Tiered residual values coming in MY 2018?

by Tim Jones on February 7, 2017, 5:08 pm
Tiered Residual Values

Starting in 2018 BMW is implementing a tiered residual system for leases written with BMW Financial Services. As if leasing wasn't complicated enough already BMW is adding another layer of calculation to the mix. I'm looking for people in the know to help me decipher the latest program so I can write it up for everyone on Bimmerfest. The info in this thread came from the latest 2018 4 Series LCI update, but will it also apply to other 2018 models?

From what I can tell the standard monthly residual value will apply to the 4 Series Sport and Premium tiers only, and there will be a RV adjustment percentage for the M Sport and Luxury tier, as well as the M Sport Executive and Luxury Executive tier (see chart below).

The monthly RV number sheet that dealers get will now include a new table immediately preceding the standard RV grids, which details the RV adjustments for each tier. These RV adjustments must be applied to the posted RV for the Sport/Premium model in question to arrive at the correct RV for the other tiers.

2018 BMW residual value

2018 BMW residual value chart

What does everyone think? What's BMW's game here?



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154 responses to Tiered residual values coming in MY 2018?

rkinra commented:
February 7, 2017, 5:51 pm

It looks like (based on what you have above) that they will reduce the RV for adding M Sport or Lux package?

That doesn't make sense, as you're making the car more desirable at lease end.

If this structure added points to the RV, then it would make sense to me.

Very odd.
namelessman commented:
February 7, 2017, 6:11 pm

Quote:
Originally Posted by tim330i View Post
What does everyone think? What's BMW's game here?
My thinking is that BMWFS wants to make M sport/luxury/executive models pay additional depreciation as these loaded units cannot recoup the RV of those extra packages in resale/auction when compared to base/standard models.
tim330i commented:
February 7, 2017, 6:14 pm

So you'll pay more up front and a point or two in additional depreciation as well based on your thought process? All to make sure BMW can retain the RV at the end?

Tim
jjrandorin commented:
February 7, 2017, 6:23 pm

Quote:
Originally Posted by rkinra View Post
It looks like (based on what you have above) that they will reduce the RV for adding M Sport or Lux package?

That doesn't make sense, as you're making the car more desirable at lease end.

If this structure added points to the RV, then it would make sense to me.

Very odd.
But it actually DOES make sense (in a bean counter way) because options dont actually make the car more VALUABLE at lease end, just more desirable.

BMW takes a BATH on lease turn in on these highly optioned cars that have 10k of options that are now worth like 1k at lease turn in. We kind of saw this when they put a maximum amount that can be residualized on the 3's (making people pay full price for loading up options).

@Tim, im obviously not in the business but to answer your question of "what is BMWs play here" with my own opinion, they want to stop losing as much money on these highly optioned "lower tier" cars on lease turn in, so they are subsidizing the RV "less". Still likely inflated but not as much so.

Would not be surprised to see this combined with a maximum amount that can be residualized on these as well, and would also love to see if this only applies to the "lower trim" such as 430s or does it apply to the 440 as well.

Screen shots only show 430, and I would not be surprised if its only on the 430 as they need a way to get people to move "up" to the higher trim car because the 430 is plenty fast and nice enough for most people, so there are not too many reasons to go for the 440 /340 right now other than "because you can" or preference for the sound.
namelessman commented:
February 7, 2017, 6:27 pm

Quote:
Originally Posted by tim330i View Post
So you'll pay more up front and a point or two in additional depreciation as well based on your thought process? All to make sure BMW can retain the RV at the end?

Tim
Let's say M sport is $3k package. At 60% RV the package itself should fetch $2.4k at resale/auction, but forum posts said resale/auction usually does not put much value on these packages. Let's say the M sport can only fetch half of the 60% RV, or $1.2k at auction, for a loss of $1.2k to BMWFS.

Let's assume the M sport 430i is $60k. A 2% drop in RV means lessees need to pay extra $1200, and that $1200 helps BMWFS to weather the loss of $1.2k at auction for that M sport package.

Does this tiered RV only apply to 430i? How about a 330i with M sport package?
namelessman commented:
February 7, 2017, 6:33 pm

Quote:
Originally Posted by jjrandorin View Post
BMW takes a BATH on lease turn in on these highly optioned cars that have 10k of options that are now worth like 1k at lease turn in. We kind of saw this when they put a maximum amount that can be residualized on the 3's (making people pay full price for loading up options).
How does BMWFS put a max that can be "residualized" on the 3's? Does it mean loaded units do not get any incentive?

In general it is good BMWFS starts to keep track of lease subsidies and ask lessees to pay for those, instead of require cash/finance deals to subsidize leases.
ctorrey commented:
February 7, 2017, 6:33 pm

Quote:
Originally Posted by jjrandorin View Post
But it actually DOES make sense (in a bean counter way) because options dont actually make the car more VALUABLE at lease end, just more desirable.

BMW takes a BATH on lease turn in on these highly optioned cars that have 10k of options that are now worth like 1k at lease turn in. We kind of saw this when they put a maximum amount that can be residualized on the 3's (making people pay full price for loading up options).

@Tim, im obviously not in the business but to answer your question of "what is BMWs play here" with my own opinion, they want to stop losing as much money on these highly optioned "lower tier" cars on lease turn in, so they are subsidizing the RV "less". Still likely inflated but not as much so.

Would not be surprised to see this combined with a maximum amount that can be residualized on these as well, and would also love to see if this only applies to the "lower trim" such as 430s or does it apply to the 440 as well.

Screen shots only show 430, and I would not be surprised if its only on the 430 as they need a way to get people to move "up" to the higher trim car because the 430 is plenty fast and nice enough for most people, so there are not too many reasons to go for the 440 /340 right now other than "because you can" or preference for the sound.
I agree with this. I can also imagine where those who don't have a strong understanding of lease concepts are blown away when the CA tells them that their lease payment just went up an extra $100+ month because the options they chose moved them to new 'residual tier'. Leases are already overwhelming for many, many people and this just makes it more difficult. It's almost discouraging people from spending more on your product. Seems counter intuitive from that perspective.
namelessman commented:
February 7, 2017, 6:38 pm

Quote:
Originally Posted by ctorrey View Post
I agree with this. I can also imagine where those who don't have a strong understanding of lease concepts are blown away when the CA tells them that their lease payment just went up an extra $100+ month because the options they chose moved them to new 'residual tier'. Leases are already overwhelming for many, many people and this just makes it more difficult. It's almost discouraging people from spending more on your product. Seems counter intuitive from that perspective.
BMWFS has been quite aggressive to pursue volume/sales leader, and it looks like that goal has been curtailed. Without the sales volume, BMWFS needs to account for currently subsidized lease costs and ask lessees to pay up.
tim330i commented:
February 7, 2017, 6:39 pm

I get it from a bean counter perspective, but BMW is in the business of selling cars. As ctorrey pointed out this is just adding a ton of complexity to leasing, which is already complicated enough as is.

Seems like we need the March info to see how this will be applied to vehicles beyond the 430i.

Tim
tim330i commented:
February 7, 2017, 6:47 pm

Quote:
Originally Posted by namelessman View Post
Let's say M sport is $3k package. At 60% RV the package itself should fetch $2.4k at resale/auction, but forum posts said resale/auction usually does not put much value on these packages. Let's say the M sport can only fetch half of the 60% RV, or $1.2k at auction, for a loss of $1.2k to BMWFS.

Let's assume the M sport 430i is $60k. A 2% drop in RV means lessees need to pay extra $1200, and that $1200 helps BMWFS to weather the loss of $1.2k at auction for that M sport package.

Does this tiered RV only apply to 430i? How about a 330i with M sport package?

For your calculations wouldn't 60% of $3,000 M Sport price really be $1,800?

I'm guessing this is going to apply to a bunch of low tier cars like the 330i, 320i, 530i, etc. but we won't know until BMW gives us more info.

Tim
namelessman commented:
February 7, 2017, 6:57 pm

Quote:
Originally Posted by tim330i View Post
For your calculations wouldn't 60% of $3,000 M Sport price really be $1,800?

I'm guessing this is going to apply to a bunch of low tier cars like the 330i, 320i, 530i, etc. but we won't know until BMW gives us more info.

Tim
Yes you are correct, 60% of $3k is $1800 not $2400. That $2400 number in my head was for M sport + Adaptive M with MSRP $3700@65% RV.
jjrandorin commented:
February 7, 2017, 7:02 pm

Quote:
Originally Posted by namelessman View Post
How does BMWFS put a max that can be "residualized" on the 3's? Does it mean loaded units do not get any incentive?

In general it is good BMWFS starts to keep track of lease subsidies and ask lessees to pay for those, instead of require cash/finance deals to subsidize leases.
BMW set a maximum residualized amount on certain cars... remember this thread?

http://www.bimmerfest.com/forums/sho...d.php?t=924667

"As a result of the price increases, the Maximum Residualizable MSRP has been increased from $49,100 to $49,400 for the 330i Sedan and from $51,100 to $51,400 for the 330i xDrive Sedan."

In essence, if you "option up" a 330i past the maximum residualized MSRP of 49.400, a person will have to pay 100 percent of that amount over the maximum residualized MSRP. So if a person makes the car 52,000 and the maximum residualized MSRP is 49,400, they need to pay 100% of that 2600 thats over the maximum residualized MSRP.

I have heard porsche does this as well, so its not unique to BMW and is something that came about in the latter part of last year from what I remember... around the same time the paint cost increased from 550 to 700.

(this is somewhat off topic for this thread but It certainly could be coming for the 430 as well).
namelessman commented:
February 7, 2017, 7:07 pm

Quote:
Originally Posted by jjrandorin View Post
As a result of the price increases, the Maximum Residualizable MSRP has been increased from $49,100 to $49,400 for the 330i Sedan and from $51,100 to $51,400 for the 330i xDrive Sedan."
It looks like BMWFS is restructuring its lease structures to recoup costs.
MJBrown62 commented:
February 7, 2017, 7:16 pm

BMW has been using a Maximum Residualizable MSRP (MRM) for 330's since this past September. I think this is just a new iteration of the same play.

They manipulate the residual for nicely/highly options 330's/430s. People were building well-optioned 328s/330s that had MSRPs like a lightly equipped 435/440. But the engine retained the value more than the options. So the goal was to get people to move up.

This, if similar, does the same. Maybe a 440 will residualize better than the 430 fully loaded.

I'm not sure, but it seems like the same play.
jjrandorin commented:
February 7, 2017, 7:16 pm

Quote:
Originally Posted by namelessman View Post
It looks like BMWFS is restructuring its lease structures to recoup costs.
The quote I quoted was taken from that thread ( a post from tim actually). Want to make sure I give credit to the proper source.

With that being said I agree with you. Leasing BMWs (especially loading them up with a bunch of options) is going to get significantly more expensive.
Der_Kommissar commented:
February 7, 2017, 8:20 pm

Quote:
Originally Posted by jjrandorin View Post
The quote I quoted was taken from that thread ( a post from tim actually). Want to make sure I give credit to the proper source.

With that being said I agree with you. Leasing BMWs (especially loading them up with a bunch of options) is going to get significantly more expensive.
And if they don't add value with more standard equipment (i.e. backup camera) to make buying more attractive, volume is going to decline. Which sounds like what they really want anyway. This will also drive CPO prices up in the long run, since there will be fewer lease returns.
namelessman commented:
February 7, 2017, 8:38 pm

Quote:
Originally Posted by Der_Kommissar View Post
And if they don't add value with more standard equipment (i.e. backup camera) to make buying more attractive, volume is going to decline. Which sounds like what they really want anyway. This will also drive CPO prices up in the long run, since there will be fewer lease returns.
Makes sense. Maybe this is part of the overall game plan to drop prices(e.g. offer all the techs for $2k to $3k just like Honda).

There were posts that mentioned BMWAG is shifting allocation away from the US(due to soft prices in spite of record incentives). With reduced inventory(and volume), BMWFS/BMWNA needs to start taking away lease subsidies to realign with latest market conditions.

CPO prices heading up also helps with private resale.
TXPearl commented:
February 8, 2017, 12:53 pm

This approach makes perfect sense. A $63K 340i won't hold its value (in % terms) as much as a $49K 340i.

I generally like gadgets so I've taken advantage of the mispricing of high MSRP leases in the past. I may be more selective with options in the future since they'll now cost more.
Autoputzer commented:
February 8, 2017, 1:12 pm

BMW's more in the business of leasing cars than selling them. 57% of new BMW's are leased in the US, with the 3 and 4 Series model's lease rates being even higher.

Most options depreciate faster and further (eventually down to zero in many cases) than the base car.

Albert Einstein supposedly once said "Things should be as simple as possible, but no simpler." The differences in the actual residual values of highly optioned cars, and oversimplified residual rates has caused the leasers of less optioned cars to subsidize the leasers of heavily optioned cars.

If you're worried about additional costs for leasing, buy the car new or buy it after the lease is up. I track my ownership costs of all my vehicles. I'm not going to burden everybody with my spreadsheet again. But, for my 2014 535i, I expect the ownership costs (depreciation, maintenance and repairs, and capital costs) to be about $1/mile for the first four years and first 50k miles, and about $0.50/miles for the second four years and second 50k miles.

The additional cost of leasing with more accurate residual rates is trivial when compared to the cost of getting a new car every three years.
zoombie99 commented:
February 9, 2017, 8:48 am

I had this nearly five years ago with my Lexus GS. As soon as I went to a loaded car, the residual went down. That's one of the reasons I moved over to the 535 when my lease was up. Disheartening news.


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f1fan commented:
February 9, 2017, 9:58 am

I leased a Toyota and when I added the Nav, I payed the total cost of the Nav over the course of the lease. This was in '13. Did I pay it...yes The more desirable car won out.
PhantomCypher commented:
February 9, 2017, 2:49 pm

This is going to disenfranchise a lot of existing lessors as when they go back to get the exact same car the payment is going to be astronomically higher than what they were paying. This will lead to a mass migration of repeat lessors to other brands as they may be more competitive lease (Mercedes, Lexus, etc.)
jjrandorin commented:
February 9, 2017, 3:40 pm

Quote:
Originally Posted by PhantomCypher View Post
This is going to disenfranchise a lot of existing lessors as when they go back to get the exact same car the payment is going to be astronomically higher than what they were paying. This will lead to a mass migration of repeat lessors to other brands as they may be more competitive lease (Mercedes, Lexus, etc.)
Many people choose BMW BECAUSE their lease numbers are inflated towards the customer. It really depends on how this shakes out...

Suppose this is only on the 430 for example but the 440 has the same residual... making it almost a wash to get a 440 vs a 430. Is someone switching brands, or getting the higher end car? BMW is betting that people will take the higher end car.

Why? Where are they going? Merc and Audi do not support their residuals as much as BMW does. Lexus? Different buyer In my opinion.

Some may leave the brand, to go pay the exact same thing for a merc or an audi, but unless those two change their pricing this just brings BMW "In line" with their rivals, not behind them... just like the maintenance change did.

