Mercedes PCP

XeonSX

jaydeeuk1 wrote: »

New cars can and do go wrong, often niggling things - thats what the warranty is for. Once that expires you're on your own. If you had £45k in cash, but wanted a PCP to keep your money in an s&s isa, then I'd say yeah, go for it, but tbh it doesn't sound like you can really afford it sorry.
If you're thinking of keeping it anyway, probably cheaper to buy outright than a PCP, unless its 0%
Theres a £46k e class on there for £35k, saved you £10k straight away.

1. Sounds like loans are for people who already have all the money. I fail to see how that makes sense. Most PCP deals for new cars include retailer deposit, in my example it's 7k. It more than compansates the 3K interest I'll pay for this finance option. So no, buying outright is not cheaper.
2. Its not refreshed model and it's not built to my spec.

racing_blue wrote: »

You're looking at renting a car for 3 years for about £25,000. After that, you have the option to buy a 3 year old used car.
This being a money saving website, I can't resist pointing out that you'd save fifty monkeys by going straight to step two.

I see way too many replies here advising me not to buy a factory car. I am perfectly aware of the total cost of car + cost of this deal and choose to spend the money this way, that's not what this post is about.
I just wanted to understand the criteria for successful PCP application as to avoid worsening my credit history.

SeanG79

I just wanted to understand the criteria for successful PCP application as to avoid worsening my credit history.

One application will have negligible impact on your credit profile.

As mentioned previously, if your only exposure to credit is a mortgage you are likely to be approved. (provided no missed payments/defaults/CCJs).

Manufacturers finance is there to get their cars on the road...

Tiddlywinks

I bought a Volvo on a PCP but rejected it after three weeks - I then went to BMW and got a different car with a new PCP whilst the Volvo one was still showing as live on my credit file.

The dealer said their checks centred more around identity and fraud rather than affordability - they can always repossess the car and then take action to recover costs etc so their aim is to make it easy to buy and worry about the consequences later.

andyfromotley

Why not just apply for a personal loan for the cost of the car? (minus your deposit)

You can almost always get a matching deal by using carwow or similar, the dealer contributions blah blah blah are nearly always illusionary.

You own the car.
You can sell it if your circumstances change at any time.
You can do whatever mileage you want, when you want.

You will never ever run the risk of posting on here, 'help i'm stuck in a PCP'.
I have never yet seen a convincing argument for PCP's.

XeonSX

I'm not sure if I don't understand something or you're wrong but let me do the maths and you tell me if I am.

45k car over 3 years.

PCP - 10k Deposit, 7k Retailer deposit, 10k loan, 18k Final Payment (I intent to keep the car)
I repay 10k across 3 years @ £278 /month repayment + 28k across 3 years @ £77 / month interest (6.4% APR with Mercedes) = £355
£355 * 36 = £12780
Now totals: £12780 + £10000 + £18000 = £40780

Car loan - 35k across 3 years @5% (generous but anyway, it only makes your case stronger)
This comes to £37700 (£1047 / month) + £10000 = £47700

Your option is 7k more expensive. Now lets talk about pros and cons of each:

You own the car.

I own the car either way after paying off loan or PCP with final payment

You can sell it if your circumstances change at any time.

True, that's where car loan is better I guess

You can do whatever mileage you want, when you want.

If I intent to own it at the end, and I do then it doesn't matter what mileage I do.

You will never ever run the risk of posting on here, 'help i'm stuck in a PCP'.

Instead you'll have 'help I'm stuck with this 1k a month car loan'.
It's a lot easier to pay £355 per month than a £1050 you suggest I go for. The risks with PCP are less because you can give the car back after 3 years in addition to each month only costing £355.
The option you suggested, selling the car. Let me see if that's even useful.
Say you hit a problem 1 year into your loan. By that time you'd have spent 10k deposit + repayed 11k of your loan + spent £1500 in interest. Total spent £22.5k. Car probably depreciated by 33% so worth 30k. You sell and pay the loan back £30k - £24k = £6k - is what you have left so that 1 year costed you £16.5k

With PCP after 1 year. You can't back out since you can't sell the car so have to finish 3 year finance PCP deal. However since you only spend £355 a month you save £1050 - £355 = £695. After a year you saved up 695*12 = £8340. For next 2 years, to finish PCP, you need £355 * 24 = £8520.
This means you'd have almost saved up enough money to finish your PCP deal.
and if we calculate cost of ownership for those 3 years; guaranteed car value is 18k, I don't buy it though since I'm broke in this scenario. 10k + £355*36 = £22780

In conclusion it costed £6280 more to own the car for 3 years on PCP than 1 year on personal loan. Risks are the same.

I have never yet seen a convincing argument for PCP's.

Now this worries me, you have 1730 posts and been a member for over a year. Why are you suggesting such poor finance advice. I hope it's just your or my mistake and not some ulterior motive.

