Agility Finance Options

[Dringo]

All,

I've started this thread to get a fresh start. There's already a long Agility related thread here: http://forums.mercedesclub.org.uk/showthread.php?t=79320
But here is what I need advice on:

I have a A180CDi on Agility finance. Its been well kept, in A1 condition and dead on the 14k/year mileage contract, over 3years. The so called balloon (or purchase) payment has been set, and I have the following options:
1. Purchase the car (may or may not be a good deal)
2. Hand it back (thus the car cost me the original deposit plus the monthly finance)

As part of Option1, I can 'buy' the car (pay off the finance) and 'trade-in' as the deposit for another Agility finance deal. For this to be attractive, I need the 'trade-in' value with MB to be worth more than the quoted optional purchase payment (plus remaining monthly financing).

What is the likelihood of this? A quick look at Autotrader pricing looks like it might be very tight. Anyone with experience of this? Does it normally work that the trade-in is a couple of hundred more than the owed money only? Or could I expect £1k-£2k which is more like what you need as a decent deposit on the next one.

 

[E320mark]

I bought my last car this way (new bmw 525 d msport) and to be totally honest never again! I put £7000 down and agreed a payment for 36 months all fine and dandy, I intended to purchase the car at the end of the 3 years. That was until things started to go wrong, turbo problem then diesel leaked into the oil, all fixed under warranty but I wanted an extra year for piece of mind, all I got was fixed to BMW specification. I had lost confidence in the car after speaking to several people who told me the engine had been damaged as a result of the leak.
So not only did I lose the £7k I lost a hell of a lot more when I swopped it for my e320.
The lease option looked good to me as the 5 was the car I always wanted and was for keeping, plain and simple car loan from now on for me!!

 

[rhud]

When I changed my A Class for a new one last November I was offered a trade-in deal which was significantly LESS than the 'payment to purchase' sum. Hence I handed the old car back and started again. Effectively the dealership was not interested in acquiring my old car, even though the mileage was low and the condition immaculate.

 

[Dringo]

@rhud
That's my concern too. Despite the MB dealer being very positive 3 years ago about the OPP (option purchase payment) being very conservative etc, I bet they will claim 'recessionary' market conditions bla bla. What is the margin between MB trade-in and the MB retail price? 20% ? If so, its tight.

@E320mark
This is why I was told NOT to increase my deposit just to minimise my monthly finance payments. I think I paid about £2k but will check. Even so, I was trying not have a car that was costing me £3k+ per year.
The trouble with a normal car loan approach is that you have to borrow a LOT of money to get new (which includes warranty and peace of mind) and even with a 3yr old car you will be depreciating a lot every year without the possible higher servicing cost.

 

[hawk20]

I don't follow E320mark's logic. You start a PCP with a small deposit, known payments and knowing that at the end of the deal you will be guaranteed a residual (Guaranteed Final Value or GFV) that will pay off all remaining finance. You can buy the car if you want to at the guaranteed value or part ex it against new or give it back and walk away.

If the market is buoyant when the 3 years is up you may be lucky and get more for your car than the GFV and have a tad towards your next deposit. If the market is lousy, well that is MB's problem not yours; you have a guaranteed value.

Dringo's problem is simple. Go to the Glass's Guide website and type in all the details on your car and for a measly £3 they will give you a detailed valuation showing trade, part ex, private sale, and dealer prices. This is the Guide most used by the dealers themselves. Print it off and use it to haggle the best deal you can with several dealers. Doing this I have never failed to get at least the Glass's Guide part ex figure.

When other owners I know, who have had A class diesels, and have checked with Glass's Guide, the part ex figure has usually been a bit above the GFV's. My daughters was quite a bit above the GFV a couple of months back and they bought the car as it was worth more than giving it back. Also they know its history and that it has been well looked after.

Get the Glass's figure and put it up here, and the GFV and we can all have a go at guessing your optimum strategy.

Dringo is your's Classic, Classic SE, Elegance or Avantgarde? Any extras? (some extras, not many, put up the market value).
Is it on an 08 plate with 42k miles?
Manual?
5 doors?
A five door, A180cdi Avantgarde, manual 08, with 42k miles in average condition has a part ex value of around £7,400 in average condition and £8,100 in excellent condition. A Classic SE would be worth about a grand less.

 

[hawk20]

Dringo:- does it pay to buy?
You say it may do if the part ex value is above the GFV and remaining payments.

Bear this in mind. Even if the two values are close together. To buy a similar car from a dealer will cost you a lot more than the part ex value as they mark it up and have to make a living. So you are buying at below dealer prices.

Secondly, you are buying a car you know. You know if it has been shunted, looked after, that the mileage is genuine etc etc. You don't know these things when you buy secondhand any other car.

If it is the car you want, then this may be a good buy. But, of course if you want a change, then most of us manage to fiddle the figures till they say what we want them to say!

 

[rhud]

I started again because I wanted an A Avantgarde - with among other things Park Assist,because of a physical problem I have. It is altogether a much nicer car than my old Classic SE. There was a financial penalty to this decision which I was prepared to go along with.