Audi and Merc dont give free maintenance and BMW does... BMW pulled back on it, and people flipped and said that the free maintenance was one of the reasons why they got BMWs.. ok thats cool but when you go take your money and go to audi or merc, you are not getting that there either, so at that point you are REALLY saying " I would rather be in an audi or merc, but am choosing BMW because its cheaper".

At equivilent pricing, who chooses what? I think we are about to find out...

I also think that we will see a shift in people taking the higher trim models instead of the 90/10 we see now. If a highly optioned 430 costs the same as a medium optioned 440, who is choosing what? Quite a few will take the 440.

BMW could have gone about this by just not making certain options available on the 430 vs the 440 as well... but that would have been a MUCH MUCH more public out cry, as the general public is not going to know how to process this change, or care. Saying "you can only get M sport on a 440" for example would have been VERY public, with pitchforks etc.

My take on this anyway.
namelessman commented:
February 9, 2017, 4:46 pm

Quote:
Originally Posted by PhantomCypher View Post
This is going to disenfranchise a lot of existing lessors as when they go back to get the exact same car the payment is going to be astronomically higher than what they were paying. This will lead to a mass migration of repeat lessors to other brands as they may be more competitive lease (Mercedes, Lexus, etc.)
Before this pending change BMW lease is considerably cheaper than MB and Lexus. With this 1-2% RV change, BMW lease will still be cheaper than MB and Lexus(at least that's what my coworkers concluded with their pending deals). BMWFS is basically splitting the difference with the customer, e.g. now is $1k(e.g.) instead of $2k(e.g.) cheaper than MB and Lexus.
caveatesq commented:
February 9, 2017, 5:26 pm

Audi has been doing this for years with different residuals for their "Premium", "Premium Plus" and "Prestige" trim levels, and for years Porsche has imposed a cap on the the maximum MSRP that can be residualized to avoid losing its shirt when those over-optioned 911's come back. BMW seems to be showing its disfavor for the American market a lot lately. These lease changes are just another example.
jjrandorin commented:
February 9, 2017, 5:51 pm

Quote:
Originally Posted by caveatesq View Post
Audi has been doing this for years with different residuals for their "Premium", "Premium Plus" and "Prestige" trim levels, and for years Porsche has imposed a cap on the the maximum MSRP that can be residualized to avoid losing its shirt when those over-optioned 911's come back. BMW seems to be showing its disfavor for the American market a lot lately. These lease changes are just another example.
You can look at this like "BMW is showing its disfavor for the american market" or " The american market is showing its disfavor to BMW" because of the large disparity between US sales last year and the ROW( rest of world).

ROW sales were UP (and pretty substatially in some markets). US sells were down. Even with down US sales, BMW group sales were up. Only makes sense to shift cars and strategies to markets that are "hot".

US sales were down in spite of large incentives, so should they continue the "race to the bottom" mentality? (rhetorical question, as a consumer of course I want them to).
Robert A commented:
February 9, 2017, 6:04 pm

I think we need to wake up and realize that BMW may have made small but fundamental changes to its leasing philosophy. First we saw the removal of lease incentives and program discounts in the holiday season. Now we're seeing residuals that are more reflective of actual resale market conditions. I also heard recently that BMWFS is imposing residual limits on certain models, including the 330i. The result, if true, makes the leases much more expensive for highly equipped models.
namelessman commented:
February 9, 2017, 11:11 pm

Quote:
Originally Posted by Robert A View Post
I think we need to wake up and realize that BMW may have made small but fundamental changes to its leasing philosophy. First we saw the removal of lease incentives and program discounts in the holiday season. Now we're seeing residuals that are more reflective of actual resale market conditions. I also heard recently that BMWFS is imposing residual limits on certain models, including the 330i. The result, if true, makes the leases much more expensive for highly equipped models.
The shift in lease philosophy(e.g. one RV fits all) is probably driven by market reality. E.g. a comparably equipped MY14 328i is currently $9k cheaper than a base MY14 335, while the MSRP of that base 335i is only $4k more expensive than comparably equipped 328i, that alone necessitates reduced RV(e.g. MRM) on 330i going forward.
Robert A commented:
February 9, 2017, 11:17 pm

I'm not following your logic. A comparably equipped 328/335 or 330/340 are about $3k apart at MSRP.

FWIW, BMW charges the same delta for the M Sport package as it does to upgrade an identically equipped car to a 6 cyl engine,, but the engine upgrade must cost considerably more to produce. Thus, to my mind, they should want to sell many more 330is with M Sport where (presumably) the profit margins are higher. At least, that's what I think.

Quote:
Originally Posted by namelessman View Post
The shift in lease philosophy(e.g. one RV fits all) is probably driven by market reality. E.g. a comparably equipped MY14 328i is currently $9k cheaper than a base MY14 335, while the MSRP of that base 335i is only $4k more expensive than comparably equipped 328i, that alone necessitates reduced RV(e.g. MRM) on 330i going forward.
namelessman commented:
February 10, 2017, 12:42 am

Quote:
Originally Posted by Robert A View Post
I'm not following your logic. A comparably equipped 328/335 or 330/340 are about $3k apart at MSRP.

FWIW, BMW charges the same delta for the M Sport package as it does to upgrade an identically equipped car to a 6 cyl engine,, but the engine upgrade must cost considerably more to produce. Thus, to my mind, they should want to sell many more 330is with M Sport where (presumably) the profit margins are higher. At least, that's what I think.
Your logic makes sense, namely, BMWNA wants to sell more 330i than 340i(and past incentives aligned with that focus).

While BMWNA can encourage more 330i(328i) sales than 340i(335i) by not lowering RV of 330i(328i), BMWFS/BMWNA is hit by reality than current 328i/335i resale(of comparable configs), at 3-yr lease end, is $9k apart, and the one-size-fit-all RV cannot account for that.

It looks like BMWFS believes that lowering the RV(through MRM and tiered RV) will protect their margin. The mechanics will be something like, the depressed RV also reduces sale, which then helps with resale at lease end, and subsequently stabilize margin of BMWFS at lease return.

This also shows 335i/340i to be a noticeably better choice(resale wise) than 330i/328i for cash buyers.

Sounds like QE?
schnell525 commented:
February 10, 2017, 7:49 am

Ah, BMW is going the way of Land Rover with tiered leasing. BMWFS subvented there cars to a large degree compared to Audi. MB subvents their leases heavily. BMW stopped doing so, significantly in the late 2000's. There is a tier on MF but based on the model package, not necessarily on the option (if you bake it down, yes it comes down to option).

BMW is going to cut themselves off at the knees because their favorable MF's made them so competitive especially against Audi. MBFS heavily subvents their cars as well. What BMW owners will find out if they try to trade early or sell their cars how much the market price of their car does not match the residual. As well, up front they'll get hit with a higher payment quote which may make them walk.

This should be interesting.
Elias commented:
February 10, 2017, 9:32 am

Last summer I was in the market to buy an suv, my wife wanted to check out the Cayenne and
she loved it. I wanted to Lease a Cayenne S and the Lease payments were not favorable at all.
The SA told me if I wanted a good lease deal I would have to Lease a base model as those
were the only ones with favorable lease terms. So we ended up buying the Cayenne S.
If BMW goes the TRV route Leases will drop but financing cars will go up, how much who knows.
TXPearl commented:
February 10, 2017, 10:01 am

I think we're conflating the "lease residual subsidy" (which may still remain at the current level, on average, still unclear) with the bias toward leasing for high MSRP/well-optioned vehicles (which tiered residuals will mitigate). There are so many moving parts on a lease already, that I don't think this alone will change much.

Probably the biggest threat to leasing (and financing, car sales in general) would be if interest rates were allowed to go to their natural level (higher). Lease payments of <1% of MSRP never made sense until 2009. Someday, that will be true again.
namelessman commented:
February 10, 2017, 12:32 pm

Quote:
Originally Posted by schnell525 View Post
Ah, BMW is going the way of Land Rover with tiered leasing. BMWFS subvented there cars to a large degree compared to Audi. MB subvents their leases heavily. BMW stopped doing so, significantly in the late 2000's. There is a tier on MF but based on the model package, not necessarily on the option (if you bake it down, yes it comes down to option).

BMW is going to cut themselves off at the knees because their favorable MF's made them so competitive especially against Audi. MBFS heavily subvents their cars as well. What BMW owners will find out if they try to trade early or sell their cars how much the market price of their car does not match the residual. As well, up front they'll get hit with a higher payment quote which may make them walk.

This should be interesting.
BMW's favorable lease terms are not bringing in enough sales, so BMWFS may as well revert those favorable terms back to industry norms.
Robert A commented:
February 10, 2017, 12:34 pm

Good points, but where did you see that used values for identically equipped 328/335 are $9k apart? Not disputing it -- just want to know.

Quote:
Originally Posted by namelessman View Post
Your logic makes sense, namely, BMWNA wants to sell more 330i than 340i(and past incentives aligned with that focus).

While BMWNA can encourage more 330i(328i) sales than 340i(335i) by not lowering RV of 330i(328i), BMWFS/BMWNA is hit by reality than current 328i/335i resale(of comparable configs), at 3-yr lease end, is $9k apart, and the one-size-fit-all RV cannot account for that.

It looks like BMWFS believes that lowering the RV(through MRM and tiered RV) will protect their margin. The mechanics will be something like, the depressed RV also reduces sale, which then helps with resale at lease end, and subsequently stabilize margin of BMWFS at lease return.

This also shows 335i/340i to be a noticeably better choice(resale wise) than 330i/328i for cash buyers.

Sounds like QE?
namelessman commented:
February 10, 2017, 12:39 pm

Quote:
Originally Posted by TXPearl View Post
I think we're conflating the "lease residual subsidy" (which may still remain at the current level, on average, still unclear) with the bias toward leasing for high MSRP/well-optioned vehicles (which tiered residuals will mitigate). There are so many moving parts on a lease already, that I don't think this alone will change much.

Probably the biggest threat to leasing (and financing, car sales in general) would be if interest rates were allowed to go to their natural level (higher). Lease payments of <1% of MSRP never made sense until 2009. Someday, that will be true again.
Free money/low rates does pay a factor, although adding $6k+(e.g. $55k MSRP 330i M sport) to depreciation paid by lessees also speaks volume.

The rising rate affects car sales. As far as premium charged by BMWFS, it is usually 3% above fed rate. E.g. 8% lease/finance rate in 2000 was with 5% risk free rate, while the current 3% rate is against 0% risk free rate. So technically the analysis of cash/finance/lease will be similar, e.g. cash buy versus lease is w.r.t. 3%.
Robert A commented:
February 10, 2017, 12:54 pm

It's not for me to tell BMW how to run its business. However it seems those low-resale options are actually very inexpensive to produce, high profit margin items that BMW would want to market heavily. For instance, the M Sport package or the navigation system cannot cost much to produce. So, if they take "losses" on resale, are they really losing any money?

Quote:
Originally Posted by TXPearl View Post
I think we're conflating the "lease residual subsidy" (which may still remain at the current level, on average, still unclear) with the bias toward leasing for high MSRP/well-optioned vehicles (which tiered residuals will mitigate). There are so many moving parts on a lease already, that I don't think this alone will change much.

Probably the biggest threat to leasing (and financing, car sales in general) would be if interest rates were allowed to go to their natural level (higher). Lease payments of <1% of MSRP never made sense until 2009. Someday, that will be true again.
namelessman commented:
February 10, 2017, 1:43 pm

Quote:
Originally Posted by Robert A View Post
It's not for me to tell BMW how to run its business. However it seems those low-resale options are actually very inexpensive to produce, high profit margin items that BMW would want to market heavily. For instance, the M Sport package or the navigation system cannot cost much to produce. So, if they take "losses" on resale, are they really losing any money?
Good points, in fact NADA shows that for MY13/MY14, M sport package on 328i and 335i have same resale value, of $2k.

On the other hand, BMWNA/BMWFS has all the data points for their own cars. E.g. M sport or Nav can be outsourced,if so the prices charged by BMWAG/NMWNA is tied to supplier prices.
Der_Kommissar commented:
February 10, 2017, 1:55 pm

I seriously explored leasing last fall, and just about leased a new 3 series instead of buying a CPO as I have done in the past. I had a great deal on the table for a car I liked a lot. The thing that stopped me was thinking about what my next lease would cost. I seriously doubted I would get such a good deal the next time. I did not want to get stuck into an expensive future for a cheap present, and felt I could control my costs better with buying CPO. That logic seems to have been supported by this recent move by BMW. I totally understand it from their perspective, but they've trained their customers to expect cheap leases, so there will be a period of disruption before their market settles down again into whatever new pattern is intended.
jjrandorin commented:
February 10, 2017, 2:29 pm

Quote:
Originally Posted by namelessman View Post
Free money/low rates does pay a factor, although adding $6k+(e.g. $55k MSRP 330i M sport) to depreciation paid by lessees also speaks volume.

The rising rate affects car sales. As far as premium charged by BMWFS, it is usually 3% above fed rate. E.g. 8% lease/finance rate in 2000 was with 5% risk free rate, while the current 3% rate is against 0% risk free rate. So technically the analysis of cash/finance/lease will be similar, e.g. cash buy versus lease is w.r.t. 3%.
BMW is saying a 55k 330 M sport should not exist as a leased vehicle (at least in my mind), and I dont blame them for not wanting to take a bath on it. What we need to see is, is this ONLY on the lower tiers (as I suspect) or is it across all lines.

That will tell us their thinking.
namelessman commented:
February 10, 2017, 2:32 pm

Quote:
Originally Posted by Der_Kommissar View Post
I seriously explored leasing last fall, and just about leased a new 3 series instead of buying a CPO as I have done in the past. I had a great deal on the table for a car I liked a lot. The thing that stopped me was thinking about what my next lease would cost. I seriously doubted I would get such a good deal the next time. I did not want to get stuck into an expensive future for a cheap present, and felt I could control my costs better with buying CPO. That logic seems to have been supported by this recent move by BMW. I totally understand it from their perspective, but they've trained their customers to expect cheap leases, so there will be a period of disruption before their market settles down again into whatever new pattern is intended.
If this move entices customers to go from lease to CPO it will help BMWNA to stabilize RV.

BTW festers and friends say the buyout discounts are not that great as well, so that also supports the theory that BMWNA is trying to redirect customers to CPO.
namelessman commented:
February 10, 2017, 2:36 pm

Quote:
Originally Posted by jjrandorin View Post
BMW is saying a 55k 330 M sport should not exist as a leased vehicle (at least in my mind), and I dont blame them for not wanting to take a bath on it. What we need to see is, is this ONLY on the lower tiers (as I suspect) or is it across all lines.

That will tell us their thinking.
Another related point is, will price of base 340i go up? A $3k delta on comparably equipped 330i versus base 340i is not much given the HP/lb-ft gain plus beefed up components.
justinnum1 commented:
February 10, 2017, 2:38 pm

BMW will end up selling less cars because of this.
Der_Kommissar commented:
February 10, 2017, 4:10 pm

Quote:
Originally Posted by namelessman View Post
If this move entices customers to go from lease to CPO it will help BMWNA to stabilize RV.