Mahsroh

XeonSX wrote: »

Instead you'll have 'help I'm stuck with this 1k a month car loan'..

Although, by your own admissions you need to save £500 a month in addition to the £355 monthly payments. So you'd still end up saving/paying off £855 going down the PCP route The risk here being that you fail to save £500 per month and end up taking out a further loan to pay off the £18k incurring further interest etc.... and I speak from BITTER experience! Albeit on a much smaller scale when I was younger.

I wouldn't get offended by people offering you advice over and above the original question you posed. That's what this forum is all about. You asked a question but in doing so people spotted a potential risk that you may not have considered and offered their advice accordingly.

Unfortunately, by definition this forum is used by those looking to save money, so responses to a "I want to take out a large loan to buy a £45k car" are always going to result in some negative responses (not necessarily from me - I drive a 65 plate C Class!) But if you can afford it then great - enjoy it - but please don't take offence when people offer alternative views / solutions to your issue, even if it's not directly answering the question you asked.

XeonSX

I will only need to save extra £500 if I want to own the car in the end. There is no owning a car without paying something for it and the way I see it PCP is the cheapest with least risk. "taking out a further loan to pay off the £18k" - I won't be forced to do it. That's the most important thing.

saverbuyer

XeonSX wrote: »

I'm not sure if I don't understand something or you're wrong but let me do the maths and you tell me if I am.

45k car over 3 years.

PCP - 10k Deposit, 7k Retailer deposit, 10k loan, 18k Final Payment (I intent to keep the car)
I repay 10k across 3 years @ £278 /month repayment + 28k across 3 years @ £77 / month interest (6.4% APR with Mercedes) = £355
£355 * 36 = £12780
Now totals: £12780 + £10000 + £18000 = £40780

Car loan - 35k across 3 years @5% (generous but anyway, it only makes your case stronger)
This comes to £37700 (£1047 / month) + £10000 = £47700

Your option is 7k more expensive. Now lets talk about pros and cons of each:
I own the car either way after paying off loan or PCP with final payment
True, that's where car loan is better I guess
If I intent to own it at the end, and I do then it doesn't matter what mileage I do.
Instead you'll have 'help I'm stuck with this 1k a month car loan'.
It's a lot easier to pay £355 per month than a £1050 you suggest I go for. The risks with PCP are less because you can give the car back after 3 years in addition to each month only costing £355.
The option you suggested, selling the car. Let me see if that's even useful.
Say you hit a problem 1 year into your loan. By that time you'd have spent 10k deposit + repayed 11k of your loan + spent £1500 in interest. Total spent £22.5k. Car probably depreciated by 33% so worth 30k. You sell and pay the loan back £30k - £24k = £6k - is what you have left so that 1 year costed you £16.5k

With PCP after 1 year. You can't back out since you can't sell the car so have to finish 3 year finance PCP deal. However since you only spend £355 a month you save £1050 - £355 = £695. After a year you saved up 695*12 = £8340. For next 2 years, to finish PCP, you need £355 * 24 = £8520.
This means you'd have almost saved up enough money to finish your PCP deal.
and if we calculate cost of ownership for those 3 years; guaranteed car value is 18k, I don't buy it though since I'm broke in this scenario. 10k + £355*36 = £22780

In conclusion it costed £6280 more to own the car for 3 years on PCP than 1 year on personal loan. Risks are the same.
Now this worries me, you have 1730 posts and been a member for over a year. Why are you suggesting such poor finance advice. I hope it's just your or my mistake and not some ulterior motive.

Or do what I did with Mercedes.


1: Get price from broker.
2: Get dealer to match price including PCP discounts.
3: Pay off PCP within 14 days
4: Keep dealer discounts.


optional 5: Take out personal loan at 3.4% to cover 28k.


£820 per month.

Mahsroh

saverbuyer wrote: »

optional 5: Take out personal loan at 3.4% to cover 28k.

Sounds optimistic for a loan of more than £25k?.......

XeonSX

saverbuyer wrote: »

Or do what I did with Mercedes.


1: Get price from broker.
2: Get dealer to match price including PCP discounts.
3: Pay off PCP within 14 days
4: Keep dealer discounts.
optional 5: Take out personal loan at 3.4% to cover 28k.
£820 per month.

Right, so this option is to save on £2770 interest that I'll have to pay over 3 years. I will indeed be cheaper to go from 6.4% Mercedes APR to 3.4% you suggest. That is very low, I wasn't aware this low was available. With mortgage I'm at higher lending risk so don't think I'll qualify. I also thought Mercedes won't allow me to end the deal this early especially after £7000 discount only because I went for their finance deal and even if they do they must have some penalties for early repayment.

But, you've done it so I guess it's possible. Let me look at their small print... thanks for the tip.