Lease or Buy

[hawk20]

At the end of 3 years, however, with PCP you gave the car back (or paid the balloon payment). With HP the car was yours.

That is correct. But my point is that you have paid lots extra to own the car outright, and it may cost you less (often does in fact) to pay less per month for a PCP, and then buy it at GFV after 3 years. But many, of course, like the freedom to keep changing every three years with no depreciation worries. And that is the best thing about a PCP.

 

[mercuk]

mercuk i take it you had a look @ the national Mercedes offer on the web??!!.
I think you be very lucky to get a grand in interest if you bank it :Oops:
Good luck to whatever you choose

Hi

- not sure what the national offer is but the offers page is here:
http://www2.mercedes-benz.co.uk/con...e_mpc/passengercars/home/new_cars/offers.html
The best offer i could find on their website was the lease offer i mentioned.

- Interest. £2k+ is valid. Remember this is nearly £30k in 4%+ accounts over 3 years reducing monthly. Whereas if i hand over the £30k on a new car i don't get this interest.

- M Thanks

 

[st4]

That is correct. But my point is that you have paid lots extra to own the car outright, and it may cost you less (often does in fact) to pay less per month for a PCP, and then buy it at GFV after 3 years. But many, of course, like the freedom to keep changing every three years with no depreciation worries. And that is the best thing about a PCP.

Do you one better. Hand the car back if its worth a lot less than the GMFV. If the stealer sends it down to the auctions, bag it for less than the GFMV. Someone did that with a 335d IIRC- GMFV was £24k and the car was worth less than that and bagged it for £18k down the auctions 2 days later. All he had to do was put his CDs back in the CD changer, and get the seat back into position and off he went.

I for one will do this with my car (unless it gives major trouble or I am bored of it) in 18months time when under the 50% rule I can hand it back with nothing else to pay. Bank of Scotland will probably auction it, and I will buy it back (unless the bids go above the 50% figure which they certainly won't) and I'll save money as 8%APR on HP isn't that good really

 

[Alex M Grieve]

Yes but you pay a lot less on the PCP as you are not buying any equity -just paying for depreciation and interest on capital.
that depends on the GFV which on the MB offers has often been at least 50% of the price you pay (after discount). Hard to beat that in the present world owning the car yourself.

I think the snag with PCPs of this sort is that even MB dealers or MB Direct will have trouble achieving sale prices of "at least 50% of the price you pay after discount" on a 3 year old car. Their business model is liable to end in tears when lots of PCPs end up in the car being returned, rather than purchased. They will then stand to make a loss when selling these cars at less than their "book value".

The high residual has certainly helped hold down the monthly payments on the PCP, but the residual may well be higher than the price the car could achieve at sale at that point. The user will then wish to return it and buy a similar car for less. Alternatively, as was my case, the car had achieved a higher mileage than the dealers would want if they were to sell it as a used car, so it went to auction (and fetched rather less than the GFV).

 

[Rory]

I think the snag with PCPs of this sort is that even MB dealers or MB Direct will have trouble achieving sale prices of "at least 50% of the price you pay after discount" on a 3 year old car. Their business model is liable to end in tears when lots of PCPs end up in the car being returned, rather than purchased. They will then stand to make a loss when selling these cars at less than their "book value".

Not really, and this is part of the con with PCPs that makes me dislike them.

The cars are transferred to the finance company for a fraction of the list price, so it's most unlikely that anyone will lose money. And bear in mind what I said earlier, the great thing is that if you return the car, you're probably going to buy another one, on another PCP. Yippee!


Now if you could buy the car with cash for the same price as MB Finance buys the car, the picture would be completely different. PCPs are distorting the market. OK, we're musing over whether to take £30k out of saving or to use PCP, but few people have that choice. So, for many people, PCPs enable them to acquire cars that they can't really afford. MB sells loads of cars, and that messes up the residuals for everyone, hence making PCPs look good. Ever wonder why the UK has the lowest used car prices in the world? Vicious circle?

 

[*Thumper]

You we're doing well !! ............

Why do I now own a Mercedes ? . forgetting the low rate finance ........... the future value is nearly £6k, higher then an equivelent priced top of the range Mondeo/Passat ........... thats £6K less to finance.

