Dealer deposit contribution

[H.7]

I received an email from my local Merc dealer advertising a deal on a new Mercedes SLC - https://www.easternwestern.co.uk/mercedes-benz/new...

The OTR price is just over £52k, but includes a Dealer Deposit Contribution of over £15.5k if I take their finance. So, is the real price of the car around £36.5k? Presumably, if I'm a cash buyer, they'll try to get £52k out of me. Given that the cost of the finance doesn't come close to the dealer contribution, I'm at a loss to work out why they inflate the price so much.

Anyone?

[Sheepshanks]

It notes the car (I might be missing something here but the ad doesn't even show which model it is?) has £12K of options so in any event it's really only a £40K car. I think £40K is top of the range for SLC.

There is a thread running on one of the MB forums that MB just can't sell the new SL and it's being massively discounted, but don't know about SLC.

[r129sl]

Presumably the real price of the car is about 5p.

Lord knows what is going on these days. However, it is usually open to you to take the finance deal and then pay it off after five minutes.

[niva441]

It's the discount that isn't a discount.

I intended to buy mine for cash, but because of all the incentives they could add to the finance deal, it wasn't worth buying outright from the dealer. Then I cleared it the next month.

[r129sl]

Sheepshanks said:

There is a thread running on one of the MB forums that MB just can't sell the new SL and it's being massively discounted, but don't know about SLC.

One of my clients reckons he got £26k off a new SL400. Horrible thing it is, mind; I'm not surprised they can't sell it.

[H.7]

Thanks for the replies. I guess they're trying to buy market share by offering a seemingly expensive car at a seemingly knock-down price. Still looks like a 35k car (maybe a £23k car if you discount the extras) that they're trying to flog for £52k

[PenelopaPitstop]

There's a discussion about it on SLKWorld: http://www.slkworld.com/slc-general-discussion/

[cptsideways]

Its a discount on an overpriced car, perfectly normal practice, though only available if you rent it for 3 years.

Mind you for the past few years Merc have been doing cheap monthlies with big customer deposits who then loose them at the end of term. So lots of ex customers in rather massive negative equity.

[PenelopaPitstop]

Because it's not really deposit, it's initial payment. You can pay off finance straight away after cashing dealer contribution. No need to pay it off for number of years if you don't have to. You just have to ignore list price and use discounted price as standard.

[Ari]

cptsideways said:

Its a discount on an overpriced car, perfectly normal practice, though only available if you rent it for 3 years.

No it isn't. As has been said, nothing stopping a cash buyer taking the finance to access the deposit contribution and clearing it (with his cash) the next day.

cptsideways said:

Mind you for the past few years Merc have been doing cheap monthlies with big customer deposits who then loose them at the end of term. So lots of ex customers in rather massive negative equity.

How do do you get into negative equity with a guaranteed future value?

[eybic]

Ari said:

How do do you get into negative equity with a guaranteed future value?

Is it actually offered as a guaranteed future value?

[Ari]

Pretty rare for these balloon payment PCP type things to be offered without one.

[Sheepshanks]

Ari said:

Pretty rare for these balloon payment PCP type things to be offered without one.

I think it was a leading question.

I don't know if there's been some direction on this, but it tends to be called something like Optional Final Payment now.

Apparently people, particularly those who wanted to buy the cars at the end, were getting upset that their cars were worth less the GFV.

[eybic]

It might not be referred to as a guaranteed value though, just a final payment.

[eybic]

Sheepshanks said:

I think it was a leading question.

Not in a sarcastic way

[cptsideways]

The GFV or value at the end of the term ended up being less than planned = no equity to transfer to a new deal. With most deals the difference is then put down as a deposit into the next one. If there is neg equity you have effectively lost your deposit as you don't get it back, so its not really a deposit at all is it!

[r129sl]

It was never a deposit: it was always simply a first payment.

[Sheepshanks]

While GFV is changing its name, the deposit is still called a deposit.

We had a girl at work who completely refused to believe that she wouldn't get the deposit back at the end of the term - she thought she could hand the car back and they'd return her deposit, as happens when you hire something. It could just be her being thick, but my brother had a car for his wife on PCP and the salesman insisted they'd get the p/x value of their old car back at the end. They didn't - it was under water.

I've long been convinced that many people getting into PCP don't fully understand what they're doing. It's essentially a trap.

[DuraAce]

Sheepshanks said:

I've long been convinced that many people getting into PCP don't fully understand what they're doing. It's essentially a trap.

Quite scary isn't it? I work with a couple of people with the same mindset - convinced they get the deposit back when the term finishes. They look at me like I'm thick when I tried explaining it to them. Cries of "you don't understand", "the salesman promised me".

Should be good entertainment to watch when they look for new cars.

[eybic]

I think PCP is a good idea if you're regularly changing your car (every 3 years) and can put in a decent deposit, it's not a good way to buy a car to keep though.