I am currently driving a 2006 Audi A3 Special Edition 1.6 auto petrol (31,000 miles) and my husband wants me to upgrade. We looked at a 2008 Mercedes CLS320 cdi (26,215 miles), the dealer is offering to part exchange allowing £6,000 for the Audi, they are selling the mercedes to us, through a PCP agreement, for £22,050.00 on a 3 year contract guaranteeing the value at just over £10,000 at the end of 3 years.
This deal would bring our monthly payments to £295 which is less then we currently pay for the A3 on hire purchase (which is paid off in 2 months). It is affordable for us, but what I don’t understand is what equity will we have at the end of 3 years to use as a deposit for another car?
I love the mercedes, gave it a thorough test drive today and cannot fault the car in any way. But I don’t want to make a poor financial decision based on my love for luxury!
Any advice would be really appreciated, thanks 
Forgot to add that the A3 has rear parking sensors as the only extra. The mercedes has a couple of extras and the dealer offered to have front and rear parker sensors installed.
March 29th, 2011 at 8:06 pm
You won’t have any equity at the end of your 3 years of payments and you won’t have the Mercedes either unless you come up with the £10,000 balloon payment. A PCP contract just protects you from the Mercedes depreciating in value below £10,000 in which case, you just return the car since it would cost you more than it is worth.
Of course the contract will likely state that you will be charged for any excess miles and any damage on the car if you return the car.
I assume your agreement is the Mercedes sells for £22,050 - £6,000 trade in = £16,050 - £10,620 in payments = £5,430 (a cost of £4,570 in interest payments over the 3 years since you can purchase the Mercedes for £10,000 after 3 years).