Mercedes Benz Lease early settlement due to low mileage, no salary

Sandtree

rebecca1 said:

Grumpy Chap: 
I have just checked paperwork and it states: Regulated Contract Purchase. 
Before I signed the contract, I told the dealership that I had no intention of keeping the car after 3 years. 
They said that I could hand he car back and if the condition and mileage are OK there would be no further payment. 
Hopefully this info helps... Car Tax was £465.00 per annum 
Rebecca  

So this is a Personal Contract Purchase (PCP) and so a finance agreement secured on the vehicle rather than a Personal Contract Hire (PCH) which is a lease. 

With PCP you are repaying finance and have various options at the end of the finance which includes either paying the balloon or handing the car back. With PCH your paying a service charge to hire the car alone and in theory have no rights to ever own the car.

Many mistake PCP for a lease but legally its not and hence you have the right to hand the car back once 50% of the finance is cleared etc.

Finance companies are well aware that people get the mileage wrong and inevitably this is built into their calculations. With lockdown you have been unfortunate that it was more extreme but that doesnt mean they have to consider recalculating the value.

For reasons I never really worked out my PCP with Mercedes was lower than I was anticipating (they even lowered the price after we agreed a price but before signing) but when we got to the end of the contract the Balloon was about £7.5k above the asking price for similar cars to mine so clearly just handed it back and walked away. We were under the total mileage but only because we'd moved into central London so our usage had gone off a cliff for the last 9 months else we were on track to be substantially above. We also gave it back a week or so early to avoid the need for us to do the next major service or MOT

feolojad

rebecca1 said:

Not wanting to hand the car back to Mercedes with drastically less mileage ( no where near 45,000 miles  I wrote to MB Finance and asked if they could reduce my monthly payments for getting the car back under mileage. They said they cannot change the lease terms now and that Covid 19 had devalued cars.  They did not want to speak to me any further so I went back to the Manager at the dealership. 

I had a look online to value the car and I'm seeing similar cars being sold through Dealers around £20,000   

I am a little bit miffed that Mercedes at not being able to give me a better/more options. 

If my car has done only 30,000 instead of 45,000 when I hand it back surely that would make the car worth more? It seems everything works out better for them!

Unfortunately you're not entitled to anything. You sign up to an agreed annual mileage upon which the expected future value of the car is calculated and you finance the difference. If you don't use that then that's down to you. It was there to be used. What you're asking as akin to getting a pizza from a takeaway and then going back and asking for a partial refund because you didn't eat it all.

The fact it's maybe worth more is neither here nor there other than for making the decision on how to get out of the finance agreement. Had it been worth less than the final calculated value then would you be complaining because when the deal ended you walked away winning? Would you be willing to compensate Mercedes because they got it wrong and the car wasn't worth as much as they calculated so they lost out? No.

When you "buy" cars you can't afford on this type of finance one of the gambles you take is on the value of the car at the end of the finance period. Sometimes you win, sometimes you lose, that's just the nature of it as nobody can predict with 100% accuracy what the value of that individual vehicle will be 3,4,5 years down the line.

If you don't like that then you either buy a car you can afford outright in cash, lease a car or get one on a conventional hire purchase agreement or bank loan where you own it in full at the end.

rebecca1

Definitely sounds like a PCP.
What is the balloon payment?
I would have to email the franchise and ask... As I had no intention of ever owning it after 3 years...  

Grumpy_chap

rebecca1 said:

Definitely sounds like a PCP.
What is the balloon payment?
I would have to email the franchise and ask... As I had no intention of ever owning it after 3 years...  

That's fine, and no need for you to own the car.  Just, if the value of the car is higher than the balloon payment, then that gives you more options.  Otherwise, VT may be your early route out.

Sandtree

rebecca1 said:

I would have to email the franchise and ask... As I had no intention of ever owning it after 3 years...  

Or read your contract as its a fixed value and so will be stated in the documentation

rebecca1

Sandtree said:

rebecca1 said:

I would have to email the franchise and ask... As I had no intention of ever owning it after 3 years...  

Or read your contract as its a fixed value and so will be stated in the documentation

£18.075 Balloon Payment... 

Grumpy_chap

£18k balloon payment and the cars retail on the MB forecourt at £20k. 

Unlikely you can make it work to sell the car trade and achieve a gain above the balloon (plus remaining months), but you can't lose anything by putting the details into an online car buying service to find out.

That will mean that VT at the 50% mark is probably your best option.

When you return the car, you should be able to claim the refund on the VED remaining.

Given the recent period, the lower than expected mileage on your car will not be anything special as all the cars returned at 3 years will also be at reduced mileage because of doing nothing in lockdown.  I also suspect that the demand for used / new cars is now reducing as
(a) economy reality biting
(b) who needs a car if life-style has adapted to no miles?

macman

If you VT at 33 months, then I calculate that your motoring finance has cost you £582pm, or just shy of £7,000pa. Ouch...
I'm still not clear from your posts if you were somehow under the impression that what you had taken out was a conventional lease?

rebecca1

macman said:

If you VT at 33 months, then I calculate that your motoring finance has cost you £582pm, or just shy of £7,000pa. Ouch...
I'm still not clear from your posts if you were somehow under the impression that what you had taken out was a conventional lease?

My shopping list with the Mercedes dealer was: 
1) Deposit and monthly payment price was ok 
2) 3 years was ok
3) I could hand the car back at the end of 3 years and walk away...
4) 15,000 miles per year
He didn't say specifically mention what the specific name was.... I was happy with the deal. Of course no one could for see C19 
I understand that, therefore we did not  discuss under mileage just if I went over the mileage! 
Rebecca 

AdrianC

rebecca1 said:

My shopping list with the Mercedes dealer was: 
1) Deposit and monthly payment price was ok 
2) 3 years was ok
3) I could hand the car back at the end of 3 years and walk away...
4) 15,000 miles per year
He didn't say specifically mention what the specific name was.... I was happy with the deal. Of course no one could for see C19 
I understand that, therefore we did not  discuss under mileage just if I went over the mileage! 

And you have a product that does exactly what you wanted of it.

Even better - if the car is worth more than predicted at the end of the term (whether because depreciation is lower, or because of mileage), you can benefit from that, which you couldn't under a lease.