BTW festers and friends say the buyout discounts are not that great as well, so that also supports the theory that BMWNA is trying to redirect customers to CPO.
That's true, but the lease and the CPO market are two sides of the same coin. With differential RVs on higher end leases there will be fewer CPOs in the market, along with less variability in what is offered. That will result in fewer CPO sales overall. If customers are redirected towards buying, then there will be fewer CPOs too. I've thought that the BMW strategy of late is to try to rent every car as a lease, then sell it again as a CPO, and that they prefer that over selling a car outright. I would think this move will break that chain, which is fine if they make buying more attractive with either lower prices or more standard equipment. The other option is that they really are ready to give up on volume and are just going for margin now.
AksNasZasNas commented:
February 10, 2017, 5:09 pm

Great thread. I think this philosophical change will be limited to highly optioned 330s, 430s, eventually 530s.

It will have no appreciable effect on the number of new cars sold or leased but may increase the CPO market.

But as JJ said, we do not have enough data points yet to determine what exactly bmw is thinking. Only time will tell.


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Robert A commented:
February 10, 2017, 5:12 pm

Odd that there's no apparent impact on the 328d. Also wonder how this might affect CAFE.
namelessman commented:
February 10, 2017, 6:21 pm

Quote:
Originally Posted by Robert A View Post
Odd that there's no apparent impact on the 328d. Also wonder how this might affect CAFE.
Maybe BMW will have this pure electric offerings ready soon, hence there will be no need for PZEV 330i?
TXPearl commented:
February 10, 2017, 6:32 pm

Quote:
Originally Posted by Robert A View Post
It's not for me to tell BMW how to run its business. However it seems those low-resale options are actually very inexpensive to produce, high profit margin items that BMW would want to market heavily. For instance, the M Sport package or the navigation system cannot cost much to produce. So, if they take "losses" on resale, are they really losing any money?
Agree. For that matter, does base MSRP/invoice represent the true cost to BMW to produce a car? I'm skeptical when they're consistently willing to eat $$ on residual subsidies.

It's more complicated than just analyzing a single deal, for sure, (e.g. what's the value of a repeat customer every 2-3 years?) but eventually you have to make some money on selling/leasing cars.
namelessman commented:
February 10, 2017, 6:55 pm

Quote:
Originally Posted by TXPearl View Post
Agree. For that matter, does base MSRP/invoice represent the true cost to BMW to produce a car? I'm skeptical when they're consistently willing to eat $$ on residual subsidies.

It's more complicated than just analyzing a single deal, for sure, (e.g. what's the value of a repeat customer every 2-3 years?) but eventually you have to make some money on selling/leasing cars.
My wild guess is that 10% of MSRP is to account for inflated RV.
jjrandorin commented:
February 10, 2017, 10:14 pm

Everyone, can I just say how awesome this thread has been? Great discussion points, no real mud slinging, and interesting discussion. awesome awesome

namelessman commented:
February 11, 2017, 2:18 am

Quote:
Originally Posted by Robert A View Post
Good points, but where did you see that used values for identically equipped 328/335 are $9k apart? Not disputing it -- just want to know.
One reference is nada(close to manheim). For MY14 328i versus MY14 335i, say, 30k miles, the prices are $20550 versus $29450 clean trade, or $9000 delta.

Another reference is kkb(which allows more options to be specified than nada), MY14 328i and 335i prices are $22311 versus $30174 private sale, or $8000 delta.
AksNasZasNas commented:
February 11, 2017, 1:07 pm

Quote:
Originally Posted by jjrandorin View Post
Everyone, can I just say how awesome this thread has been? Great discussion points, no real mud slinging, and interesting discussion. awesome awesome





Well said. [emoji122]
RaslDasl commented:
February 11, 2017, 5:09 pm

It's all such a game. BMW gets to keep the low advertised lease numbers on the moderately optioned vehicles. Then make more profit on the highly optioned ones. I wouldn't cry foul if it were not for some of their absurd option packages and prices. $300 for Apple Car Play? Auto high beams bundled with adaptive LEDs? $400 for a backup camera on a brand new 2017 5 series when the cameras will be required by law in 2018? I don't expect to pay the same for a BMW as a KIA but don't want to pay so much extra for options that are standard on a car that costs half as much. And now you are going to penalize me for adding those same options that should be standard? And then even when you pay through the nose for those options you get inferior technology. 2G connections in 2013 and 3G in 2016? I rented a Chevy Aveo that was better equipped than our 2010 5 series that no longer has BMW assist due to 2G hardware. BMW money should at least buy you a 5 year leg up on an airport compact rental car.


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Eagle11 commented:
February 12, 2017, 7:49 am

Quote:
Originally Posted by zoombie99 View Post
I had this nearly five years ago with my Lexus GS. As soon as I went to a loaded car, the residual went down. That's one of the reasons I moved over to the 535 when my lease was up. Disheartening news.


Sent from my iPhone using Bimmerfest mobile app
Audi does this already, the RV on a A4 mid level (whatever it is called) is higher then the top line A4.
Eagle11 commented:
February 12, 2017, 7:58 am

Quote:
Originally Posted by RaslDasl View Post
It's all such a game. BMW gets to keep the low advertised lease numbers on the moderately optioned vehicles. Then make more profit on the highly optioned ones. I wouldn't cry foul if it were not for some of their absurd option packages and prices. $300 for Apple Car Play? Auto high beams bundled with adaptive LEDs? $400 for a backup camera on a brand new 2017 5 series when the cameras will be required by law in 2018? I don't expect to pay the same for a BMW as a KIA but don't want to pay so much extra for options that are standard on a car that costs half as much. And now you are going to penalize me for adding those same options that should be standard? And then even when you pay through the nose for those options you get inferior technology. 2G connections in 2013 and 3G in 2016? I rented a Chevy Aveo that was better equipped than our 2010 5 series that no longer has BMW assist due to 2G hardware. BMW money should at least buy you a 5 year leg up on an airport compact rental car.

Since the new leasing tier states in MY18, but you can look at the future if you look at the 4 series order guide, I was surprised how well they bundled some options together. And yes, the back up camera is started on the MY18 4 series.
need4speed commented:
February 12, 2017, 11:09 am

Quote:
Originally Posted by Robert A View Post
Odd that there's no apparent impact on the 328d. Also wonder how this might affect CAFE.


My ? as well. Pushing leases into the more expensive (usually more powerful motor) car will hurt CAFE. I'd be surprised if they could get anywhere near enough out of the i or e cars to help in time.
RaslDasl commented:
February 12, 2017, 12:02 pm

Quote:
Originally Posted by need4speed View Post
[/B]
My ? as well. Pushing leases into the more expensive (usually more powerful motor) car will hurt CAFE. I'd be surprised if they could get anywhere near enough out of the i or e cars to help in time.
Look at the 530e pricing for your answer. It's essentially the same as the 530i. No doubt this is subsidized to help CAFE.
namelessman commented:
February 12, 2017, 3:11 pm

The nada and kbb numbers do show that BMFS set the correct RV for MY14 335i, while the RV for MY14 328i is off by 10% MSRP.

So it does make sense the MRM and tiered RV are applied on 330i going forward, at least from profit/loss perspective.

As far as CAFE, one possibility is that the non-PZEV fleet is doing good enough for BMWNA.

Is there any link for BMWNA's CAFE data/break-down?
Ty Vil commented:
February 17, 2017, 10:58 am

This was made official this morning with a bulletin to all dealer group employees.
tim330i commented:
February 17, 2017, 5:30 pm

Quote:
Originally Posted by Ty Vil View Post
This was made official this morning with a bulletin to all dealer group employees.
But it wasn't expanded beyond the 4 Series, at least not yet.

Tim
mh4ll commented:
February 17, 2017, 5:56 pm

Quote:
Originally Posted by tim330i View Post
But it wasn't expanded beyond the 4 Series, at least not yet.

Tim
Any confirmation on whether this applies to the 440 or just the 430?
tim330i commented:
February 17, 2017, 6:09 pm

I haven't seen anything more than what I posted in the first post. I don't think we will know until the March leasing info is sent to dealers.

Tim
DavidP@bmwportland commented:
February 19, 2017, 11:23 am

Quote:
Originally Posted by namelessman View Post
My thinking is that BMWFS wants to make M sport/luxury/executive models pay additional depreciation as these loaded units cannot recoup the RV of those extra packages in resale/auction when compared to base/standard models.


Nailed it.


Sent from my iPhone using Bimmerfest mobile app
Robert A commented:
February 19, 2017, 11:41 am

I actually think BMW is simply moving away from subvented leases. This is just one example.
Quote:
Originally Posted by DavidP@bmwportland View Post
Nailed it.


Sent from my iPhone using Bimmerfest mobile app
jjrandorin commented:
February 19, 2017, 11:48 am

Quote:
Originally Posted by Robert A View Post
I actually think BMW is simply moving away from subvented leases. This is just one example.
We wont know that until we see if they do the same on the higher end models. We are all guessing but I would bet that the 440 / 540 / 340 do not see the same reductions in residual that the '30 models are getting.

I said this before, but I feel that BMW is saying that the 320 /320 /430 / 530 models are for "the masses / non enthusiast", and that when you start doing things like adding M sport, etc you should move up to the higher engine model (at least on a lease).

Having more uptake on the bigger engined models will make BMW more money, and its likely that those options hold a little more value on the higher engined model than on the lower one, where they basically devalue to zero.
Robert A commented:
February 19, 2017, 11:52 am

But look what they're doing to service loaners, and the simple lack of incentives though the holiday season. I think the days of cheap leases are over.
Quote:
Originally Posted by jjrandorin View Post
We wont know that until we see if they do the same on the higher end models. We are all guessing but I would bet that the 440 / 540 / 340 do not see the same reductions in residual that the '30 models are getting.

I said this before, but I feel that BMW is saying that the 320 /320 /430 / 530 models are for "the masses / non enthusiast", and that when you start doing things like adding M sport, etc you should move up to the higher engine model (at least on a lease).

Having more uptake on the bigger engined models will make BMW more money, and its likely that those options hold a little more value on the higher engined model than on the lower one, where they basically devalue to zero.
namelessman commented:
February 19, 2017, 12:33 pm

Quote:
Originally Posted by Robert A View Post
But look what they're doing to service loaners, and the simple lack of incentives though the holiday season. I think the days of cheap leases are over.
The cheap leases also overlap with the fed cheap money. Maybe BMWNA expects interest rate will trend up, hence it is re-structuring its lease so that they don't need non-cheap money to subsidize lease end transactions.
namelessman commented:
February 19, 2017, 12:54 pm

Quote:
Originally Posted by Robert A View Post
I actually think BMW is simply moving away from subvented leases. This is just one example.
Did BMWFS use to subsidize leases as much back in dotcom days and beyond? This seems to be a natural regression back to running average.
Robert A commented:
February 19, 2017, 1:54 pm

That should affect the MF not the RV. I think the writing is on the wall -- the days of cheap leases are over.
Quote:
Originally Posted by namelessman View Post
The cheap leases also overlap with the fed cheap money. Maybe BMWNA expects interest rate will trend up, hence it is re-structuring its lease so that they don't need non-cheap money to subsidize lease end transactions.
Robert A commented:
February 19, 2017, 1:56 pm

I don't recall the RVs but the MFs were much higher. However the selling prices of the cars, even after inflation, was much lower.
Quote:
Originally Posted by namelessman View Post
Did BMWFS use to subsidize leases as much back in dotcom days and beyond? This seems to be a natural regression back to running average.
namelessman commented:
February 19, 2017, 2:06 pm

Quote:
Originally Posted by Robert A View Post
That should affect the MF not the RV. I think the writing is on the wall -- the days of cheap leases are over.
My thinking is that the subsidized RV is funded by cheap money, like a Ponzi scheme.

Yes, my old E39 was $46.5k out the door, that's much cheaper than current 5-series, even it was MSRP minus pricing back then.
Robert A commented:
February 19, 2017, 2:37 pm

IMO, the current MSRPs are artificially inflated and the evidence is in a poor resale values.
Quote:
Originally Posted by namelessman View Post
My thinking is that the subsidized RV is funded by cheap money, like a Ponzi scheme.

Yes, my old E39 was $46.5k out the door, that's much cheaper than current 5-series, even it was MSRP minus pricing back then.
namelessman commented:
February 19, 2017, 3:24 pm

Quote:
Originally Posted by Robert A View Post
IMO, the current MSRPs are artificially inflated and the evidence is in a poor resale values.
Your comment supports my assertion that 10% MSRP is padded to support inflated RV.

BMWFS is restructuring its lease in order to drop MSRP, or with same MSRP offers extra standard features(e.g. driver tech) to be relevant with competitors.
namelessman commented:
February 19, 2017, 3:43 pm

Quote:
Originally Posted by Robert A View Post
IMO, the current MSRPs are artificially inflated and the evidence is in a poor resale values.
From another perspective, the inflated MSRP also is taken care by dynamic pricing and the massive incentives, e.g. my MSRP $43k 328i was sold at $37k, at the beginning of model year.

Based on $37k, the current $15k to $17k resale@4.5 years is not too shabby.

Having said that, if the current incentives(or lack of) cannot drop price to 15%+ off MSRP, then one option will be to keep leasing $80/month electric car until BMWFS/BMWNA get things resolved.
mwm1166 commented:
February 20, 2017, 12:27 am

First they gutted the ED program, then they adjusted their invoice price, then they went to maximum amount that can be residualized, now tiered residual program and they are gutting the lease program on Demo's and Loaners. I am feeling more and more like BMW's are going to stop representing any value add for the money over the competition, and with them getting larger and larger and softer and softer (and more common). It's going to get awfully hard to stay loyal to the brand. I'm thinking I've got my 340i on lease thru 2019. If they have an even bigger 3er then, and no rwd 4 door 2er, I might buy this car off the lease and drive it until its dead or a money pit and start looking to who has come along to compete. I won't buy the brand just for the roundel, unlike many folks, and they were great cars to lease because they are not long term reliable or easy/cheap to maintain. So, some Asian maker or someone will emerge. Hell I drove the giulia today and that's a great competitor, the XE is pretty damn close. But I guess BMW spent 30 years making their name and are now chasing in and they care less and less about dynamics. They want to be a luxury brand, ok. Well, let's see where this goes. Before I could say "Audi doesn't drive as well, merc doesn't drive as well, Acura is crap now, and Lexus don't impress me." But now I can say "hmmm those Alfa's and Jaguar's are primed to eat the 3 series lunch, and that ATS is a heck of a handler...."
kjboyd commented:
February 20, 2017, 3:36 am

Quote:
Originally Posted by mwm1166 View Post
First they gutted the ED program, then they adjusted their invoice price, then they went to maximum amount that can be residualized, now tiered residual program and they are gutting the lease program on Demo's and Loaners. I am feeling more and more like BMW's are going to stop representing any value add for the money over the competition, and with them getting larger and larger and softer and softer (and more common). It's going to get awfully hard to stay loyal to the brand. I'm thinking I've got my 340i on lease thru 2019. If they have an even bigger 3er then, and no rwd 4 door 2er, I might buy this car off the lease and drive it until its dead or a money pit and start looking to who has come along to compete. I won't buy the brand just for the roundel, unlike many folks, and they were great cars to lease because they are not long term reliable or easy/cheap to maintain. So, some Asian maker or someone will emerge. Hell I drove the giulia today and that's a great competitor, the XE is pretty damn close. But I guess BMW spent 30 years making their name and are now chasing in and they care less and less about dynamics. They want to be a luxury brand, ok. Well, let's see where this goes. Before I could say "Audi doesn't drive as well, merc doesn't drive as well, Acura is crap now, and Lexus don't impress me." But now I can say "hmmm those Alfa's and Jaguar's are primed to eat the 3 series lunch, and that ATS is a heck of a handler...."


