For about the last 25 years, we have had our cars on PCP finance - we started out with Renault, but saw the V.A.G. lights burning bright from the 2nd PCP car onwards and have enjoyed cars from VW, Seat and latterly from the Skoda stable. 

 

On the last occasion, Mercedes-Benz almost won me over when advertising their C class on LBC radio "from only £220 a month" (when the Skoda dealer was trying to get me into a Rapid Sport at £220 a month).   However, once I started talking to the Mercedes dealer, the "from" £220 a month was clearly the sprat to catch the mackarel and "realistically" we would be looking at about £280 a month.   Inevitably, we walked away from that just as Skoda introduced a really good offer on the Rapid which included 3 years free servicing - as the avert said "No Brainer".

Now, as we approach the time when we should be looking at changing the Rapid, Mercedes are at it again........this time, making wonderful claims about their "Approved Used Cars" which include outstanding warranties - even guarantees that if an MOT fails, they will cover the cost of putting the car right to get it through and give you a replacement car if yours is ever in for warranty repair.   The offers really sound too good to be true - and maybe they are.

The typical 5 year old "C" class is retaling at between £10.500 and £12,500 according to style, engine and mileage.   However, the PCP offer (with a £2,000 deposit) is about £260 a month.   When you compare that with a V.A.G. car retailing at £17,000 (£3,500 deposit) with a PCP monthly payment of about £170 a month, it looks like Mercedes are in rip-off country.

Is Mercedes finance operating at a very high interest rate or is the residual value of an older Merc rubbish?   Anyone know why there is such a disparity?

Without the two sets of full figures and details it's not possible to give much comment. I'd assume the VW will have a much larger ballon payment but that is a stab in the dark tbh.

Edit, are they both used?

Edited 3 January, 20179 yr by matt1chelski

Yes 5 year old Mercedes are not worth a great amount no matter how much a Mercedes Dealership, an Independent or a Private Individual are asking for them.

They are ten a penny and can be bought cash money for sweeties. Or Magic Beans.

If a 5 year old is not worth much really, just think how desirable or un-desirable as a used car a 2012 Merc will be when 8 years old in 2020.

 

The UK is full of Used Cars of all sorts and the fact New Cars can be a better deal than Used is why many go for new and others can get used for 'Much Cheapness'.

Some Finance is Cheap & some is really not obviously.

Edited 4 January, 20179 yr by Offski

Bearing in mind that Sainsbury`s are offering personal loans at 2.9% right now, even with "deposit contributions" of a couple of grand in some instances,but a interest rate rate of the like of 5-7 per cent or even 10% in some cases, it makes you wonder if anyone is taking up these offers?  

Interesting, but the first thing that I noticed was that Mercedes Finance HP runs at 6.1% and PCP at 6.11% whilst the "Offers" run by VW/Seat/Skoda Finance at the moment not only give a deposit contribution but also offer PCP at 0% APR.

I also think Offski is right.   Although Mercedes have always been beautiful cars, there is a glut of second hand ones on the market thanks to their popularity with the taxi/airport limo businesses (which also indicates hard wear and tear and possible inaccuracies with odometer readings and service records).   Whilst the cars are built to last, there is a question mark over how easy and 8 - 10 year old car would be to shift when we finished with it!

On retrospect, I think Mercedes-Benz are trying their luck at both ends of the spectrum - fully loading the retail price and charging high interest rates.   There's the old adage the police will always tell you "If something sounds too good to be true, it probably is.................."

My experience of MB consist of fake promises of a deal until they get you into.the dealership. Then basically try a very hard sell to shift stock they've had to take. Don't get me wrong then all do this. But MB in my experience is the worse.

Another thing I noticed that their discount (if you can get them to agree it), still works out more about month than an advertised car at 3-4k more.

Interestingly, I rang MB Finance this morning to enquire why their interest rates are so out of kilter and they blamed it on "Brexit" and the poor Foreign Exchange rates.  As we all know, the business transacted in Britain props up an ailing European motor trade which would really struggle without us.

