles a year.

But I do like the idea of owning the E320cdi outright even if it has got 140k miles on it, but as you say, do I want to be paying £600 a month for a 5 year old car?? Probably not.

 

[mbenz76]

That must be a new thing then, I know with the S320cdi when we wanted to refinance it they wouldn't allow it, said it would have to go back into the dealer network and then we could buy it. But this meant dealer getting their margin too, which was a no go.

It was the dealer who told me about it when going through all the finance stuff before collection.

Also seem to recall reading a brief paragraph on it on the MB website when I was reading up on everything before getting the car.

I wonder what actually happens though. Take my car for example - my balloon is £20k ish. If the car is worth say £16k at the end of 3 years I will be foolish to buy it (from a financial point of view). If I hand it back and it goes into the dealer network, they will surely have to put it up for sale at our around the £16k mark otherwise it will be overpriced. I could then buy back from the dealer, and even with a markup probably spend less that £20k? Or is that too simple!

Like you say though, most people don't have £20k sat around. I don't. If I want to buy it out at the end I will probably finance whatever part of the £20k I don't have and buy it.

 

[gIzzE]

If Mercedes have set all the balloons similar to what you have on yours then you will probably find that becomes the market value of the car anyway, if they have hundreds of cars coming in at £20k you can bet that will be the trade in value at the end of your lease.
The lease companies tend to dictate future values more often than not.

 

[Smiley]

If Mercedes have set all the balloons similar to what you have on yours then you will probably find that becomes the market value of the car anyway, if they have hundreds of cars coming in at £20k you can bet that will be the trade in value at the end of your lease.
The lease companies tend to dictate future values more often than not.

Surely simple supply and demand dictates the value of a used car?
For years and years the value of a 3 yr old average mileage mainstream car has been 35 - 40% of its new price give or take a bit. So chances are your £45k new car is going to be worth £16-18k. It is unlikely to be <£15k and also unlikely to be more than £20k.
So you can be pretty certain what the depreciation is going to cost you - and how you finance that depreciation is up to you.
The reason that the car manufacturers structure their finance deals with large balloon payments is that it reduces the monthly repayments and people look at that figure vs their monthly income or car cash allowance. It takes the focus off the real total cost including the depreciation.
Over a 10 or 20 year period the cost of new car depreciation where the car is changed every 3 or 4 years is a big number - in the example above it is £10k pa.

 

[gIzzE]

But when you do these agreements with manufacturers the balloon i guaranteed so even if it is worth £5k less you just walk away and start again, and that is one of the reasons the finance tends to dictate the price, far more cars are bought using finance than with cash, if it were the other way round then things may be different.
I don't see how you can say 'it takes the focus the real total cost including the depreciation.' ??? You pay your deposit, you then pay a monthly amount to cover depreciation and then you hand your keys back and start over, to me it seems to perfect way to make you realise that cars are only ever a depreciating product. *

I would say the price of a 3 year old car has been more like 50% not 35-40%, definitely back at retail anyway.

Have a look at all the 2008 57 plate cars with around 35k miles on them, the ones that are still current certainly seem to be holding value very well.





*I know there is exceptions with collectibles.

 

[LTD]

One thing looks certain.

The W212 will be a great 3yo second hand car.

 

[gIzzE]

I think a lot of the problem is the increase in new prices, MB dictate what the new price is going to be, and a specced W212 E350 sport is around £8-9000 more than the same specced W211 sport. However....when it comes to used prices the customer has a lot more say in the price, sure Mercedes will be hoping for a 50% residual on the forecourt, but will the customer really pay £25k for a 3 year old car when his last one cost him under £20k?

BMW are the same, in fact they have gone mad, I specced up a 530d sport and it was £53000 and had less spec than my 535d sport had on it 5 years back and that was only £51k. There is also a £9000 difference between the 520d sport and the 530d sport, at least with Mercedes there is only £4000 between the two.

Will people seriously pay £30,000 for a 3 year old 40k mile 530d sport?? I seriously doubt it.

I think we need to start seeing 6 year warranties from the German marques, at least you have a chance of getting decent money when you sell used, I think that is one of the reasons US cars do better residual wise, they have longer warranties, or you can buy 3 more years for something silly like $1000. And that makes a hell of a difference.
I would pay £30k for a 3 year old 530d sport if it still had 5 years no quibble warranty remaining, but without that warranty I look at buying new and just paying the interest on the difference, which is not much more than a warranty costs, and you get all the benefits of it being a new car, like less servicing costs, improved power, improved mpg, improved emissions etc. etc.


Cars are just getting too expensive and not enough help from the manufacturer to help keep residuals up.

 

[Smiley]

One thing looks certain.

The W212 will be a great 3yo second hand car.

Quite. Brand new £45k. 3yrs old 40k miles £18k. 6yrs old 80k miles £9k.
So the first 3 yrs cost £27k and the second three years £9k and that's without the cost of capital. And at 6 yrs old and 80k miles most looked after MBs are just nicely run in and ready for the next 150k miles. I would only look at a new car if the 3 yr old price were something like 60% of the new price.