+1. having been in the BMW family since i was 18 (minus a brief departure for Volvo) there isn't a single model that 1) i actually like anymore or 2) that has any resemblance to any of my past BMWs. even my X1 has steering so vague it's sometimes scary to drive.

dynamic is no longer a given and the way they will be leasing soon minus the free maintenance... why stay? or it's time to find a nice old E39 and bring it back to life.
Der_Kommissar commented:
February 20, 2017, 10:51 am

Quote:
Originally Posted by kjboyd View Post
+1. having been in the BMW family since i was 18 (minus a brief departure for Volvo) there isn't a single model that 1) i actually like anymore or 2) that has any resemblance to any of my past BMWs. even my X1 has steering so vague it's sometimes scary to drive.

dynamic is no longer a given and the way they will be leading soon minus the free maintenance... why stay? or it's time to find a nice old E39 and bring it back to life.
Shoulda gotten the Xdrive X1. But seriously, making one take AWD to get the better steering was unfortunate for those of us in areas where we could get away with RWD. I would have preferred the drive and the MPG of the sDrive, but they were hard to find as a CPO with any equipment in the midwest. But the better steering is a bonus. I also saw the X1 as the last of the old BMWs, and worth holding on to.
MJBrown62 commented:
February 20, 2017, 2:04 pm

Unfortunately for purists the US Market for the BMW is no longer the direct response drive feel and firm suspension.

Having sold them for the past 10 years, I lost plenty of sales to competitors who offer a softer interior, more electronics, easier steering etc. Lexus, Acura, Infiniti and Mercedes on the high-line side.

BMW wasn't able to gain market share by continuing to build cars that met a more purist vision of the brand. So that's what we have now.

Put these cars in sport mode and let go of the past.

On the free maintenance front. I hear a lot of grumbling about that. The bottom line is that over 65% of new BMW buyers lease (depending on the market). So why have a program in place that 1) the lessee wont use the most expensive portion offered (brakes) and it becomes the benefit of the next buyer who will likely get them done in that last year.

The subsidy is now on the CPO car. Dealers have to pay $$ to "refresh it." It's no longer a selling point for non-BMW dealers selling one. And the client can upgrade the maintenance coverage tailored to the services and terms they need.

It's still better than nearly all of what's offered by other high-line manufacturers.
Robert A commented:
February 20, 2017, 2:34 pm

Where do you see a subsidy in a CPO car?
Alpine300ZHP commented:
February 20, 2017, 2:47 pm

Quote:
Originally Posted by MJBrown62 View Post
Unfortunately for purists the US Market for the BMW is no longer the direct response drive feel and firm suspension.

Having sold them for the past 10 years, I lost plenty of sales to competitors who offer a softer interior, more electronics, easier steering etc. Lexus, Acura, Infiniti and Mercedes on the high-line side.

BMW wasn't able to gain market share by continuing to build cars that met a more purist vision of the brand. So that's what we have now.

Put these cars in sport mode and let go of the past.

On the free maintenance front. I hear a lot of grumbling about that. The bottom line is that over 65% of new BMW buyers lease (depending on the market). So why have a program in place that 1) the lessee wont use the most expensive portion offered (brakes) and it becomes the benefit of the next buyer who will likely get them done in that last year.

The subsidy is now on the CPO car. Dealers have to pay $$ to "refresh it." It's no longer a selling point for non-BMW dealers selling one. And the client can upgrade the maintenance coverage tailored to the services and terms they need.

It's still better than nearly all of what's offered by other high-line manufacturers.
Hey Mikey, I have to beg to differ on your defense of BMW's decision to gut the free service plan. How is the reduction to 3/36 and removal of brake coverage justified by the fact that most cars are 3 year leases when BMW already made it so that the free service only applies to original purchase??? This was done back in 2014 IIRC. The most recent move, to me, smacks of chasing profits pure and simple and it penalizes people like me who do 45k-50k miles (or more) on a lease. I confess that I have only needed 2 brake jobs over the 23 BMW's I have owned, but I sure would like to have kept the other free service up to 50k miles. I would have been much happier with a 3/50 free service plan. I understand that you and other CA's are defending BMW's recent moves, but the reality is that most of the moves are indefensible. They are pure profit grabs and everyone needs to be honest about that. BMW is chasing margin and everything they are doing is to further that agenda. I have no problem with them chasing margin and it is their right to do whatever they want with their product. However, it has affected the decisions I make when it comes to buying/leasing BMW's and I am sure that I am not the only one adjusting my buying habits accordingly. BMW's recent changes prompted me to take advantage of a company car offered by my employer. In the old days, I would have turned that perk down and said "I ll keep driving my M4". These days, I am taking that perk and giving up a BMW (I am either selling the M4 before the lease is up or I am finishing out the lease and walking away without replacing it.....I have been in talks to dump the M4 and x6 for a x6m/x5m). After 23 BMW's since 2001 (ranging in price from 105k to 32k), I think BMW should take notice that some of us are voting with our wallets.
adrian's bmw commented:
February 20, 2017, 3:01 pm

Quote:
Originally Posted by mwm1166 View Post
First they gutted the ED program, then they adjusted their invoice price, then they went to maximum amount that can be residualized, now tiered residual program and they are gutting the lease program on Demo's and Loaners. I am feeling more and more like BMW's are going to stop representing any value add for the money over the competition, and with them getting larger and larger and softer and softer (and more common). It's going to get awfully hard to stay loyal to the brand. I'm thinking I've got my 340i on lease thru 2019. If they have an even bigger 3er then, and no rwd 4 door 2er, I might buy this car off the lease and drive it until its dead or a money pit and start looking to who has come along to compete. I won't buy the brand just for the roundel, unlike many folks, and they were great cars to lease because they are not long term reliable or easy/cheap to maintain. So, some Asian maker or someone will emerge. Hell I drove the giulia today and that's a great competitor, the XE is pretty damn close. But I guess BMW spent 30 years making their name and are now chasing in and they care less and less about dynamics. They want to be a luxury brand, ok. Well, let's see where this goes. Before I could say "Audi doesn't drive as well, merc doesn't drive as well, Acura is crap now, and Lexus don't impress me." But now I can say "hmmm those Alfa's and Jaguar's are primed to eat the 3 series lunch, and that ATS is a heck of a handler...."


You keep saying BMW gutting programs when it appears that other brands have already been doing this and have actually been seeing increases in sales (and margins) i.e. Porsche, Audi, MB. One could say that BMW is just no longer subsidizing people's trips to Europe or "buying" their business with losses at the auction on used car leases.

When you drove the Guilia, out of curiosity, did you get a lease estimate on that ride?
Alpine300ZHP commented:
February 20, 2017, 3:10 pm

Quote:
Originally Posted by adrian's bmw View Post
You keep saying BMW gutting programs when it appears that other brands have already been doing this and have actually been seeing increases in sales (and margins) i.e. Porsche, Audi, MB. One could say that BMW is just no longer subsidizing people's trips to Europe or "buying" their business with losses at the auction on used car leases.

When you drove the Guilia, out of curiosity, did you get a lease estimate on that ride?
I agree with you. BMW is aligning themselves with the rest of the high-end market and margins will increase as a result. While I gamed the BMW system as much as the next guy, I always wondered how long it would last. Logically, BMW could not aspire to be the sales leader every single year and be able to make the profit they wanted. However, it was nice while it lasted and BMW's prior system is why I have 23 BMW's to my name. I am confident that I will remain a BMW client because the competition has yet to offer me an alternative that will make me jump ship. I cross shop all the time and end up back in a BMW. The incentives and promotions were good while they lasted and I cannot complain because, like I said, I milked it for all it was worth while I could.
kjboyd commented:
February 20, 2017, 3:30 pm

Quote:
Originally Posted by der_kommissar View Post
shoulda gotten the xdrive x1. but seriously, making one take awd to get the better steering was unfortunate for those of us in areas where we could get away with rwd. I would have preferred the drive and the mpg of the sdrive, but they were hard to find as a cpo with any equipment in the midwest. But the better steering is a bonus. I also saw the x1 as the last of the old bmws, and worth holding on to.


+1
kjboyd commented:
February 20, 2017, 3:34 pm

the flip side of this coin is that maybe it's not BMW doing this for BMW... but for pissed off dealers who can't make a decent profit any more on "invoice +$500" and no charge oil,brake and fluid changes.
mwm1166 commented:
February 20, 2017, 4:02 pm

Quote:
Originally Posted by Alpine300ZHP View Post
Hey Mikey, I have to beg to differ on your defense of BMW's decision to gut the free service plan. How is the reduction to 3/36 and removal of brake coverage justified by the fact that most cars are 3 year leases when BMW already made it so that the free service only applies to original purchase??? This was done back in 2014 IIRC. The most recent move, to me, smacks of chasing profits pure and simple and it penalizes people like me who do 45k-50k miles (or more) on a lease. I confess that I have only needed 2 brake jobs over the 23 BMW's I have owned, but I surely would like to have kept the other free service up to 50k miles. I would have been much happier with a 3/50 free service plan. I understand that you and other CA's are defending BMW's recent moves, but the reality is that most of the moves are indefensible. They are pure profit grabs and everyone needs to be honest about that. BMW is chasing margin and everything they are doing is to further that agenda. I have no problem with them chasing margin and it is their right to do whatever they want with their product. However, it has affected the decisions I make when it comes to buying/leasing BMW's and I am sure that I am not the only one adjusting my buying habits accordingly. BMW's recent changes prompted me to take advantage of a company car offered by my employer. In the old days, I would have turned that perk down and said "I ll keep driving my M4". These days, I am taking that perk and giving up a BMW (I am either selling the M4 before the lease is up or I am finishing out the lease and walking away without replacing it.....I have been in talks to dump the M4 and x6 for a x6m/x5m). After 23 BMW's since 2001 (ranging in price from 105k to 32k), I think BMW should take notice that some of us are voting with our wallets.
+1
Also I have said it once and will say it again...
BMW executives are on the record stating this very fact. They weren't chasing the sales crown in 2016, and they were focusing on margin. I'm sure that wasn't a 6 moth strategy.

In fact you can see this change starting back in 2014, little by little they have been changing the little things which add up to a big increase. It's like the airlines going for bag charges, then seat charges, then selling snacks and drinks. Sure it's just one little change here or there but it made huge gains in profits for them. It's that slow nickel and dime, but when you add up the change in lease cost of a new 3 or 4 series today compared to the same way I did mine in 2013, it's a big change across the lifetime: 1% of invoice increase, 2% ED increase, no free brakes for car now versus the front and rears I had replaced on my 435i in its 36,004 miles that I did on the car, that's probably 750-1000 bucks, the increase in the lease origination fee from 725 to 925. Start doing the math. Essentially, if you wanted to spend same dollars you're either moving down in car you buy from BMW, moving to other brands to see what the value is, or considering buying a CPO or leasing a demo. (In fact I'm sure people were leasing some demo and loaner 16 cars at the end just to avoid ending up with a 17 and no brake service, the biggest bummer of my 2017 3er is knowing I'm hosed on they service and driving in LA stop and go, I will certainly burn thru a set before turn in).

Anyway, BMW is increasing their profit. There is nothing wrong with it. I'm not angry, they owe me nothing more than the current contracts I have with them. However, they are sure to have understood, as the CA's here should, that changing this structure means some loyal customers (I'm on my 4th BMW and helped get my dad into 3, my brother into 1, my sister into 1, and three friends into theirs all thru Greg) will move on looking at other options. Frankly, BMW opened the door for this.

If you offer such an amazing product at a great price, people feel like that is value. However, if the cars are very similar to the competition in terms of amenities and driving, then, my ability to compromise brand gets easier: "well I like the BMW but the Giulia is also super fun to drive, and right now Alfa is offering me more equipment for 420 a month after taxes and BMW wants to nickel and dime me...so, I can try something new."

You see how this works? Offer me an unbeatable product at an unbeatable price, I have no need to look elsewhere.

I love the wife's new X1. However, let's be straight we have transverse engine FWD sDrive truck: if they keep nickel and dime-ing me, do I really need a BMW badge? A VW Tiguan is similar in size and design and cheaper, and there are literally so many options for this design of small SUV.

I like my 340i a lot. However my e46 zhp has better steering. My f30 is as big a 3 series as I ever want. And I'm sure the new G20 330i will be starting at 40k without leather without a lot of standard equipment. Which means a 340i G30 will basically be a 50k car, and that's when a 3 year old design XE and Giulia will be sitting around with their starting price being low to mid 30's...

BMW built a brand for themselves and now they are cashing in. Chasing Chinese buyers who don't want drivers cars, but are new money and want expensive European brands. They are also chasing people like my wife with their SUV development. That's fine. But competing directly with everyone is dangerous in some ways because you just become part of that pack. BMW is great but it will never be Mercedes with that prestige. It's prestige was drivers cars.
mwm1166 commented:
February 20, 2017, 4:08 pm

Quote:
Originally Posted by adrian's bmw View Post
You keep saying BMW gutting programs when it appears that other brands have already been doing this and have actually been seeing increases in sales (and margins) i.e. Porsche, Audi, MB. One could say that BMW is just no longer subsidizing people's trips to Europe or "buying" their business with losses at the auction on used car leases.

When you drove the Guilia, out of curiosity, did you get a lease estimate on that ride?
I keep saying they are gutting their programs because they are. It doesn't matter whatever everyone does. BMW had programs place that represented value to their loyal customer base (most Joe blow off the street doesn't even know about them), and they have begun to change those things. Just because they are becoming like everyone else doesn't mean they aren't removing value from programs that used to offer more value (I.e. Gutting the program). Removing value is irrefutable. Is it justifiable, sure thing. But it's a fact an indisputable. They have removed chunks of value from several places for long term brand loyal people.

Think I'm wrong? Watch the US sales figures this year....