 

Funnily enough, I think they must be having a review because now if I try to bring up PCP rates opn the MB site, there is a message to say that PCP rates are currently unavailable.

Maybe go into a Mercedes Dealership that is owned by Arnold Clark & look at applying for finance.

I did with a family friend, they did not want Finance but were told they could have & they went through the build, the car came to £43,000 & could be built.

So they put down a deposit & made the finance application just to see the story as it looked a good deal and could be paid back.

 

So they waited and waited and called in to see about their order to be told they were knocked back on Finance & no car ordered, 

but they said they wanted the car anyway they came into buy cash anyway but now wanted to know why Mercedes refused the Finance.

Turns out it was Finance by Arnold Clark not Mercedes and as it was they could not get a build on the £43,000 CLA 45 AMG.

Cash was not king and AC were at it as usual. 

Then they were going to have an issue refunding the deposit.

 

I had the keys to a demonstrator i was getting a test drive in though and told them we were holding the Demonstrator until money was back on the card.

5 minutes later we were away happy as larry & their demonstrator had been out for a bit of a spin which was nice.

Edited 4 January, 20179 yr by Offski

It's called marketing.

 

Interest rates, depreciation, residuals, term, options, brand equity, deposits, currency, part exchange, specifications, balloon payments... they are all tools used to complicate a potential sale and make it look more attractive than it might be.

 

Cut through the bull **** by simply adding up the total cost of the deal.

 

What is it going to cost you? Is the car worth that total amount? Simple.

 

There are a lot of people out there that hate buying cars, these are the people who want the process to be over as quickly as possible and are unfortunately the ones that get bamboozled by the salesman and get hit the hardest.

 

PCP is fast falling out of favour with PCH becoming the cheaper option. As has been mentioned you'd be crazy to sign up to a main dealers finance package if the cost to borrow is more than Sainsbury's 2.9% (taking into account deposit contributions / free servicing etc. that comes tied to main dealer finance).

 

It shouldn't come as a surprise to anyone that a Mercedes costs more than a Skoda, whether bought on finance or for cash.

Edited 4 January, 20179 yr by silver1011

Just been looking at the finance quote on a Golf Match TDi that I maybe interested in and even including the two services worth around £500  but with an average APR of 15.8%(!!!), I`d still save money taking a Sainsburys loan at 2.9% for the balance of payment on the Golf, if I choose to purchase it. 

 

Madness how these finance companies think they can get away with these percentages. 

It shouldn't come as a surprise to anyone that a Mercedes costs more than a Skoda, whether bought on finance or for cash.

 

I was comparing a second hand Mercedes versus a brand new, never previously registered Skoda.   The 5 year old Mercedes C Class retailing at at £12,950 is higher on PCP monthly payments than a brand new Skoda Octavia retailing at £20,619 and that is what I was having difficulty getting my head around.

You may find that at the end of the Mercedes PCP term, you won't have the negative equity that the Ocatavia/ most new car owners are currently finding. The Merc has already taken it's big depreciation drop, so it should be a more linear drop over the term of the finance.

 

My 3 series was an approved used car, I'm halfway through my term and the settlement figure is not far away from the trade in price! granted, the amount i'm paying monthly could have got me a new Skoda on a similar term PCP deal, but at the time I did not have the deposit needed.

Edited 5 January, 20179 yr by Ally_bassman

^^^^^

This and next month and the month after and on through the year...... is the time to visit BMW Dealerships to get a used car bargain.

But then it is the same at any prestige Dealership if looking at something that is going to be 3 years old this year.

As to 5 years old cars then obviously there are crackers around if it is your lucky day, money pits if not.

2016 had record car sales,  all these cars are going to be handed back/traded in within the next 3/4 years.

 

I think alot of people are going to get a shock....