You can play with numbers all day long ......... but there are a thousand ways to buy a car ...... when you've found the one that suits you ........... you compare apples with apples around the garages, and then pick one !!

Now then ........ shall I buy the car when the 3 years is up ....... I dunno !.... I'll wait and see what it's worth compared to the balloon payment ............ another Brucie bonus !

 

[Rory]

thats £6K less to finance.

Nope. Someone else who doesn't really understand PCPs. You finance the whole amount.

Don''t feel bad about it - I know someone who bought on PCP and thought she was going to get the initial deposit back after 3 yrs.


And a C Class might well have better residuals than top of the range Mondeo / Passat etc, but you're not supposed to buy those models. Neighbour of mine tried to get a top of the range Renault Laguna for test drive and Renault told him they'd never actually brought one into the UK.

You can get new Mondeos for £12K.

 

[*Thumper]

Find me brand new, unregistered, Titaniumx Mondeo for £12K and i'll buy 3

Nope you don't finance the whole amount ............ you sign to be liable for the whole amount, and make payments based on the bit THAT IS'NT THE DEPOSIT, AND THE FINAL BALOON PAYMENT, levied at the interest rate charged.

Simple economics .................

Yep your right ..someone else who does'nt understand PCP's !!

 

[hawk20]

Nope. Someone else who doesn't really understand PCPs. You finance the whole amount.


You can get new Mondeos for £12K.

That is not really correct. The payments you make cover depreciation only down to the GFV level. Plus interest on total capital tied up in the car. So yes you pay interest on the whole value but you don't repay any of the capital value below the GFV.

So Thumper is right that a high GFV does reduce the payments you make on a PCP. With HP you would have to make payments to pay off the £6k of GFV; with a PCP you don't need to do that.

 

[PanzerMcGrory]

im losing the will to live with this ****,
The alternative to finance is simple, buy a two or three year old Merc and the benefits are plain to see. or simply curl up and die

 

[Rory]

So yes you pay interest on the whole value

Thank you.

 

[*Thumper]

No. you pay interest, on the amount "Borrowed" .......... GFV is is set aside !

EG
Cash Value 30K
deposit 2K
GVF 10K
amount financed 18K ........repayments based on 18K at whatever % interest over period

End of period hand back car, or pay GFV, and keep it ........... you can of course finance the GVF

The cheapest way to buy a car ................ advantages .... new car .. lower repayments.. 3 year warranty .etc etc !

All this is after you screw the price down of course... some people dont try !

Only works well on vehicles like Mercedes with Higher retained values ........... as the numbers stack in the consumers favour.

Buying a 2-3 year old car..could cost more in repayments, because you dont have this option.

Downsides ........ you are liable for the whole value of the contract ...... so if you cant keep up repayments ............ you'd have to sell the car, and fund the amount owing! . the same as a normal loan.

So buying a car of less value, ie, 2-3 years old, is less exposure to debt !

 

[st4]

Thumper, you can PCP a used car, but the deal won't be as good as the APR will certainly be higher and the cost difference to an HP may not be that much more.

A new car on a PCP does make a used one not seem as good value, providing your the sort of fella who changes their car every 3 years and who's circumstances are very secure.

Thats my main gripe with a PCP is that because the 50% payable lies so near the end of the agreement (as the GMFV is usually almost 50% of the total amnt payable) that essentially you have a lot of payments to stump up if you terminate. Getting out of a PCP isn't as easy as getting out of a HP, and thats where the HP, in my circumstances comes up trumps.

 

[Rory]

No. you pay interest, on the amount "Borrowed" .......... GFV is is set aside !

EG
Cash Value 30K
deposit 2K
GVF 10K
amount financed 18K ........repayments based on 18K at whatever % interest over period

"GFV is is set aside" - so the finance company lends you the GFV for 3 years at no cost? Hahaha!!!

You're wrong, I'm afraid. I'm not surprised - PCPs are designed to confuse. Even hawk20 has admitted he was given duff gen by Mercedes on the PCPs on his previous car.

Have a look at the deals on the MB website. In the example you give, the amount to finance is £28K.

 

[*Thumper]

Don't really need to .......... I have a contract in front of me !!
I'm talking from experience, as a user ........ not throwing anecdotes around.

 

[Rory]

Don't really need to .......... I have a contract in front of me !!