 

[Dringo]

OK. Worth getting the valuation I guess, when compared to the £95 that MB will charge just to exercise the purchase
My A-Class is a A180 2.0TD CDI CVT Elegance SE Hatchback. 5Dr Auto. Registered Sept 2008. Soon to have 40k Miles (@14k/annum). Excellent Condition. No faults. Extras?: 6CD MB Audio + Mediaport. AirCon. Underseat storage! Folding Door mirrors. Half Artico/Cloth Seats.
Glass says: Trade-in - excellent:£8,911.00 Trade-in - average:£8,140.00.

OPP is £8300 'in addition to outstanding payments' which would imply a total of £8950 or so until the contract term is complete.

So it appears to be borderline break even and therefore not worth doing the 'buy to trade-in' option ? Of course the MB dealer may offer more, but then will just discount the replacement car less! I'd probably do better to hand it back and bargain better.

One big factor - Service Assyst is counting down to a 'Service C' at about exactly the hand-over mileage. I don't want to reach that Service before I hand it back, obviously, as it sounds like a big service? The minute I hit that counter, I think I am liable for the service

There's also some stupid clause about needing to return it with 6 months of MOT! Does that mean I have to MOT it before the 3 years is done. I'm am confident it would be fine, but its another £50 cost for me (at least).

 

[E320mark]

I have since been told that the maximum anyone should put in as a deposit on a lease type contract is £3k, not really good to me now. Any car you buy will always work out that bit cheaper per month if you put down a higher deposit, my advice would be set yourself a monthly budget and stick to it, don't get sucked in like I did with the car that I always wanted!

 

[hawk20]

I have since been told that the maximum anyone should put in as a deposit on a lease type contract is £3k, not really good to me now. Any car you buy will always work out that bit cheaper per month if you put down a higher deposit, my advice would be set yourself a monthly budget and stick to it, don't get sucked in like I did with the car that I always wanted!

Paying a higher deposit means you have lower payments. You also borrow less and pay interest on less money borrowed. I have sometimes chosen to pay a higher deposit as it pays to do so -even though few dealers seem to realise that.

 

[hawk20]

OK. Worth getting the valuation I guess, when compared to the £95 that MB will charge just to exercise the purchase
My A-Class is a A180 2.0TD CDI CVT Elegance SE Hatchback. 5Dr Auto. Registered Sept 2008. Soon to have 40k Miles (@14k/annum). Excellent Condition. No faults. Extras?: 6CD MB Audio + Mediaport. AirCon. Underseat storage! Folding Door mirrors. Half Artico/Cloth Seats.
Glass says: Trade-in - excellent:£8,911.00 Trade-in - average:£8,140.00.

OPP is £8300 'in addition to outstanding payments' which would imply a total of £8950 or so until the contract term is complete.

So it appears to be borderline break even and therefore not worth doing the 'buy to trade-in' option ? Of course the MB dealer may offer more, but then will just discount the replacement car less! I'd probably do better to hand it back and bargain better.

One big factor - Service Assyst is counting down to a 'Service C' at about exactly the hand-over mileage. I don't want to reach that Service before I hand it back, obviously, as it sounds like a big service? The minute I hit that counter, I think I am liable for the service

There's also some stupid clause about needing to return it with 6 months of MOT! Does that mean I have to MOT it before the 3 years is done. I'm am confident it would be fine, but its another £50 cost for me (at least).

Did you buy it brand new or a few months old. Sounds like it may have been secondhand as I have never heard of the MOT clause. But IMO if the car will be over 3 years old when it reaches the end of the agreement then it is only fair that you should have the MOT done and the service as well if it is on annual servicing. If you were buying the car from someone else, surely you would expect those things to be done.

If instead you bought the car brand new on a PCP, then I am baffled by the MOT clause. But you will be charged for any outstanding services needed.

 

[Dringo]

so if I tie myself into another 3 yr agility contract, this new A-Class will have cost me just over £10k for the 3 years (excluding tax, servicing, tyres, insurance etc)

I am thinking I could have paid £11-12k for a nice 2nd hand luxury car (like an older E-Class, CLK etc) back then and still have that car, worth about at least £3k now (so cost £8-9k).

That's only £1-2k better off, with a likelihood of at least 1 serious service/fix to pay for in that time with no warranty. So the £10k for peace of mind and a new-car experience isn't too bad I guess.

Unless you buy a car <£7k, I think it will always lose £3k per year in depreciation alone.

 

[hawk20]

My advice as a rough guide is to divide the deposit by 3 to get the annual cost of the deposit and add that to the payments. The total is the annual cost of buying on a PCP. A new A class does indeed come out at about £3k per annum.

 

[Rory]

But IMO if the car will be over 3 years old when it reaches the end of the agreement then it is only fair that you should have the MOT done and the service as well if it is on annual servicing.

Our company lease cars always had to be MOT'd before they went back - it was a pain as they'd often fail on some spurious thing and then the lease company would moan about the cost of repairing them (they were on full maint contracts), or we'd have to get tyres changed which meant taking them elsewhere as they wouldn't pay for tyres at a dealership.