 

At the end of the day, Cars are exspensive. PCP deals tend to hide this from people as you're not paying it all off like HP would. The balloon payment has to paid off one way or another, so being sucked into low monthly payments and incorrectly calculated milage figures will always come back to haunt you.

Edited 5 January, 20179 yr by Ally_bassman

Actually there might have been Record First Registrations & many of those were the likes of BMW, Mercedes, Audi, VW registering cars to Dealerships

& then they become Used Cars when sold to someone that is not the Manufacturers really.

How many 'New Cars actually went to a paying customer' are more difficult to know.

 

BMW and the others are controlling used car valuations because they owned them from new really, and then when on finance they are the ones providing finance.

At the end of the day its about the total amount you pay over the term of the deal.

The interest rates are higher on used cars, than new. But personal loans from the likes of Sainsburys bank are usually cheaper, unless you go for 0% from Skoda.

With Mercedes C class, there are some nice year old models starting around £18k with around 10k miles on them, thats the sweet spot, still in good condition but depreciated from the £30k list price.

Some will be management/staff cars, others daily rental, but buy on condition and you should be ok.

I'd rather spend £18k on a Merc than a Skoda Rapid, which is a very basic car, no offence.

 

I was comparing a second hand Mercedes versus a brand new, never previously registered Skoda.   The 5 year old Mercedes C Class retailing at at £12,950 is higher on PCP monthly payments than a brand new Skoda Octavia retailing at £20,619 and that is what I was having difficulty getting my head around.

 

 

This is why it is dangerous to focus on the monthlies.

 

The only number of interest is the total amount payable. Only then can you make a like-for-like comparison.

As someone who not only sold PCPs for a living, but also had a MB PCP on a C350cdi, I can say I found my PCP with them to be pretty good. Got some equity in the car when I moved on and negotiated a decent deal when I got her. This was 2012 to 2015  :)

At the end of the day its about the total amount you pay over the term of the deal.

The interest rates are higher on used cars, than new. But personal loans from the likes of Sainsburys bank are usually cheaper, unless you go for 0% from Skoda.

With Mercedes C class, there are some nice year old models starting around £18k with around 10k miles on them, thats the sweet spot, still in good condition but depreciated from the £30k list price.

Some will be management/staff cars, others daily rental, but buy on condition and you should be ok.

I'd rather spend £18k on a Merc than a Skoda Rapid, which is a very basic car, no offence.

 I used the Skoda configurator to build up a Rapid with Xenons the other day and it came to nigh on 19 grand. Now that is scary? Who would pay that for a Rapid? 

On the last occasion, Mercedes-Benz almost won me over when advertising their C class on LBC radio "from only £220 a month" (when the Skoda dealer was trying to get me into a Rapid Sport at £220 a month).   However, once I started talking to the Mercedes dealer, the "from" £220 a month was clearly the sprat to catch the mackarel and "realistically" we would be looking at about £280 a month.  

 

Assuming a similar deposit, paying an extra £15 a week to drive a C class instead of a Rapid seems like an excellent deal to me.

 

In more general terms, I don't have a problem with PCP but what I do find dishonest is cars advertised at £200 a month, but there's such a huge first payment that it brings the true monthly cost over the full term up to £400 a month.

The argument 'you could by a 1/2/3 year old X for the price of a new Y' is fraught with danger. Before you know it, you're driving around in a twelve year old Maserati that drains your bank account faster than you can blink.

A decent year old Rapid can be had for under £9k (I know, I had one) and you'll struggle to get anything with as much space for that price/age. Maybe a poverty spec i30, but they are nowhere near as good to drive. I traded mine in after a year with no negative equity at all. The dealer described the Rapid as 'an unsung hero' :D

Edited 6 January, 20179 yr by RapidPaul

I think a lot depends on individual preferences as well as the reason why we go down the PCP route.