Sure did, maybe because of Presidents' Day weekend sale, but before really negotiating (I didn't wanna waste time because I wasn't really buying) I was looking at 280 HP sport package car for 40k and 420 a month. It had nicer leather, and some other standard equipment that I would easily say I would prefer the Giulia to a 330i. Now I prefer my 340i to the Giulia because it has 40 more HP inline 6, but if I was cross shopping a 330i I would definitely get the Giulia to be honest.
mwm1166 commented:
February 20, 2017, 4:13 pm

Quote:
Originally Posted by kjboyd View Post
the flip side of this coin is that maybe it's not BMW doing this for BMW... but for pissed off dealers who can't make a decent profit any more on "invoice +$500" and no charge oil,brake and fluid changes.
I made this point regarding the large dealer networks influencignsome of the changes to make things more opaque for customers. I mentioned how we were told Autonation, Penske, Sonic, et al. Were part of the bitching that caused the ED changes, but Adrian laughed me out of the building for stating that the larger dealer networks would be screaming for changes in how the programs work and are advertised.

Who knows, but I would not be surprised. I'm sure Autonation and large groups feel like they can't beat the mom pop stores off completely and dominate a market as easily if they have to compete with such open information on invoice+500 and ED deals and demo and loaner leases etc.
Der_Kommissar commented:
February 20, 2017, 4:38 pm

It's clear the game is changing- we'll just have to see where the sweet spot is in the market over the next few years. They may keep leasing viable for low to mid equipment cars as an entry into the brand, at least. But overall, I think they are just taking Apple's approach of going for margin over volume. Apple is not particularly worried about the enthusiast right now either.
mwm1166 commented:
February 20, 2017, 4:53 pm

Quote:
Originally Posted by Der_Kommissar View Post
It's clear the game is changing- we'll just have to see where the sweet spot is in the market over the next few years. They may keep leasing viable for low to mid equipment cars as an entry into the brand, at least. But overall, I think they are just taking Apple's approach of going for margin over volume. Apple is not particularly worried about the enthusiast right now either.
Great point about Apple. It's funny 15 years ago professionals in my business absolutely had to have Mac because of how well sorted their system was for professional use. However, as they have moved to pleasing the masses, they abdicated their advantage to the pro. Then, Microsoft for example has started to scoop up some of that market with their surface line. Specifically, Apple destroyed Final Cut, so people began switching to adobe premiere which is capably run on windows or OSX. Then, Microsoft pioneered running their OS with touch pens which are great mobile products for artists (Apple weakly responded it this with iPad Pro). Then the surface studio came out and blew away the iMac with its improved form and its updated internals (whereas iMac hasn't been updated in several years). Mac pro's haven't been updated in 3 years. Basically the powe user is being forced to consider the competition who cares about dedicated work machines for artists and editors.

BMW is ceding the pure sporty driving pleasure space for enthusiasts to other brands (slowly but surely). And those competitors who want market share will probably and have begun to price to undercut BMW. So, it's the same kind of thing.

If the G20 doesn't blow the competition away in terms of driving pleasure, then people will look elsewhere. BMW would do good to get a 4 door 2 series out, yes it would cut into more expensive 3er sales, but if they made that car their driver focused 2 door and 4 door model they might be able to shore up their weakness in this area. Otherwise, watch the interest in their sedans erode slowly as they become bigger and more luxury based. I'm sure it will take time to completely diminish the value of the brand as a driver oriented car, however, 1 or 2 iterations is all it takes to go from "20 years on car and driver top ten," to "they just aren't doing it anymore."
adrian's bmw commented:
February 20, 2017, 5:16 pm

Quote:
Originally Posted by mwm1166 View Post
I keep saying they are gutting their programs because they are. It doesn't matter whatever everyone does. BMW had programs place that represented value to their loyal customer base (most Joe blow off the street doesn't even know about them), and they have begun to change those things. Just because they are becoming like everyone else doesn't mean they aren't removing value from programs that used to offer more value (I.e. Gutting the program). Removing value is irrefutable. Is it justifiable, sure thing. But it's a fact an indisputable. They have removed chunks of value from several places for long term brand loyal people.

Think I'm wrong? Watch the US sales figures this year....

Sure did, maybe because of Presidents' Day weekend sale, but before really negotiating (I didn't wanna waste time because I wasn't really buying) I was looking at 280 HP sport package car for 40k and 420 a month. It had nicer leather, and some other standard equipment that I would easily say I would prefer the Giulia to a 330i. Now I prefer my 340i to the Giulia because it has 40 more HP inline 6, but if I was cross shopping a 330i I would definitely get the Giulia to be honest.
Therein lies the rub- what you consider "value". Let's talk about the "gutting". These programs that represented "value" are the ones that allowed a dealer to buy a car from BMW FS or a service loaner that had between 5-10k miles where the MSRP was let's say $65k and the "residual" was very aggressive, let's use 63% and the car was written down, hmmm, 20%. This in turn created a stupid lease payment a new BMW couldn't even touch by let's say $200 per month, so basically turning a BMW payment into a "Honda Accord" payment. That value? Same goes for ED- "value" like the "programs" where dealers doing over 10% off on ED's and getting lease payments way better than U.S. deals, thus cannabilizing domestic sales. Are you referring to that "gutting", too? Justifiable, indisputable, irrefutable- maybe BMW thinks it's unsustainable especially compared to what our competitors are doing or (really not doing what BMW has been doing increasingly over the years).

So on the flip side, you're kinda right. But I think it's the other way around. BMW is moving away from the "gutting" business and being more equitable. It diminishes the brand, kills residual values, and cheapens the product, IMO.

I hear you. I really do. And I respect your opinion, but I have a client advisor opinion, too, and this opinion is rarely heard, at least from a dealer perspective. I can't say I speak for all client advisors or dealers, but I'm certain they share the same sentiments.

BMW is always evolving their loyalty programs and even expanding new ones, like corporate fleet, for example. Many companies have really good loyalty programs. But what these programs that you think they're gutting did was not so much keep loyal customers, it brought payment buyers in that may have been considering a less expensive brand; it also made them addicted (or is spoiled a fair word to use here?) to these programs or the way it's been for so long, that they became so accustomed to the status quo? And as someone mentioned earlier, it's been nothing short of a race to the bottom instead of the top.
adrian's bmw commented:
February 20, 2017, 5:23 pm

Quote:
Originally Posted by Der_Kommissar View Post
It's clear the game is changing- we'll just have to see where the sweet spot is in the market over the next few years. They may keep leasing viable for low to mid equipment cars as an entry into the brand, at least. But overall, I think they are just taking Apple's approach of going for margin over volume. Apple is not particularly worried about the enthusiast right now either.
I agree.
mwm1166 commented:
February 20, 2017, 5:40 pm

Quote:
Originally Posted by adrian's bmw View Post
Therein lies the rub- what you consider "value". Let's talk about the "gutting". These programs that represented "value" are the ones that allowed a dealer to buy a car from BMW FS or a service loaner that had between 5-10k miles where the MSRP was let's say $65k and the "residual" was very aggressive, let's use 63% and the car was written down, hmmm, 20%. This in turn created a stupid lease payment a new BMW couldn't even touch by let's say $200 per month, so basically turning a BMW payment into a "Honda Accord" payment. That value? Same goes for ED- "value" like the "programs" where dealers doing over 10% off on ED's and getting lease payments way better than U.S. deals, thus cannabilizing domestic sales. Are you referring to that "gutting", too? Justifiable, indisputable, irrefutable- maybe BMW thinks it's unsustainable especially compared to what our competitors are doing or (really not doing what BMW has been doing increasingly over the years).

So on the flip side, you're kinda right. But I think it's the other way around. BMW is moving away from the "gutting" business. It diminishes the brand, kills residual values, and cheapens the product, IMO.

I hear you. I really do. And I respect your opinion, but I have a client advisor opinion, too, and this opinion is rarely heard, at least from a dealer perspective. I can't say I speak for all client advisors or dealers, but I'm certain they share the same sentiments.

BMW is always evolving their loyalty programs and even expanding new ones, like corporate fleet, for example. Many companies have really good loyalty programs. But what these programs that you think they're gutting did was not so much keep loyal customers, it brought payment buyers in that may have been considering a less expensive brand; it also made them addicted (or is spoiled a fair word to use here?) to these programs or the way it's been for so long, that they became so accustomed to the status quo? And as someone mentioned earlier, it's been nothing short of a race to the bottom instead of the top.
Value is the amount of stuff you can get for your money.

I agree that we have been very fortunate and spoiled by the generous programs that BMW had offered and supported that cut into their profit margin. It's absolutely true. I know we have been lucky. I agree, that is completely irrefutable and undeniable.

I'm not saying BMW is wrong or evil for doing this stuff. Nor am I saying they should be unprofitable because of it. I'm just simply saying that you are definitely getting less for your money than you could 18 months ago on a similar car.

Also, it's absurd to compare a 63k bmw lease on a loaner or demo to a Honda Accord. There is no way they come close in payment nor in amenities of the car or driver experience. So, that's clearly a false equivalence.

I also am not suggesting that BMW owes anyone anything beyond the contracts already in place. They don't. They are free and clear to compete in the marketplace how they like. I'm just pointing out how it will change behavior of customers and how BMW opened this door. I'm also sure that BMW studied this and made this decision with eyes wide open. This is their decision to make exclusively and if they feel like slightly less volume with an increase in margins on the units they did sell is the way to go, wonderful.

I'm also not saying this guarantees they will be uncompetitive. Clearly this is how the rest generally work, so they will be comparable in price and when you're the leader in driving dynamics even a slight step back doesn't eliminate that advantage.

I'm just saying it won't be a slam dunk for people to, without looking elsewhere, stay with the brand. Sure some people will, but some wont. And that's ok.

But for me, it's going to be worth my while to shop around and consider because the competition is now getting that good. I'm sure I'm not completely alone. I'm also sure it won't lead to an annihilation of the brand or mass exodus overnight. They spent years building the brand so that they can afford to do this with confidence now.

I'm also not arguing that the previous structure was sustainable. I'm not privy to the Board or know what their numbers look like or what motivates their decisions. They made their decisions and it's hard to argue they are wrong.

Once again I'm merely discussing how they have removed what was value to customers like myself. 1) slightly softening the driving dynamics 2) taking away from the ED program (which I built a 3 week euro vacation around before with my savings) 3) taking away the brakes from maintenance program (I will pay for brakes before my 36k miles are up assuredly 4) raising wholesale cost to dealerships so it removes room to negotiate and make sure the salesman and dealer are compensated fairly 5) making tiered residuals on cars that are optioned appropriately for the level of stuff you should have on a 50+k car 6). Significantly changing the residuals on demos above 5k miles and all the while still keeping the mileage adjustment in place. These things may likely affect future sales to folks.

I'm not storming out saying "I'll never lease another BMW again!" However, it will increase the possibility that my next sports sedan lease might not be a BMW. There are many variables people consider. I'm just pointing out things that were a part of BMW's advantage in getting customers in to cars in the past that erode that advtange now. Will they miss those financial losses that they incurred by having those programs, no. However,
This is the trade-off when you go for margins over volume.
namelessman commented:
February 20, 2017, 5:42 pm

Quote:
Originally Posted by adrian's bmw View Post
BMW is moving away from the "gutting" business and being more equitable. It diminishes the brand, kills residual values, and cheapens the product, IMO.
BMW is in the business of making money, hence it does not kill RV or cheapen the product by subsidizing leases. Instead BMWNA averages out the costs and pops up the MSRP/invoice(e.g. add 10% margin) to cover the lessees, and ask cash/finance folks to pay up.

BMW is normalizing to industry standard, mainly since the massive incentives do not bring further sales gains. That signals the market is no longer susceptible to sugar highs, and instead is demanding realistic invoice/MSRP on comparably equipped cars(e.g. driver tech) to be at par with competitors(including the high trims of Honda and the like).

Also most people seem to be unaware that 7% ED savings reflect how much BMWNA saves with ED, e.g. no 5% AVP to dealer, and no drive event credits.

Since US drive events no longer give out $1000 credits, the drop of 2% ED discount basically lines up with that.
namelessman commented:
February 20, 2017, 5:54 pm

Quote:
Originally Posted by mwm1166 View Post
Once again I'm merely discussing how they have removed what was value to customers like myself. 1) slightly softening the driving dynamics 2) taking away from the ED program (which I built a 3 week euro vacation around before with my savings) 3) taking away the brakes from maintenance program (I will pay for brakes before my 36k miles are up assuredly 4) raising wholesale cost to dealerships so it removes room to negotiate and make sure the salesman and dealer are compensated fairly 5) making tiered residuals on cars that are optioned appropriately for the level of stuff you should have on a 50+k car 6). Significantly changing the residuals on demos above 5k miles and all the while still keeping the mileage adjustment in place. These things may likely affect future sales to folks.
Most of the items on your list are mainly to expand customer base and brand appeal. Now that the sale crown campaign is no longer the focus, the readjusted pricing structure will extract the loyalists from the rest.

And to go over the list:

1. the softened driving dynamics actually bring in lots of new fans, esp. the other purse string holders of families.

2. how did the ED savings pay for a 3-week Euro vacation? Please share. BTW as mentioned in post#94, the 2% drop in ED discount lines up with the removal of US-only drive event credits.

3. My brakes says 55k miles and 60k miles for replacement, and that's 50% stop-and-go, including downhills. Most people won't use the brake coverage without going on tracks.

4. Dealers are in the business to make money. They won't sell anything at a loss, and there is no worries of them not getting compensated fairly. One hint is that the sales crown comes with hefty monthly/quarterly/year-end sales quota bonuses, and those bonuses are paid by customers.

5. and 6. are basically adjusting RV to realistic values, so that lessees won't be "rewarded" by the loopholes.
mwm1166 commented:
February 20, 2017, 6:04 pm

Quote:
Originally Posted by namelessman View Post
Most of the items on your list are mainly to expand customer base and brand appeal. Now that the sale crown campaign is no longer the focus, the readjusted pricing structure will extract the loyalists from the rest.

And to go over the list:

1. the softened driving dynamics actually bring in lots of new fans, esp. the other purse string holders of families.

2. how did the ED savings pay for a 3-year Euro vacation? Please share.

3. My brakes says 55k miles and 60k miles for replacement, and that's 50% stop-and-go, including downhills. Most people won't use the brake coverage without going on tracks.

4. Dealers are in the business to make money. They won't sell anything at a loss, and there is no worries of them not getting compensated fairly. One hint is that the sales crown comes with hefty monthly/quarterly/year-end sales quota bonuses, and those bonuses are paid by customers.

5. and 6. are basically adjusting RV to realistic values, so that lessees won't be "rewarded" by the loopholes.
1) very true

2) mistyped I meant to say 3 week euro vacation

3) as I posted earlier my 435i needed both front and rear brakes replaced at around 33k miles. I live in the city with a lot of stop and go driving and even the freeways in LA can go from 80 mph to stopped in mere moments. So it's not just a line it's a fact. It will cost me money

4) I wasn't insinuating that dealers didn't make money before, but rather that you can't negotiate the same percentage off a car as before with the invoice cost increase and still see them make a profit. Meaning 1% increase guaranteed innehay you will pay.

