Help! Getting out of PCP car finance?

Drysdale

Hello,

I am in need of help. Last year (November 2007) I bought a brand new Mercedes Benz A150 Avantgarde SE (3 door) on a PCP finance plan - 5.9% interest over 3 years. At the end of the agreement I have the option to hand the car back and owe nothing, use the equity I have built up through payments as a deposit on another car or pay a balloon payment of around £7000.

I purchased the car at the time for £13995 with no deposit (100% finance)- around £1000 off the OTR price so thought I was getting a fairly good deal. The car has been reliable, however my reasons for needing it have unexpectedly gone and due to separate (unforeseen) financial issues I am in very much a need to get rid of the car. I am paying £268 p/c/m.

ONE YEAR later (Dec '08) I was shocked to discover that the average trade in price for the car in it's condition/mileage is no more than £6,800! If I managed to trade in at that price I would be looking at negative equity of close to £4,500! This has got to be one of the worst depreciating cars I have seen - losing nearly 60% of its value in one year!

I simply cannot wait until the end of the agreement (November 2010) - I am happy to pay a penalty fee (to an extent) for handing the car back early but don't want anything that will affect my credit rating. I just want to hand the car back with no strings!

Is there a way out? I haven't spoken to my creditors yet (Mercedes Benz Finance) and would rather get some advice from you lot before making anything formal.

I'm aware that I can cancel the agreement if I have paid more than half of the balance - however as I paid no deposit originally I will only have paid half on my current £268 p/c/m when my agreement is finished (3 years) - this is obviously not an option for me.

Any ideas? Help!

Lemonade_Pockets

Your stuck between a rock and a hard place i'm afraid.
Your options are either try and sell it for as much as possible and cover the remainging negative equity yourself.

Or keep going until you reach three years or half the balance which ever comes sooner.

Unfortunately all cars this year have taking a right pasting in terms of depreciation. So you are not alone i've lost a 1/3 on a second hand car that i bought @ trade price in 6months.

Actually i have half a thought.........what is the GFV (guaranteed future value)?

willsonline

Hi

I was in same position a few months back. I had the car 18 months and decided just to sell on the open market, I got £1,000 back after paying off finance.

If your gunna lose money then you need to read the contract and weigh up your options?

bigstevex

Also, mercedes are one of the worst for depreciation, here's a quick example of the worst one i've seen, a 2006 m benz S65 amg is about £140K new, now its worth about £30-40K! ~£50K a year loss!

My own experience is that i bought a second hand car (volvo) in june this year for £14000 cash £2000 less than its book price so a bargain in my eyes, its now worth £10000, eveybody is in the same boat with cars at the moment!

Drysdale

Thanks for the replies so far. The GFV is around £7500 for info - quite a jump considering it's worth around £6500 with 2 years left!

Looks like I'm going to have to accept it. Does anyone know of any exceptions?

bigstevex

In the long run it looks like you might be better keeping it, can you actually afford the repayments or is that the problem?

Lemonade_Pockets

Drysdale wrote: »

Thanks for the replies so far. The GFV is around £7500 for info - quite a jump considering it's worth around £6500 with 2 years left!

Looks like I'm going to have to accept it. Does anyone know of any exceptions?

Its worth doing a bit of homework to find if thats actually what its worth or if your dealer is just trying to pull a fast one.

If it turns out that £6800 is a fair price, ring the finance company and explain the situation. From their point of view if you hand it back in 2 years and they effectively are paying £7500 for it and by that point it will be worth far far less, as the gap is only gonna get bigger.

So it would be in their interest's to take the car back now. Now i'm sure that they won't want to loose out on 2years worth of payments either but given the situation they might be able to come up with some sort of deal so its worth a shot.

To give u an idea of the problem from a manufactures point of view. Ford Credit in America lost almost $3bn in the first half of this year because they had the same problem with a huge number of trucks were the GFV had been over estimated.

JonathanA

Assuming good condition and approx 15000 miles the trade price for your car is approx £7800, retail £9500. Now, we all know that car prices are depressed at the moment, so those prices won't be achievable in December I wouldn't think, but you may find you are able to do better than the price you've been quoted. It may be worth asking MB for a settlement figure on the loan, so that you know exactly how much negative equity you have in the car. On your figures, the total amount repayable would have been £17,148 (payments + final payment due), so it was quite an expensive car. Are you planning to not have a car in the future or are you planning to buy a cheaper car? If so, you may be able to strike a deal with someone if you are buying something else, but you would inevitably have a loan for more than the value of a car you are buying.

Lemonade_Pockets

Having done a little investigation, i think £6800 is a reasonably fair shout given the current climate. Anything more is a bonus. If you can get £7800 snap their hand off as they've clearly been on the hard stuff.

You could part ex it and load the negative equity onto the new agreement but if you take this route you need to be sure that your not going to have to change again untill your back to break even.


N.b if bargaining with dealers make sure they don't artificially inflate the value of your px to keep you happy and then give a rubbish deal on the new car.

Drysdale

JonathanA and Lemonade Pockets - thankyou for your input. I will give MB Finance a call tommorow and let you know how it went. I am not holding my breath, and am more than expecting a flat 'NO'. Thanks.