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

DrEskimo

rebecca1 said:

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 

Whilst it can act just like a lease (in that you can simply pay the upfront cost and monthlies and then hand it back to the finance house at the end of the agreement), the way it operates is very different. A lease has no concept of the underlying value of the car. You pay a set sum per month (plus an initial upfront payment that can be 1, 3, 6 or 12 months worth of payments) which is dictated by the lease company. How this is determined is completely hidden and calculated by the lease company.

In contrast a PCP finance agreement is just a loan to buy a brand new car. The only difference is the finance company predicts the future value of the car (based on the age and mileage of similar cars) and agrees to buy the car from you at that price at the end of the agreement. Deferring this amount to the end of the agreement means you pay a lot less per month, as you are not paying off the entire cost, just the difference between the cost to purchase, and the predicted value (i.e. the expected depreciation of the car).
Of course you don't have to hand the car back, this is just one of your options. You are free to trade the car in for more (or less) at any time in the agreement to any garage or dealer, or even pay the loan off and keep it.

This difference means that the two agreements are handled very differently when it comes to early termination or mileage adjustments.

Supersonos

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?

Wow.  £28,000 to "rent" a car for three years.  Absolutely crazy.

I've never done a PCP (or similar) deal.  Every time I look into one I just don't see how it makes any financial sense.

AdrianC

Supersonos said:

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?

Wow.  £28,000 to "rent" a car for three years.  Absolutely crazy.

I've never done a PCP (or similar) deal.  Every time I look into one I just don't see how it makes any financial sense.

The OP's borrowed a £40+k car, and three years later it's an £18k car.

So that's £22k of depreciation and £6k of interest on the £40k...

DrEskimo

Supersonos said:

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?

Wow.  £28,000 to "rent" a car for three years.  Absolutely crazy.

I've never done a PCP (or similar) deal.  Every time I look into one I just don't see how it makes any financial sense.

It's not PCP per se, it's new cars (which is hardly a secret...). PCP just adds on a few grand of interest to the costs.

It would still be very expensive if someone bought the car with cash then traded it in to the garage 3 yrs later.

Sea_Shell

And all for the joy, or kudos, or bragging rights to drive a new premium brand car.

Making a £40k car "affordable" for people who could otherwise never be able to have one.

You could get a really nice second hand car for £28k over 3 years.

AdrianC

Sea_Shell said:

You could get a really nice second hand car for £28k over 3 years.

You could get a very, very decent one for the £7k the OP put down before even getting the keys.

Sea_Shell

AdrianC said:

Sea_Shell said:

You could get a really nice second hand car for £28k over 3 years.

You could get a very, very decent one for the £7k the OP put down before even getting the keys.

Very true!!

Supersonos

DrEskimo said:

Supersonos said:

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?

Wow.  £28,000 to "rent" a car for three years.  Absolutely crazy.

I've never done a PCP (or similar) deal.  Every time I look into one I just don't see how it makes any financial sense.

It's not PCP per se, it's new cars (which is hardly a secret...). PCP just adds on a few grand of interest to the costs.

It would still be very expensive if someone bought the car with cash then traded it in to the garage 3 yrs later.

But if you buy the car cash, you still have an asset (albeit a depreciating one) which you can then sell.  The OP did nothing more than rent the car.  They even paid £7,000 before they started paying the £500+ per month... only to just hand back the car at the end.  £7,000 would buy a perfectly acceptable used car.

And for what?  To say to their friends "Look at my shiny new car!" 

If you can't easily afford a brand new car without borrowing, you should buy used. 

Herzlos

Supersonos said:

If you can't easily afford a brand new car without borrowing, you should buy used. 

The OP could afford it and happily paid it knowing what it involved, then circumstances changed and now they want to get rid of it.

We all know a used car is cheaper but not everyone wants one.

Herzlos

DrEskimo said:

It's not PCP per se, it's new cars (which is hardly a secret...). PCP just adds on a few grand of interest to the costs.

It would still be very expensive if someone bought the car with cash then traded it in to the garage 3 yrs later.

Depreciation is 4x the interest, and they could have potentially lost even more (but had a bit more freedom) if they paid cash for it new (no finance incentive, no opportunity to use the money for something else).