Without doubt, the most cost-effective motoring is to pick up a bargain at auction providing you know what you're doing and what you're looking out for.   I don't, and we don't have anyone in our family who knows much about the mechanical aspects, so we could easily be fooled by sawdust keeping the gearbox quiet etc, so we need to be able to buy with confidence.

 

25 years ago, we first entered the PCP arena.   We knew it was an "expensive" way to buy a car - for a start, buying brand new means a good quarter of the price disappears in tax and depreciation as soon as you wheel the car out of the showroom

 - and then there are interest, dealer margins etc. but, what it does is put everything on to a monthly budget.   You pay your mortgage, council tax, water rates, electricity, gas etc monthly from your salary, why not your motoring costs too?   For a fixed monthly payment, you have a car with a warranty for the life of the PCP deal - you either have "free" servicing factored in or if you buy a VAG car, the dealers offer fixed price servicing plans which you can add to your PCP payment.   The only time you have to stick your hand in your pocket is to buy tyres (in our case, usually one set after the first two years), windscreen wash, de-icer and car shampoo.

 

In fact, SEAT and Skoda now offer low deposit PCP options which make our monthly budgetting so much easier.   The initial deposit is the same as the first month's payment.   As long as you are reasonably accurate with your mileage forecast, there's no earthly reason why anything can go wrong.   Even if the car is in negative equity at the end of the agreement, you have a "Guaranteed Future Value" which means you can walk away and leave VAG to swallow the loss (although they will have made a profit from the original deal).

The used Mercedes option looked attractive initially but the warranty is only for a year (and many Mercs/BMW's tend to be treated like the company Cortina's of old), they are looking for high deposits and buying used from a dealer means the screen price is closer to the "top end" of Glass's Guide.   I think when Roger Rapid's deal ends, it will be either another Rapid or a Seat Toledo.

 

I fully agree with RapidPaul's comment about the Rapid being the unsung hero - I have been very pleased with mine!

Don't forget, a PCP can be the cheapest way to buy a car, cheaper than regular HP (PCP is a form of HP) Cash, Contract hire etc. You have to weigh up what the total cost of the car will be over the time you keep it. Of course you can't guarantee what the part-ex of a car will be, down the road, but it's rare that the value will be less than the one that is generated in a PCP quote. 

 

 The reason a PCP can work out the cheapest route is there may be financial support from the manufacturer, this in turn typically means that the dealership will also have to contribute a small amount to the PCP deal (it is usually unclear how much of the 'PCP's Manufacturer contribution' is from the manufacturer and how much from the dealer, although the manufacturer normally gives the major share of any contribution).

 But this means the dealer will retain most of their profit in 'the metal' and that is the meat on which you negotiate. Also there will possibly  be room for negotiation on the rate, as well as further haggling to liberate some of the funds the dealership gets for selling the PCP in the first place.

 

HP and PCP deals will net a dealer a small amount of 'back end' money and sometimes if you take HP with a dealer, they will use a company like Black Horse rather than their own manufacturer finance. This may be because of flexible rate or the fact they get a bigger 'bung' for selling the third party finance package in the first place. 

 

 

Btw, if buying secondhand, it rarely makes financial sense to take a PCP as there will be virtually no manufacturer support, which is why dealers that offer PCPs on these vehicles often use third party finance companies. 

Edited 7 January, 20179 yr by Lady Elanore

In reality PCH deals are now much cheaper than PCPs, I'd urge you all to add up the total payable on a PCP and compare to PCH, it is usually cheaper.

If you are happy with constantly changing cars every few years PCH will be cheaper for you.

Conversely add all the deposits and payments you would make over say 10 years, and you might be surprised how much you are spending.

You might be able to afford a better car but keep it for 10 years, which if you do average miles and maintain it will be no problem for most cars.

PCH can be cheaper in monthly payments, but always check the manufacturers contribution on a PCP. it often can outweigh the interest you would pay on say, a 3 year deal, making the offer better than a 0% conventional HP contract. Plus you get to haggle on the price of the car on top of the offered deal :)