6) adjust the residuals to realistic values is better for them worse for the customer. So, them having a car that's worth what it should be at lease end doesn't help me a bit....im not arguing that it should, but it's clearly something that will involve more cost to me, because I don't see them lowering prices or freezing them or offering me a car loaded with LEDs and leather and tech for the same cost. So, it's a perfect example of them taking more profit, which lessens the value to the end customer.
mwm1166 commented:
February 20, 2017, 6:12 pm

Actually it appears I didn't mistype 3 year euro vacation. You edited your post afterwards. And I don't think anyone would argue that saving 13% on a car would leave one with significant room versus 7% (if I bought off the lot and just went to Europe) to pay that money for touring and sight seeing and food. Especially since having your own vehicle allows you to forgoe rental costs.

So, saying that I built my vacation around that savings is not just legitimate it's true. My trip may have been 2 weeks or included less if I wasn't saving that much. Also, the savings delta was now just 2% less, but that is still money out of my pocket and that 2% would be subject to interest (money factor) and taxes. So that's real dollars. I mean sure I could withstand it, but at the time it influenced my devisions.

I'm by no means saying BMW is making themselves uncompetitive. Or they their programs as they are going forward offer little value. I'm once again stating that it's less than you got before.
namelessman commented:
February 20, 2017, 6:12 pm

Quote:
Originally Posted by mwm1166 View Post
I made this point regarding the large dealer networks influencignsome of the changes to make things more opaque for customers. I mentioned how we were told Autonation, Penske, Sonic, et al. Were part of the bitching that caused the ED changes, but Adrian laughed me out of the building for stating that the larger dealer networks would be screaming for changes in how the programs work and are advertised.

Who knows, but I would not be surprised. I'm sure Autonation and large groups feel like they can't beat the mom pop stores off completely and dominate a market as easily if they have to compete with such open information on invoice+500 and ED deals and demo and loaner leases etc.
Another infrequently discussed point is that, ED even with 5-7% discount is cheaper than US delivery for BMWAG, as BMWAG does not need to pay US-only incentives(e.g. USAA, corporate fleet), plus no US-only sales quota bonuses.

The dealers do not usually care about non-M ED(that do not consume their US-only allocations), as experienced CAs can grab $1000 profits over ED invoice with minimal work.

It is very costly for US customers to do ED and forgo US-only incentives. However, if the Euro trip is already planned, and Euro hotels and airfares are "accounted for", the ED can save money from expensive Euro rentals.
mwm1166 commented:
February 20, 2017, 6:19 pm

Quote:
Originally Posted by namelessman View Post
The dealers do not usually care about non-M ED(that do not consume their US-only allocations), as experienced CAs can grab $1000 profits over ED invoice with minimal work.
It was heavily discussed at the time that the ED structure was changed that large dealer networks didn't like that smaller dealers were doing a large amount of ED deals that people used to fly-in and fly-out in two days just to get the lease deal.

It was stated that the bigger networks wanted an adjustment to the program. Beyond that I have no proof beyond what was said on the boards by insiders at the time.

Also, Greg Poland and other CA's would argue that doing ED is too much work for just 500 over invoice. That doing an ED isn't just simple and brainless and requires a lot of extra paperwork and experience.

So, I'm not sure I buy the "minimal work" argument. I've heard varying opinions. Maybe your right, maybe you're wrong.
namelessman commented:
February 20, 2017, 6:24 pm

Quote:
Originally Posted by mwm1166 View Post
Actually it appears I didn't mistype 3 year euro vacation. You edited your post afterwards. And I don't think anyone would argue that saving 13% on a car would leave one with significant room versus 7% (if I bought off the lot and just went to Europe) to pay that money for touring and sight seeing and food. Especially since having your own vehicle allows you to forgoe rental costs.

So, saying that I built my vacation around that savings is not just legitimate it's true. My trip may have been 2 weeks or included less if I wasn't saving that much. Also, the savings delta was now just 2% less, but that is still money out of my pocket and that 2% would be subject to interest (money factor) and taxes. So that's real dollars. I mean sure I could withstand it, but at the time it influenced my devisions.

I'm by no means saying BMW is making themselves uncompetitive. Or they their programs as they are going forward offer little value. I'm once again stating that it's less than you got before.
My bad, 3-year was my typo.

As mentioned previously, these days off-the-lot, or even custom order, for US delivery can do 15% instead of 7%, and can beat out 13% ED discount over US MSRP.

As far as the 2% ED discount reduction, it is valid to equate that to a 2% price hike. However, F30(e.g.) LCI does see increased standard equipment with some price drop when compared to pre-LCI, so one can infer that 2% is not real price hike(but instead just to account for the removal of $1000 drive event credits).
namelessman commented:
February 20, 2017, 6:32 pm

Quote:
Originally Posted by mwm1166 View Post
It was heavily discussed at the time that the ED structure was changed that large dealer networks didn't like that smaller dealers were doing a large amount of ED deals that people used to fly-in and fly-out in two days just to get the lease deal.

It was stated that the bigger networks wanted an adjustment to the program. Beyond that I have no proof beyond what was said on the boards by insiders at the time.

Also, Greg Poland and other CA's would argue that doing ED is too much work for just 500 over invoice. That doing an ED isn't just simple and brainless and requires a lot of extra paperwork and experience.

So, I'm not sure I buy the "minimal work" argument. I've heard varying opinions. Maybe your right, maybe you're wrong.
Yes it depends on if there are custom/individual stuff, and travel/schedule changes, and such(that generate griefs for both CAs and customers alike). In the absence of such changes, the paperwork is not much more than US-only delivery.

Greg tends to say $500 over ED invoice is not worth it, since he usually wants $1000 profit on any deal(ED or otherwise).
mwm1166 commented:
February 20, 2017, 7:27 pm

I've gotten deals recently from greg, offered by him, without me asking that were easily under 1k profit. But my relationship probably weighs differently than most because of the number of assists I've thrown him. Who knows. But Greg is always more than fair and easy to deal with. Can't recommend him highly enough! He's one of the major factors that will likely keep me in BMW's longer than I otherwise would be. (Unless that Ferrari money comes in....)
MJBrown62 commented:
February 20, 2017, 8:07 pm

Quote:
Originally Posted by Alpine300ZHP View Post
Hey Mikey, I have to beg to differ on your defense of BMW's decision to gut the free service plan. How is the reduction to 3/36 and removal of brake coverage justified by the fact that most cars are 3 year leases when BMW already made it so that the free service only applies to original purchase??? This was done back in 2014 IIRC. The most recent move, to me, smacks of chasing profits pure and simple and it penalizes people like me who do 45k-50k miles (or more) on a lease. I confess that I have only needed 2 brake jobs over the 23 BMW's I have owned, but I sure would like to have kept the other free service up to 50k miles. I would have been much happier with a 3/50 free service plan. I understand that you and other CA's are defending BMW's recent moves, but the reality is that most of the moves are indefensible. They are pure profit grabs and everyone needs to be honest about that. BMW is chasing margin and everything they are doing is to further that agenda. I have no problem with them chasing margin and it is their right to do whatever they want with their product. However, it has affected the decisions I make when it comes to buying/leasing BMW's and I am sure that I am not the only one adjusting my buying habits accordingly. BMW's recent changes prompted me to take advantage of a company car offered by my employer. In the old days, I would have turned that perk down and said "I ll keep driving my M4". These days, I am taking that perk and giving up a BMW (I am either selling the M4 before the lease is up or I am finishing out the lease and walking away without replacing it.....I have been in talks to dump the M4 and x6 for a x6m/x5m). After 23 BMW's since 2001 (ranging in price from 105k to 32k), I think BMW should take notice that some of us are voting with our wallets.
First, only my sister calls me Mikey.

Yes, the drop of the MP onto the second owner happened a while ago. But the vast majority of lease returns come back to full-circle centers. so we add the MP back so that CPO clients get more value.

Like you said, you have had 2 brake jobs in 23 years. I have has none in about 800,000 miles of leasing two BMWs at a time over 9 years, doing $17k - $18k per year. So this is a non issue really for 65% of the U.S. new car market.

With any business, it's absolutely a margin chase. It always is. Both at the manufacturer level and the dealer level. But I'm pretty sure that the guys and gals that have to produce the numbers have taken into account the the small percentage of the market they will lose to gain margin.

I'm not jumping ship on where I work or what I drive. Just adjusting accordingly.
namelessman commented:
February 20, 2017, 9:48 pm

Quote:
Originally Posted by MJBrown62 View Post
First, only my sister calls me Mikey.

Yes, the drop of the MP onto the second owner happened a while ago. But the vast majority of lease returns come back to full-circle centers. so we add the MP back so that CPO clients get more value.

Like you said, you have had 2 brake jobs in 23 years. I have has none in about 800,000 miles of leasing two BMWs at a time over 9 years, doing $17k - $18k per year. So this is a non issue really for 65% of the U.S. new car market.

With any business, it's absolutely a margin chase. It always is. Both at the manufacturer level and the dealer level. But I'm pretty sure that the guys and gals that have to produce the numbers have taken into account the the small percentage of the market they will lose to gain margin.

I'm not jumping ship on where I work or what I drive. Just adjusting accordingly.
Chasing margin is what businesses do. Even with the old subsidized lease the margin works out due to increased volume. But since volume is stagnant even with massive incentives, the margin does not quite work out, and BMWNA and BMWFS need to re-adjust(in addition to customers adjusting to new structures).
quackbury commented:
February 20, 2017, 10:52 pm

I think BMW is losing a tremendous marketing resource: It's effectively firing brand ambassadors.

Every corporate headquarters, every doctors' office building, every country club and yacht club has one or a handful of members who are known as "the car guy(s)". Folks whom others perceive as "experts" and whose opinions are valued when the Senior VP, the cardiac surgeon or the CEO with the locker next to ours is looking for advice on their next ride. Folks like us.

For a lot of us, the game of crunching the numbers, finding the incentives and gaming the system is a big part of the thrill. It's the crack cocaine that keeps us coming back. And when we're talking about Euro Delivery on the 16th tee, showing off our Individual construction when we take a client out to lunch, or talking up PCD or the M School at a cocktail party, damn it, we sell BMW's. And we also steer qualified clients with money in their pocket (and less skill at negotiating) to the Centers and CA's that we use. We are very, very good for business.

I think the bean counters and MBA-types underestimate that. Make our deals less attractive, let us feel a little spurned by the brand, and we'll start looking elsewhere, just like the husband whose needs aren't being satisfied at home. And face it,short of M cars, BMW's don't hold as much appeal for us as they once did, and the competition - both the established players and the newcomers - are gaining ground.

Is your client considering an X3 for the wife? We can tell him that new F-Pace looks really tasty. Your new junior partner is considering a 3 Series? We can tell him to cross shop a Giulia. Your doubles partner is looking for a luxury coupe? It doesn't take much to convince him the F Type is a lot sexier than the average 6 Series. Squash opponent looking for a performance sedan? The new AMG offerings are on point, as is the Panamera. Your golfing buddy wants go green? How about a Tesla or a Karma Revero? Live in the heartland and your next door neighbor just got a promotion and asks your advice? You can tell him to drive a V Type, or a Z06 and feel good about buying American. Your fishing buddy wants a great Euro Delivery program? You can tell him in all sincerity that Volvo's blows BMW's away.

The new BMW buyers who are coming out of Lexus, Buick and Genesis are never going to be able to sway opinion and sell BMW's the way we can. And they're not going to be loyal. A bunch of us here have owned ten or more BMW's. The conquest buyers walking into showrooms today will never match that. We are a resource that BMWNA has spent years developing, honing and supporting. And now they are just pissing us away. Bob Lutz would never let that happen.
namelessman commented:
February 20, 2017, 11:50 pm

Quote:
Originally Posted by quackbury View Post
I think BMW is losing a tremendous marketing resource: It's effectively firing brand ambassadors.

Every corporate headquarters, every doctors' office building, every country club and yacht club has one or a handful of members who are known as "the car guy(s)". Folks whom others perceive as "experts" and whose opinions are valued when the Senior VP, the cardiac surgeon or the CEO with the locker next to ours is looking for advice on their next ride. Folks like us.

For a lot of us, the game of crunching the numbers, finding the incentives and gaming the system is a big part of the thrill. It's the crack cocaine that keeps us coming back. And when we're talking about Euro Delivery on the 16th tee, showing off our Individual construction when we take a client out to lunch, or talking up PCD or the M School at a cocktail party, damn it, we sell BMW's. And we also steer qualified clients with money in their pocket (and less skill at negotiating) to the Centers and CA's that we use. We are very, very good for business.

I think the bean counters and MBA-types underestimate that. Make our deals less attractive, let us feel a little spurned by the brand, and we'll start looking elsewhere, just like the husband whose needs aren't being satisfied at home. And face it,short of M cars, BMW's don't hold as much appeal for us as they once did, and the competition - both the established players and the newcomers - are gaining ground.

Is your client considering an X3 for the wife? We can tell him that new F-Pace looks really tasty. Your new junior partner is considering a 3 Series? We can tell him to cross shop a Giulia. Your doubles partner is looking for a luxury coupe? It doesn't take much to convince him the F Type is a lot sexier than the average 6 Series. Squash opponent looking for a performance sedan? The new AMG offerings are on point, as is the Panamera. Your golfing buddy wants go green? How about a Tesla or a Karma Revero? Live in the heartland and your next door neighbor just got a promotion and asks your advice? You can tell him to drive a V Type, or a Z06 and feel good about buying American. Your fishing buddy wants a great Euro Delivery program? You can tell him in all sincerity that Volvo's blows BMW's away.

The new BMW buyers who are coming out of Lexus, Buick and Genesis are never going to be able to sway opinion and sell BMW's the way we can. And they're not going to be loyal. A bunch of us here have owned ten or more BMW's. The conquest buyers walking into showrooms today will never match that. We are a resource that BMWNA has spent years developing, honing and supporting. And now they are just pissing us away. Bob Lutz would never let that happen.
Many among friends, family, and coworkers are interested in BMW. While they are typically not lessees, a majority of them is not happy with the lack of standard options with BMW's base prices. If BMWNA does lower the prices by including those missing standard options, those sitting on the fence(at least the ones in my circle) will bite.

So while BMWNA and BMWFS disappoint a small group of smart lessees that maximize the good old simplified lease structures, BMWNA and BMWFS can position themselves for sustained growth, and continued loyalty.
mwm1166 commented:
February 21, 2017, 3:25 am

Quote:
Originally Posted by namelessman View Post
Many among friends, family, and coworkers are interested in BMW. While they are typically not lessees, a majority of them is not happy with the lack of standard options with BMW's base prices. If BMWNA does lower the prices by including those missing standard options, those sitting on the fence(at least the ones in my circle) will bite.