 

[Smiley]

I think a lot of the problem is the increase in new prices, MB dictate what the new price is going to be, and a specced W212 E350 sport is around £8-9000 more than the same specced W211 sport. However....when it comes to used prices the customer has a lot more say in the price, sure Mercedes will be hoping for a 50% residual on the forecourt, but will the customer really pay £25k for a 3 year old car when his last one cost him under £20k?

BMW are the same, in fact they have gone mad, I specced up a 530d sport and it was £53000 and had less spec than my 535d sport had on it 5 years back and that was only £51k. There is also a £9000 difference between the 520d sport and the 530d sport, at least with Mercedes there is only £4000 between the two.

Will people seriously pay £30,000 for a 3 year old 40k mile 530d sport?? I seriously doubt it.

I think we need to start seeing 6 year warranties from the German marques, at least you have a chance of getting decent money when you sell used, I think that is one of the reasons US cars do better residual wise, they have longer warranties, or you can buy 3 more years for something silly like $1000. And that makes a hell of a difference.
I would pay £30k for a 3 year old 530d sport if it still had 5 years no quibble warranty remaining, but without that warranty I look at buying new and just paying the interest on the difference, which is not much more than a warranty costs, and you get all the benefits of it being a new car, like less servicing costs, improved power, improved mpg, improved emissions etc. etc.


Cars are just getting too expensive and not enough help from the manufacturer to help keep residuals up.

You are dead right. The manufacturers have not worked out (imho) that the buyers of 3-6 yr old models are just as important as the new buyers - because the level of confidence of those 3-6 yr old car buyers dictates the used price and hence the depreciation suffered by the first owner. The poor value for money of the main dealer servicing also puts off buyers of new and recent used models - if that was improved I think it would help residuals of 1 - 5 yr old cars.

 

[Smiley]

But when you do these agreements with manufacturers the balloon i guaranteed so even if it is worth £5k less you just walk away and start again, and that is one of the reasons the finance tends to dictate the price, far more cars are bought using finance than with cash, if it were the other way round then things may be different.
I don't see how you can say 'it takes the focus the real total cost including the depreciation.' ??? You pay your deposit, you then pay a monthly amount to cover depreciation and then you hand your keys back and start over, to me it seems to perfect way to make you realise that cars are only ever a depreciating product. *

I would say the price of a 3 year old car has been more like 50% not 35-40%, definitely back at retail anyway.

Have a look at all the 2008 57 plate cars with around 35k miles on them, the ones that are still current certainly seem to be holding value very well.





*I know there is exceptions with collectibles.

35 - 40% has been the normal range for years with a few exceptions such as fashionable cars like the Mini. Some high volume cars are less than 35% after 3 yrs.
Thats why your £ 53k BMW 530d will be worth nowhere near £30k at 3 yrs old - more like £21k.
Of course the retail price advertised by the main dealers (desparately trying to show how much value the cars retain) may approach 50% but anyone who pays that has overpaid (usually). The p/x value will be nowhere near that.

 

[Smiley]

I don't see how you can say 'it takes the focus the real total cost including the depreciation.' ??? You pay your deposit, you then pay a monthly amount to cover depreciation and then you hand your keys back and start over, to me it seems to perfect way to make you realise that cars are only ever a depreciating product. *
.

If the finance deal was set up to repay the full value of the car over 3 years then it would be a huge monthly payment that would make people realise just how very expensive the car is/

 

[Sashalon]

I also went with a large balloon on my E350 as it gives me the option of handing the keys back at the end of the 3 yr lease. The 5.7% rate was also too good to resist loading the final payment. I really didn't expect my car, specced as it is for £41.5k (I got it for £39k), to be worth £21k with the contracted mileage on it. Even with 6k less than expected (24k miles, which is probably what it will end up as), I am sure I will be 'in the money' to hand the car back.

To be honest, although I love almost everything about it, I will probably hand it back even if it was worth £500 more than the balloon. That is purely down to the awful and unpredictable take off lag (I have beefed about it on this site before), and I will be most pleased to get back into a car that lays down the rubber _immediately_ when you ask for it/need it. I used to think my XC90 D5 had crap take off, until the E350. I hear the revamped engine and 'box that was announced 6 weeks after I took delivery (grrr) goes some way to address the problem. I wonder if that will affect residuals on 10-reg models... Probably not, given the E-wagon's target market.

 

[saorbust]

Never buy a new car if you are watching your capital investment....

Most dealer demonstrators are 30-40% off the new price, have less than 5,000 miles and are well looked after. They also typically have a good / reasonable spec. Yes it's not your perfect specification, but it may be close.

You could argue they may have been subjected to abuse, but I doubt any dealer would let an owner abuse a car to that extent.

 

[fuzzer]

Never buy a new car if you are watching your capital investment....

Most dealer demonstrators are 30-40% off the new price, have less than 5,000 miles and are well looked after. They also typically have a good / reasonable spec. Yes it's not your perfect specification, but it may be close.

You could argue they may have been subjected to abuse, but I doubt any dealer would let an owner abuse a car to that extent.

These are often the cars used in demonstrations round racetracks etc...

not for me for a 15% gain.

 

[crockers]

Never buy a new car if you are watching your capital investment....

Those two phrases - diametrical opposed...

Trouble is do you buy your car with your head or your heart?