So it'll be obvious to you that you're wrong then.

Here's an example off MBs website:

CLC 180 K Sport Typical 6.8% APR
Monthly Payment** £265
Customer Deposit £2,500
On the Road Price £20,855
Retailer Deposit Contribution* £76
Number of Payments 36
Optional Purchase Payment † £11,450
Amount of Credit £18,278.94
Total Charge for Credit £2,986.05
Total Amount Payable ‡ £23,841.05
Total Amount Payable by the Customer ‡ £23,765.05
Acceptance Fee £180
Purchase Activation Fee † £95

 

[jberks]

I agree with Rory - the finance company still has to pay 100% for the car - well less whatever discount they can get. They then set up the payments so you pay 100% of the interest, plus a percentage of the capital. The remaining capital is the GFV. They aren't going to lend you £15,000 for 3 years, with no repayments for nothing are they?

The reason it looks cheap is that a) you aren't paying all that capital back and b) they can build in a lower payment using the discount they are getting. A discount you'd probably get yourself if you haggled hard enough.

Leases can work out very beneficial if you know what mileage you are doing for a fixed period and either can't or don't want to find the full capital over the period.

When I bought my E I couldn't afford a new one at near £40,000. In the end I bought an ex demo at a greatly reduced price but whilst there is no way I could have afforded 40k over 3 years, I could have afforded the lease payments, but it wouldn't have change the fact that I couldn't afford the car - only with a lease I'm not actually buiying it, merely covering the interest and depreciation.

Instead I bought my ex demo car for less, stuck dwn a decent deposit, HP'd the rest and now, 3 1/2 years later, own it outright whereas, had I leased, I would still be making payments, either on a new lease or the loan to clear the GFV.

The lease would have been a bit more than the HP as whilst the capital payments would have been the same, the interest would have been on a higher figure (40k).
It all depends on where you want to be at the end of it. If life is predictable and you get a fixed amount, say as car allowance, a lease is a great way to get a better car. If life is a little more unpredictable, like mine, with periods of unemployment and low income, then leases are dangerous and best avoided, and you're much better aiming to own outright. I haven't worked at all in April and won't be working for another week yet (have something nice lined up for the next few months I'm glad to say), I still have a very smart E class to tootle around in and nobody else has any claim on it or wants any payments - its all mine from the wheelnuts to the rear sam - a lovely smug feeling in the current climate.

 

[*Thumper]

So it'll be obvious to you that you're wrong then.

Here's an example off MBs website:

CLC 180 K Sport Typical 6.8% APR
Monthly Payment** £265
Customer Deposit £2,500
On the Road Price £20,855
Retailer Deposit Contribution* £76
Number of Payments 36
Optional Purchase Payment † £11,450
Amount of Credit £18,278.94
Total Charge for Credit £2,986.05
Total Amount Payable ‡ £23,841.05
Total Amount Payable by the Customer ‡ £23,765.05
Acceptance Fee £180
Purchase Activation Fee † £95

And your point is ???

Now take your 6.8% ....and work backwards to work out what the interest is paying for .............. should be simple enough for you !

 

[124coupe]

And your point is ???

Now take your 6.8% ....and work backwards to work out what the interest is paying for .............. should be simple enough for you !

His example shows about £65 of the £265 per month is interest at 6.8% APR on the always-outstanding balance of £11,450.

Paying off just the non-GFV part (£18,279 minus £11,450 = £6,829) at 6.8% would incur about £200 per month in interest and repayments (not £265).

So, covering the interest on the GFV debt accounts for about 25% of the monthly fee.

Hard to break this down accurately as the use of APR also fudges the issue slightly versus flat rate because of how they choose to account for the deposit and set up charges etc.

 

[PanzerMcGrory]

Im losing the will to live with all these figures and arguments.

Here is a bit of advice that i have followed all my life, if i cant pay cash then i wont get it. the only thing i have ever paid a loan for is my mortgage.

And before i get the usual crap about at least i can afford it, im a tramp who married a tramp and the only thing i have been given in life was the bill to bury my penniless dad.

Yes for the early years its a struggle but eventually you reap the benefits of not paying interest loan payments and start getting the finer things in life with hard earned savings.

And when i look at my E-Class i know its mine as people on hear talk about their cars when they dont actually own anything until the debt is paid for.