So while BMWNA and BMWFS disappoint a small group of smart lessees that maximize the good old simplified lease structures, BMWNA and BMWFS can position themselves for sustained growth, and continued loyalty.
You keep repeating this refrain but we have little to no proof. Standard would have to be leather, comfort access, LED or Xenon, and navigation. Those are what Kia and the rest offer. Putting parkin cameras on the car "free" because the US government forces them to is not proof this is going to happen.
namelessman commented:
February 21, 2017, 4:04 am

Quote:
Originally Posted by mwm1166 View Post
You keep repeating this refrain but we have little to no proof. Standard would have to be leather, comfort access, LED or Xenon, and navigation. Those are what Kia and the rest offer. Putting parkin cameras on the car "free" because the US government forces them to is not proof this is going to happen.
MY18 prices will show if the wishful thinking will materialize.

The facts/evidence right now point to restructured lease, and a $1k extra incentives for cash/finance over lease with fleet discount. Plus moving from pre-LCI to LCI, some options become standard, but MSRP does not go up as much as pre-LCI prices. Those give clues where BMWNA and BMWFS are heading.
mwm1166 commented:
February 21, 2017, 4:15 am

Quote:
Originally Posted by namelessman View Post
MY18 prices will show if the wishful thinking will materialize.

The facts/evidence right now point to restructured lease, and a $1k extra incentives for cash/finance over lease with fleet discount. Plus moving from pre-LCI to LCI, some options become standard, but MSRP does not go up as much as pre-LCI prices. Those give clues where BMWNA and BMWFS are heading.
I don't know a single person personally in a fleet discounted car...just saying.
namelessman commented:
February 21, 2017, 4:35 am

Quote:
Originally Posted by mwm1166 View Post
I don't know a single person personally in a fleet discounted car...just saying.
It is popular among tech companies around here, and across multiple brands. And in SoCal even "Los Angeles, City of"(city employees?) is part of the program based on what other festers posted, so just ask CA to search in the system.
mwm1166 commented:
February 21, 2017, 4:39 am

Quote:
Originally Posted by namelessman View Post
It is popular among tech companies around here, and across multiple brands. And in SoCal even "Los Angeles, City of"(city employees?) is part of the program based on what other festers posted, so just ask CA to search in the system.
Ah "tech companies" that explains a lot.
Eagle11 commented:
February 21, 2017, 5:42 am

Quote:
Originally Posted by Alpine300ZHP View Post
Hey Mikey, I have to beg to differ on your defense of BMW's decision to gut the free service plan. How is the reduction to 3/36 and removal of brake coverage justified by the fact that most cars are 3 year leases when BMW already made it so that the free service only applies to original purchase??? This was done back in 2014 IIRC. The most recent move, to me, smacks of chasing profits pure and simple and it penalizes people like me who do 45k-50k miles (or more) on a lease. I confess that I have only needed 2 brake jobs over the 23 BMW's I have owned, but I sure would like to have kept the other free service up to 50k miles. I would have been much happier with a 3/50 free service plan. I understand that you and other CA's are defending BMW's recent moves, but the reality is that most of the moves are indefensible. They are pure profit grabs and everyone needs to be honest about that. BMW is chasing margin and everything they are doing is to further that agenda. I have no problem with them chasing margin and it is their right to do whatever they want with their product. However, it has affected the decisions I make when it comes to buying/leasing BMW's and I am sure that I am not the only one adjusting my buying habits accordingly. BMW's recent changes prompted me to take advantage of a company car offered by my employer. In the old days, I would have turned that perk down and said "I ll keep driving my M4". These days, I am taking that perk and giving up a BMW (I am either selling the M4 before the lease is up or I am finishing out the lease and walking away without replacing it.....I have been in talks to dump the M4 and x6 for a x6m/x5m). After 23 BMW's since 2001 (ranging in price from 105k to 32k), I think BMW should take notice that some of us are voting with our wallets.
What I love reading from people and they say, "When I had my E46 that was a car that handled, but they went and got a E90, now these same people go out and get a F30. Knowing first hand that the F90 did not handle better then E90 or the E46. These same people complain about the handling of the current crop of BMW but continue to lease BMWs. This came be said about 5 series cars too.

My BMW has 60K miles and my brakes are good for another 18K miles, will I be able to hold out until Oct, I think so. but on other hand if you purchase or lease a BMW, one should be able to afford the repairs on them too.

The free maintenance was a great selling feature of the car but the only currently offering it is Jag, and why, reputation.. I think Alfa is missing the boat on the new Guilia not to offer free maintenance on the car, they need to get people to fork over the money for the car..

Just a bit of info of maintenance schedule, my 3013 320 is set at every 10K miles, our 2016 GT is set every 7500 miles. I was told by our SA that the BMW changed the service intervals on the GT to 7500 miles I was told why it was.
Eagle11 commented:
February 21, 2017, 5:48 am

Quote:
Originally Posted by quackbury View Post

Every corporate headquarters, every doctors' office building, every country club and yacht club has one or a handful of members who are known as "the car guy(s)". Folks whom others perceive as "experts" and whose opinions are valued when the Senior VP, the cardiac surgeon or the CEO with the locker next to ours is looking for advice on their next ride. Folks like us.
I'm going to completey disagree with that, at work in a large hospital whether it is the Dr's parking lot or employee I see many new/newer BMWs. Most of the people who are purchasing BMW purchase them for the name, they don't buy it for the driving dynamics, they also don't buy it for the "free" maintenance.

Currently in our Dr lots are 5 new BMW's, they happen to be new G30's. Another Dr bought a new I8 a couple of moths back.

Regarding sales decline, BMW had been giving huge discounts on cars, they aren't doing that so much, I wonder how much money BMW lost in the US by doing this, When it comes to leasing a new ALfa Guilia it wont come with an inflated RV either, I wonder when BMW will stop that too?
Alpine300ZHP commented:
February 21, 2017, 10:15 am

Quote:
Originally Posted by MJBrown62 View Post
First, only my sister calls me Mikey.


I'm not jumping ship on where I work or what I drive. Just adjusting accordingly.
Nice comment! As far as not jumping ship on what you drive, just adjusting accordingly....the same is true for me as I mentioned.
Der_Kommissar commented:
February 21, 2017, 10:17 am

Quote:
Originally Posted by namelessman View Post
MY18 prices will show if the wishful thinking will materialize.

The facts/evidence right now point to restructured lease, and a $1k extra incentives for cash/finance over lease with fleet discount. Plus moving from pre-LCI to LCI, some options become standard, but MSRP does not go up as much as pre-LCI prices. Those give clues where BMWNA and BMWFS are heading.
Agreed- the heuristic is to think when something goes up, something else will go down, but there's no reason in fact to expect that. The best case for BMW would be to increase profit off of leases, no change to standard equipment, and no overall change in volume. I would think they will try that for a bit to see what happens. If the bottom falls out, then expect increased standard equipment (beyond backup camera). I also think their solution may be a FWD 2 series sedan and killing the 320.
namelessman commented:
February 21, 2017, 12:32 pm

Quote:
Originally Posted by mwm1166 View Post
Ah "tech companies" that explains a lot.
Many non-tech, e.g. banks, big oil, universities, participate in the program too.
F32Fleet commented:
February 21, 2017, 1:15 pm

Great thread. A+

Sent from my HTC 10 using Bimmerfest mobile app
Squeak commented:
February 21, 2017, 1:30 pm

Quote:
Originally Posted by mwm1166 View Post
First they gutted the ED program, then they adjusted their invoice price, then they went to maximum amount that can be residualized, now tiered residual program and they are gutting the lease program on Demo's and Loaners.
Any more details on this? My current Demo Lease us up in 9 months, and always assumed I would roll into a new one -- didn't realize they are changing the demo program.
tim330i commented:
February 21, 2017, 1:35 pm

Quote:
Originally Posted by Squeak View Post
Any more details on this? My current Demo Lease us up in 9 months, and always assumed I would roll into a new one -- didn't realize they are changing the demo program.
I believe this is what he's talking about -

http://www.bimmerfest.com/forums/sho...d.php?t=965223

Tim
Squeak commented:
February 21, 2017, 1:42 pm

Quote:
Originally Posted by tim330i View Post
I believe this is what he's talking about -

http://www.bimmerfest.com/forums/sho...d.php?t=965223

Tim
Oh....
BostonB6 commented:
February 22, 2017, 5:07 pm

What's BMW's game here?

Easy. It's called making $$.

BTW - Volvo had lower residuals on their R-line when I leased my XC60.
Robert A commented:
February 22, 2017, 5:25 pm

This shouldn't be a surprise. BMW was never a nonprofit. That said, they are at the mercy of highly competitive market forces, so any sense of sudden greed on their part is mistaken.

Quote:
Originally Posted by BostonB6 View Post
What's BMW's game here?

Easy. It's called making $$.

BTW - Volvo had lower residuals on their R-line when I leased my XC60.
namelessman commented:
February 22, 2017, 5:49 pm

Quote:
Originally Posted by Robert A View Post
This shouldn't be a surprise. BMW was never a nonprofit. That said, they are at the mercy of highly competitive market forces, so any sense of sudden greed on their part is mistaken.
As far as highly competitive market forces, there is news that Model 3 test mules are rolling off assembly this week. Maybe it is time to consider American.
mwm1166 commented:
February 22, 2017, 6:20 pm

I'm waiting for hydrogen fuel cell before I go electric battery.
namelessman commented:
February 22, 2017, 6:34 pm

Quote:
Originally Posted by mwm1166 View Post
I'm waiting for hydrogen fuel cell before I go electric battery.
One choice is Toyota Mirai(Japanese for "future"). It is currently available although toyota just recently issued a worldwide recall for a software update.
mwm1166 commented:
February 22, 2017, 7:45 pm

Quote:
Originally Posted by namelessman View Post
One choice is Toyota Mirai(Japanese for "future"). It is currently available although toyota just recently issued a worldwide recall for a software update.
It's not exactly open for anyone to go in and get. And anyway, I'm under contract. We shall see where things stand in 36 months.
Axxlrod commented:
March 1, 2017, 8:12 pm

Hmmm. Well, I am not happy I came across this thread.

As a small biz owner, I lease my cars thru my biz. So I am a serial leaser. I currently have 2016 550. I am salivating over the new M550, but with the new curveballs BMW is throwing by monkeying with the RV's, I just may look elsewhere next time around. Which is silly on their part. Before they screwed up the system, they had buyers (leasers) like me locked up. Because the competitors couldn't compete on monthly payments. Now the playing field has been leveled, so I will be looking at all competing products, and one or more just might be better than BMW's offering.

There's no way I'm going to pay 50% more per month for a M550 than I am paying now for my 550 M-Sport.
jjrandorin commented:
March 1, 2017, 11:38 pm

Quote:
Originally Posted by Axxlrod View Post
Hmmm. Well, I am not happy I came across this thread.

As a small biz owner, I lease my cars thru my biz. So I am a serial leaser. I currently have 2016 550. I am salivating over the new M550, but with the new curveballs BMW is throwing by monkeying with the RV's, I just may look elsewhere next time around. Which is silly on their part. Before they screwed up the system, they had buyers (leasers) like me locked up. Because the competitors couldn't compete on monthly payments. Now the playing field has been leveled, so I will be looking at all competing products, and one or more just might be better than BMW's offering.

There's no way I'm going to pay 50% more per month for a M550 than I am paying now for my 550 M-Sport.
None of the stuff in this thread would currently affect you.

Right now, these things are on the low end models of 3s (330) and 4s (430) respectively. So far, nothing on the 440 or 340. I would expect that we will see something like this on the 530, but NOT on the 550... so if you continue to lease the high end models you likely have nothing to worry about.

(all speculation on my part but I am currently guessing that BMW is trying to move people "up market / up Model")
Axxlrod commented:
March 2, 2017, 1:56 pm

Quote:
Originally Posted by jjrandorin View Post
None of the stuff in this thread would currently affect you.

Right now, these things are on the low end models of 3s (330) and 4s (430) respectively. So far, nothing on the 440 or 340. I would expect that we will see something like this on the 530, but NOT on the 550... so if you continue to lease the high end models you likely have nothing to worry about.

(all speculation on my part but I am currently guessing that BMW is trying to move people "up market / up Model")
If this experiment with the 3 and 4 series nets BMW more $$$$, then I'm sure the program will be expanded to the other models lines.

We will see.
3ismagic# commented:
March 3, 2017, 4:28 pm

From my perspective BMW has had three substantial advantages relative to MB and Audi.
1. Generally better driving dynamics. People have been willing to spend a bit more to get a car that is more fun to drive.
2. BMW's have generally leased better than MB and Audi. Despite often higher sales prices and fewer standard features BMW has held it's own in sales in part because it has had such great leases that often made the more expensive BMW cheaper to lease.
3. BMW has had a much better European delivery program. I know few take advantage of this but for me it was instrumental in my decision making. The experience is amazing and the pricing advantage pretty much paid for the trip.

In the past 6 years all 3 of these have seen substantial erosion of the BMW advantage.

In regards to #1 IMHO the new B9 A4 is a super drivers car that the 330i. The power is rear-wheel biased at 60-40 standard and the power delivery and transmission are great. The steering is much much better than the F30. The new Alfa Giulia 2.0l has been getting rave reviews for it's driving dynamics. Long-term reliability is still TBD but it is sexy as hell and at 280HP and 5.1 0-60 it is eating BMW's lunch. Opinions on this may vary but it's obvious to anyone that Audi has stepped up it's game and that the 3-series is no longer the unquestioned king of the driving dynamics.

This thread raises serious questions about #2 going forward.

In regards to #3 BMWNA has substantially weakened the discount associated with European delivery over the past year. While the ED experience is still superior to what the others offer, the overall ED package has been chipped away.

All this is to say that with the 3 big advantages for BMW all taking a serious hit I personally will be looking long and hard at all available options when it comes time to replace my current car. If I were in the market at this moment there would be a good chance I'd get an A4 or the Alfa Romeo Giulia Ti and not a 3-series.
ctorrey commented:
March 3, 2017, 5:05 pm

Quote:
Originally Posted by 3ismagic# View Post
From my perspective BMW has had three substantial advantages relative to MB and Audi.
1. Generally better driving dynamics. People have been willing to spend a bit more to get a car that is more fun to drive.
2. BMW's have generally leased better than MB and Audi. Despite often higher sales prices and fewer standard features BMW has held it's own in sales in part because it has had such great leases that often made the more expensive BMW cheaper to lease.
3. BMW has had a much better European delivery program. I know few take advantage of this but for me it was instrumental in my decision making. The experience is amazing and the pricing advantage pretty much paid for the trip.

In the past 6 years all 3 of these have seen substantial erosion of the BMW advantage.

In regards to #1 IMHO the new B9 A4 is a super drivers car that the 330i. The power is rear-wheel biased at 60-40 standard and the power delivery and transmission are great. The steering is much much better than the F30. The new Alfa Giulia 2.0l has been getting rave reviews for it's driving dynamics. Long-term reliability is still TBD but it is sexy as hell and at 280HP and 5.1 0-60 it is eating BMW's lunch. Opinions on this may vary but it's obvious to anyone that Audi has stepped up it's game and that the 3-series is no longer the unquestioned king of the driving dynamics.