The servicing one is interesting - I wonder if you could stretch the previous annual services to their limit (you're allowed a month) so at 3yrs you'd still be 2mths away from needing a service?

I've certainly used the requirement for a major service, MOT & tyres as a trigger point to change cars in the past - no point in spending towards a thousand pounds on something the dealer can either do in-house for next to nothing, or, on an older car, not bother with and send it off to auction.

 

[Dringo]

OK, I think my summary would be this:
I'll find out for sure what the MB dealer will offer as 'trade-in' price. Then if that + the £95 fee is higher than the balloon payment (optional purchase price) then I can buy/sell to MB and the [small] balance will contribute to a deposit on another car.

Or I can just hand back. I don't believe there will be any charges for fixing anything as its in excellent condition with only about 1 stone chip. Provided I don't get to the Service C point, I won't be liable for that. I may have to MOT it at my cost - not because it gets to 3 years but because the Ts&Cs says it needs to have 6 months MOT on it when returned (maybe that doesn't apply if it currently doesn't need one - I will check).

Assuming I don't have £10k to put down on a car (I dont) then I can either get regular personal loan type finance (relatively costly at approx 10% APR) or car finance from a dealer (probably slightly cheaper). Or I can enter into another Agility scheme for the priviledge of getting a new car with a low up front payment. I think with either of these 3 options, buying a car over £10k will result in £2-3k depreciaton each year. You could be unlucky with the 2nd hand car approach and hit a big repair bill for something. The benefit of the new car Agility approach is the warranty and peace of mind. Its a commitment for 3 years or so, but you can, for a small hit, change mid term (or even pay out with an interim balloon calculation which should be fair but in Agility's favour).

Since I need 2 cars in the household I will probably, like last time, commit to the 1 new car on this scheme and the second can be more of a punt on the 2nd hand market at <£10k and get something less sensible and more fun there.

The only thing to bargain now is the deal on the new contract... and I think I will have more leverage if I just hand the car back to MB Finance since then I can choose which MB Dealer (and sales guy/gal) to work with. Unless the trade-in value is too good to refuse a buy/sell. If I was the MB sales person, I would inflate the trade-in to keep me at his dealership and just be less generous on the dealer terms of the new Agility. My feeling is he will value it at about £500 more than it owes to tempt me to do this. I don't think that will be enough.

Will let you know the next step

btw - Possibly the dealer is reading this thread, which is fine with me. He may have some other angles to bring to my attention. We'll see.

 

[Dringo]

Last update: I had to get the car serviced. A Class C service wasn't too bad but still cost me £300 or so. At least they wash the car well. I'll keep it to the end of the lease next month. No stellar deals from MB on a replacement PCP - I cannot see me going that option at the moment... more likely to buy a £2-3k runabout Merc than put that amount into a PCP and then pay £3-400/month for something like a B-CLass or more.
Lastly, I'd go with the theory that its better to pay as little deposit for the PCP as possible. OK the monthyl cost will be a little higher, but you will get less stiffed at the end when they say the car is worth less than the agreed (forcing you to walk away from your initial higher deposit, or pay more to own a car you know is worth less - but at least you know it).

 

[hawk20]

You can't get 'stiffed' at the end. You will always get the guaranteed final value when the lease ends. Or sometimes more if the market is buoyant. But never less.

As for paying the minimum deposit, there are loads of myths about that. Most are wrong. Unless you can invest at more than the APR they charge, it pays to pay a higher deposit. Why? Because you won't be paying their APR interest rate on that deposit for three years. If you raise the deposit too high they will alter the GFV so it doesn't pay to go too far. ( If they didn't do this people with cash would pay a deposit just £1 less than the price, have almost zero payments but enjoy having the guaranteed residual).

In these uncertain times there are many cars on which it pays to have a guaranteed residual and many like PCP's because of that.

 

[gizze]

The art of this is to get them to set the GFV as high as possible, and then walking.
Some of the residuals they are allowed to set are stupid high, and you can take advantage of this.

I bought my 535d sport touring with a £21k balloon after 48 months and that was doing 20k miles a year, that was always going to be worth sub £15k come trade in, I knew and they knew it, but they wanted the sale, that car cost me £380 a month with an £1750 deposit, and it was £35k.
Not bad for a car costing £51,000 10 months earlier.

OK that was a one off and residuals will never be the same again, but shows how to get a real bargain.

Leasing the same car was over £800 a month.



You have to think of any balloon based finance as renting long term imho.
As Hawk says, you walk away at the end, you may be lucky to get something back, but if Mercedes have 500 A classes coming back into the group this Sept. all with £8k balloons what do you think they will think a 3 year old A class will be to them?

Future values are set more these days by finance houses than by customer demand.



Your other option is advertise it over the next 2 weeks at £9500 and see how it goes.
That sort of car is selling well at the moment.
You don't have to take the lazy option and trade it or hand it back.


I have only traded two cars in, and that is when i was getting well above book and the difference between dealer prices and private was massive meaning I could get more from a dealer than selling private.