This thread raises serious questions about #2 going forward.

In regards to #3 BMWNA has substantially weakened the discount associated with European delivery over the past year. While the ED experience is still superior to what the others offer, the overall ED package has been chipped away.

All this is to say that with the 3 big advantages for BMW all taking a serious hit I personally will be looking long and hard at all available options when it comes time to replace my current car. If I were in the market at this moment there would be a good chance I'd get an A4 or the Alfa Romeo Giulia Ti and not a 3-series.
I tend to agree with this. I'm a BMW fan and wrapping up my 9th year of leasing (3 x 335i). I fully intend on ordering yet another one, but if value advantage of leasing a BMW vs a similarly priced competitor disappears, then I will look outside the brand. Specifically, I would be all over the new S4 over the aging 340i in a heartbeat all things leasing being equal.
Robert A commented:
March 3, 2017, 5:14 pm

I'm not sure I agree with your comments concerning the Audi. I've driven it, on a few occasions, and I think the steering is too light, and the road feel is, if anything, worse than BMW's. The issue is still the FWD platform.

Alfa is a very promising entrant in the market, but they're not going to eat anybody's lunch until they lock down a competitive leasing program. At present, there is no captive financing arm, and the companies offering leasing programs are pricing a lot of residual risk into the program.



Quote:
Originally Posted by 3ismagic# View Post
In regards to #1 IMHO the new B9 A4 is a super drivers car that the 330i. The power is rear-wheel biased at 60-40 standard and the power delivery and transmission are great. The steering is much much better than the F30.

The new Alfa Giulia 2.0l has been getting rave reviews for it's driving dynamics. Long-term reliability is still TBD but it is sexy as hell and at 280HP and 5.1 0-60 it is eating BMW's lunch..
Der_Kommissar commented:
March 3, 2017, 5:43 pm

Quote:
Originally Posted by Robert A View Post
I'm not sure I agree with your comments concerning the Audi. I've driven it, on a few occasions, and I think the steering is too light, and the road feel is, if anything, worse than BMW's. The issue is still the FWD platform.

Alfa is a very promising entrant in the market, but they're not going to eat anybody's lunch until they lock down a competitive leasing program. At present, there is no captive financing arm, and the companies offering leasing programs are pricing a lot of residual risk into the program.
Not to mention potential reliability on the Alfa that will make a BMW look like a sure thing.
mwm1166 commented:
March 4, 2017, 3:22 pm

Quote:
Originally Posted by 3ismagic# View Post
From my perspective BMW has had three substantial advantages relative to MB and Audi.
1. Generally better driving dynamics. People have been willing to spend a bit more to get a car that is more fun to drive.
2. BMW's have generally leased better than MB and Audi. Despite often higher sales prices and fewer standard features BMW has held it's own in sales in part because it has had such great leases that often made the more expensive BMW cheaper to lease.
3. BMW has had a much better European delivery program. I know few take advantage of this but for me it was instrumental in my decision making. The experience is amazing and the pricing advantage pretty much paid for the trip.

In the past 6 years all 3 of these have seen substantial erosion of the BMW advantage.

In regards to #1 IMHO the new B9 A4 is a super drivers car that the 330i. The power is rear-wheel biased at 60-40 standard and the power delivery and transmission are great. The steering is much much better than the F30. The new Alfa Giulia 2.0l has been getting rave reviews for it's driving dynamics. Long-term reliability is still TBD but it is sexy as hell and at 280HP and 5.1 0-60 it is eating BMW's lunch. Opinions on this may vary but it's obvious to anyone that Audi has stepped up it's game and that the 3-series is no longer the unquestioned king of the driving dynamics.

This thread raises serious questions about #2 going forward.

In regards to #3 BMWNA has substantially weakened the discount associated with European delivery over the past year. While the ED experience is still superior to what the others offer, the overall ED package has been chipped away.

All this is to say that with the 3 big advantages for BMW all taking a serious hit I personally will be looking long and hard at all available options when it comes time to replace my current car. If I were in the market at this moment there would be a good chance I'd get an A4 or the Alfa Romeo Giulia Ti and not a 3-series.
I've made similar points to all 3. I think where they stand is still competitive, but it has gone from a "no brained, BMW offers way more for the money" to "hmmm all things being equal I will cross shop other cars, that I might not have 3-5 years ago."

That presents some risk. Some people will still just buy BMW for the badge name. However, others will be tempted away to other brands. It remains to be seen whether this will actually harm sales in the USA, and it certainly remains to be seen whether that will matter to BMW with the Chinese market being such a cash cow and priority.

But it certainly seems BMW is done competing on volume in the USA and adjusting to fattening margins on sales here instead.

It doesn't guarantee that they won't remain the driving dynamics leader in the G20,G30 etc... it doesn't guarantee that they still won't lease better than everyone else, but that margin of advantage everywhere has been slimmed down a fair amount.
adrian's bmw commented:
March 4, 2017, 3:36 pm

Quote:
Originally Posted by mwm1166 View Post
I've made similar points to all 3. I think where they stand is still competitive, but it has gone from a "no brained, BMW offers way more for the money" to "hmmm all things being equal I will cross shop other cars, that I might not have 3-5 years ago."

That presents some risk. Some people will still just buy BMW for the badge name. However, others will be tempted away to other brands. It remains to be seen whether this will actually harm sales in the USA, and it certainly remains to be seen whether that will matter to BMW with the Chinese market being such a cash cow and priority.

But it certainly seems BMW is done competing on volume in the USA and adjusting to fattening margins on sales here instead.

It doesn't guarantee that they won't remain the driving dynamics leader in the G20,G30 etc... it doesn't guarantee that they still won't lease better than everyone else, but that margin of advantage everywhere has been slimmed down a fair amount.
You have some good points. I like the "no brained, BMW offers way more for the money" one to the "hmm all things being equal". Conversely, it made me think, "Gosh, BMW has seriously been buying some business for all these years and left some money on the table while others were holding their cards closer and closer to their vests. Sure, some will be "tempted" away, but by what? Other luxury brands are doing the same thing, so maybe the ones that would've gotten a subvented lease will now go back to the Hondas and Toyotas where they were tempted away from to begin with. Idk.

Call it fattening their margins, but weren't other brands and businesses already doing this? Call it streamlining, efficiency, growing more profitable, belt tightening, or being more equitable. Do you feel the same way about Porsche, for example?

Done competing? You mean giving away cars or offering a different value perspective and direction?
mwm1166 commented:
March 4, 2017, 3:43 pm

Quote:
Originally Posted by adrian's bmw View Post
You have some good points. I like the "no brained, BMW offers way more for the money" one to the "hmm all things being equal". Conversely, it made me think, "Gosh, BMW has seriously been buying some business for all these years and left some money on the table while others were holding their cards closer and closer to their vests. Sure, some will be "tempted" away, but by what? Other luxury brands are doing the same thing, so maybe the ones that would've gotten a subvented lease will now go back to the Hondas and Toyotas where they were tempted away from to begin with. Idk.

Call it fattening their margins, but weren't other brands and businesses already doing this? Call it streamlining, efficiency, growing more profitable, belt tightening, or being more equitable. Do you feel the same way about Porsche, for example?

Done competing? You mean giving away cars or offering a different value perspective and direction?
Done competing on volume. They are going to compete more directly and adjust their profits to have higher margin per unit is all I mean.

As far as Porsche, they are still very unique in the marketplace. There is almost no one out there that offers a competing product to the 9-11 in style, driving dynamics, cost. they have never been a value. You always had to pay for a Porsche, but many a Porsche owner is willing to pay that money because the car drives far better than anything that can be had for under 150k. Sure you can get insane expensive porsches, but those folks are usually cross shopping against much higher end things. However for 90-100k 911 what else is out here that comes close to the driving dynamics for the price? I can't think of many. So, Porsche was never competing on volume. They were always doing a high margin business on less volume. Now, their new SUV stuff is probably different, but a cayman or boxier versus an SLK or z4, give me a break. All day everyday anyone who cares about the drive will go Porsche, and they will lease for an arm or a leg. It's just apples to oranges. BMW is competing against sedans a lot and that means they face pressure from value brands like Honda and Toyota below, and direct class competitors in Mercedes, Audi, Cadillac, and jaguar, Alfa, etc. before BMW's strategy was just to outsell everyone with super lease deals and lower margins. Now they are going to compete more directly it appears and attempt to make their profit from larger margins on less units.
adrian's bmw commented:
March 4, 2017, 4:04 pm

Quote:
Originally Posted by mwm1166 View Post
Done competing on volume. They are going to compete more directly and adjust their profits to have higher margin per unit is all I mean.

As far as Porsche, they are still very unique in the marketplace. There is almost no one out there that offers a competing product to the 9-11 in style, driving dynamics, cost. they have never been a value. You always had to pay for a Porsche, but many a Porsche owner is willing to pay that money because the car drives far better than anything that can be had for under 150k. Sure you can get insane expensive porsches, but those folks are usually cross shopping against much higher end things. However for 90-100k 911 what else is out here that comes close to the driving dynamics for the price? I can't think of many. So, Porsche was never competing on volume. They were always doing a high margin business on less volume. Now, their new SUV stuff is probably different, but a cayman or boxier versus an SLK or z4, give me a break. All day everyday anyone who cares about the drive will go Porsche, and they will lease for an arm or a leg. It's just apples to oranges. BMW is competing against sedans a lot and that means they face pressure from value brands like Honda and Toyota below, and direct class competitors in Mercedes, Audi, Cadillac, and jaguar, Alfa, etc. before BMW's strategy was just to outsell everyone with super lease deals and lower margins. Now they are going to compete more directly it appears and attempt to make their profit from larger margins on less units.
I think they're definitely making some tweaks to volume because the heavy incentive hemorraging just isn't going to cut it. Giving away what you're supposed to sell just isn't sustainable.

Agreed. And Porsche has way fewer points as well and their lineup is definitely not as diverse as BMW's or Mercedes. At one time, BMW operated similarly. I think that time started around 2000, IMO.
mwm1166 commented:
March 4, 2017, 7:58 pm

I don't disagree, but you're on the side of the fence where you care whether bmw makes big or small profits. To me and most it's immaterial. We just want the most car for the least money. So, it might have been bad business all these years not making big margins. However, they grew themselves into the most respected car brand and the biggest luxury car seller in USA under that model. So, it couldn't have all been bad.
Alpine300ZHP commented:
March 5, 2017, 9:39 am

Quote:
Originally Posted by Robert A View Post
I'm not sure I agree with your comments concerning the Audi. I've driven it, on a few occasions, and I think the steering is too light, and the road feel is, if anything, worse than BMW's. The issue is still the FWD platform.



Alfa is a very promising entrant in the market, but they're not going to eat anybody's lunch until they lock down a competitive leasing program. At present, there is no captive financing arm, and the companies offering leasing programs are pricing a lot of residual risk into the program.


No one who is used to BMW should consider any Audi that is not equipped with Quattro.


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mh4ll commented:
March 5, 2017, 11:10 am

After reading though this thread, which seems to have veered off course a bit, I still am not sure whether the residual tiering applies to the 440 or just the 430?
Robert A commented:
March 5, 2017, 11:34 am

Quote:
Originally Posted by Alpine300ZHP View Post
No one who is used to BMW should consider any Audi that is not equipped with Quattro.


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i drove a Quattro sport yesterday and it was nice, but completely numb
Alpine300ZHP commented:
March 5, 2017, 2:43 pm

Quote:
Originally Posted by Robert A View Post
i drove a Quattro sport yesterday and it was nice, but completely numb


More numb than a comparable 328/330 sport? Just asking because I have not been in an Audi recently. The last Audi I drove was an RS5 and that drive made me pick my M4.


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Robert A commented:
March 5, 2017, 2:45 pm

To me, yes. The car drives great, but I don't think it has the clean, balanced feel of a RWD BMW.
Quote:
Originally Posted by Alpine300ZHP View Post
More numb than a comparable 328/330 sport? Just asking because I have not been in an Audi recently. The last Audi I drove was an RS5 and that drive made me pick my M4.


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jjrandorin commented:
March 5, 2017, 5:31 pm

Quote:
Originally Posted by mh4ll View Post
After reading though this thread, which seems to have veered off course a bit, I still am not sure whether the residual tiering applies to the 440 or just the 430?
Everything we have seen so far says it is only for the 430 currently. BMW programs can change at any time though.

The 330 has a Maximum residualized MSRP currently (but the 340 does not) and the 430 has the tiered RVs for the upgraded packaged versions, while the 440 does not.
mh4ll commented:
March 7, 2017, 8:02 am

Quote:
Originally Posted by jjrandorin View Post
Everything we have seen so far says it is only for the 430 currently. BMW programs can change at any time though.



The 330 has a Maximum residualized MSRP currently (but the 340 does not) and the 430 has the tiered RVs for the upgraded packaged versions, while the 440 does not.

Perfect. Thanks!
kjboyd commented:
March 9, 2017, 9:51 am

interesting: http://www.livemint.com/Companies/Nh...h-rivalry.html
tim330i commented:
March 9, 2017, 7:39 pm

This change to BMW's leasing seems to be as a direct result of end of lease write downs that happened in 2016. Read more about it here -

http://www.bimmerfest.com/forums/sho...d.php?t=968541

Tim
Ty Vil commented:
March 24, 2017, 6:40 pm

FYI: BMW Financial Services in conjunction with BMW of North America have discontinued the MY2018 4 Series Tiered Pricing Structure that was previously announced.
tim330i commented:
March 24, 2017, 6:44 pm

Really?! Can you post (or email me) more specifics?
Robert A commented:
March 24, 2017, 6:48 pm

MRM might be gone too.
Quote:
Originally Posted by tim330i View Post
Really?! Can you post (or email me) more specifics?
AksNasZasNas commented:
March 24, 2017, 7:47 pm

Quote:
Originally Posted by Ty Vil View Post
FYI: BMW Financial Services in conjunction with BMW of North America have discontinued the MY2018 4 Series Tiered Pricing Structure that was previously announced.


I see this as bmw being responsive to consumer and dealer issues. Solid. [emoji106]
Squeak commented:
March 24, 2017, 8:02 pm

Quote:
Originally Posted by Robert A View Post
MRM might be gone too.
Edit: never mind
namelessman commented:
March 24, 2017, 8:04 pm

Quote:
Originally Posted by Ty Vil View Post
FYI: BMW Financial Services in conjunction with BMW of North America have discontinued the MY2018 4 Series Tiered Pricing Structure that was previously announced.
Wow very interesting development. Is there any official announcement to this?
tim330i commented:
March 24, 2017, 8:16 pm

Official announcement here -> http://www.bimmerfest.com/forums/sho...d.php?t=970918

Tim
DavidP@bmwportland commented:
March 24, 2017, 10:22 pm

Quote:
Originally Posted by Ty Vil View Post
FYI: BMW Financial Services in conjunction with BMW of North America have discontinued the MY2018 4 Series Tiered Pricing Structure that was previously announced.


Starting April 1st...


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