Calculating BMW invoice pricing for MY 2017 models - Page 3 - Bimmerfest - BMW Forums



Go Back   Bimmerfest - BMW Forums > BMW Buyers Guide - Dealers, resources, pricing, tips and trick > Ask-A-BMW-Dealer

Ask-A-BMW-Dealer
Talk to our team of BMW Client Advisors from supporting BMW dealerships. Get all of your BMW pricing, ordering, buying, financing, and leasing questions answered here!

Reply
 
Thread Tools Display Modes
  #51  
Old 07-04-2016, 12:59 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
The invoice is very much the customer's business, it is a much better starting point that what the dealer wants customers to pay.

And to be specific, dealers seldom want customers to pay less than what dealers actually pay(NOT what dealers say they pay).
Do you know what they're getting right now? If not, then you don't know the full picture. Have you seen some of the deals quoted already on even new 2017's?

Their current compensation structure has a lot of twists and turns in it based on one goal: volume! The dealer can make a lot of money by pushing cars out the door regardless of what you or I think is his so-called "invoice price." Did you notice any "build-out allowances" in the July/August program? Neither did I. Did you see any Purchase Credits or Lease Credits (except for models that end in an 'e' or begin with an 'i')? Neither did I? So, gee, I wonder why?

So maybe we don't know everything about what the dealer's total compensation potential is just by thinking we know his new "invoice price?" Maybe there are other things that are important to the dealer as well as BMWNA. Maybe that's what motivates him to take what appear to be low-gross deals? We don't know that. We can only look at what we see and then put two and two together.

Reply With Quote
Sponsored Links
Advertisement
 
  #52  
Old 07-04-2016, 01:23 PM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by Ninong View Post
Do you know what they're getting right now? If not, then you don't know the full picture. Have you seen some of the deals quoted already on even new 2017's?

Their current compensation structure has a lot of twists and turns in it based on one goal: volume! The dealer can make a lot of money by pushing cars out the door regardless of what you or I think is his so-called "invoice price." Did you notice any "build-out allowances" in the July/August program? Neither did I. Did you see any Purchase Credits or Lease Credits (except for models that end in an 'e' or begin with an 'i')? Neither did I? So, gee, I wonder why?

So maybe we don't know everything about what the dealer's total compensation potential is just by thinking we know his new "invoice price?" Maybe there are other things that are important to the dealer as well as BMWNA. Maybe that's what motivates him to take what appear to be low-gross deals? We don't know that. We can only look at what we see and then put two and two together.

Yes the cost/price structure is changing, notably the incentives seem to be curtailed. And the suggested shift from CSI to loyalty as metrics of AVP is also leaning towards the volume leaders.

One scenario is that BMWNA/BMWAG will further shrink difference of invoice and MSRP, and move the potential dealer profit from front to back, and further entice dealer behaviors, e.g. metal moving. In addition BMWNA/BMWAG can beef up its bottom line, and recoup other costs, e.g. airbag recalls?

As far as relevance of invoice, knowing the invoice does not necessarily mean paying the invoice. The invoice is a point of reference, so the prevailing good deal for a specific model can be $500(e.g.) below invoice before incentives.

Other two-and-two clues observed are, dealer CAs/SMs in general are not as motivated with the metal moving business model as previous one. My wild guess is that the CAs/SMs much prefer the wide(r) gap of MSRP and invoice in the past, so they can push lucrative MSRP-minus deals to uninformed customers.
Reply With Quote
  #53  
Old 07-04-2016, 01:37 PM
jjrandorin jjrandorin is offline
Officially Welcomed to the 'Fest
Location: San Diego
 
Join Date: May 2013
Posts: 8,854
Mein Auto: 18' Tesla Model 3 Perf.
Quote:
Originally Posted by namelessman View Post
Yes the cost/price structure is changing, notably the incentives seem to be curtailed. And the suggested shift from CSI to loyalty as metrics of AVP is also leaning towards the volume leaders.

One scenario is that BMWNA/BMWAG will further shrink difference of invoice and MSRP, and move the potential dealer profit from front to back, and further entice dealer behaviors, e.g. metal moving. In addition BMWNA/BMWAG can beef up its bottom line, and recoup other costs, e.g. airbag recalls?

As far as relevance of invoice, knowing the invoice does not necessarily mean paying the invoice. The invoice is a point of reference, so the prevailing good deal for a specific model can be $500(e.g.) below invoice before incentives.

Other two-and-two clues observed are, dealer CAs/SMs in general are not as motivated with the metal moving business model as previous one. My wild guess is that the CAs/SMs much prefer the wide(r) gap of MSRP and invoice in the past, so they can push lucrative MSRP-minus deals to uninformed customers.
Actually I have a different opinion of that. they (CA / SMs) would prefer what is happening now, as its less transparent. They can pull out an invoice and tell a customer "I cant sell it lower than this to you... look here is my invoice" and the vast majority of people would buy it... while they may be making more than previous on the back end.

THAT would be a much easier sell (lower spread, "transparency" by showing every customer the invoice because they can find it online anyway, with more back end money to make up for it) than having a larger spread would. Only my opinion of course, but since back end money is not transparent, THAT is how you make money on uninformed customers, while still appearing flexible etc.
__________________

2019 X3 M40i Phytonic Blue |Blk Leather W/Blue Stiching | Alu. Rhombicle trim | Adaptive Suspension | Premium Pack | Drivers Assist | Drivers Assist + | Wireless Charging | 21" 718 Wheels| | Executive Pack | HK Stereo (hers)

18' Tesla Model 3 Performance |blue /blk|Perf. pack|FSD

BMW CCA #477341
Reply With Quote
Sponsored Links
Advertisement
 
  #54  
Old 07-04-2016, 02:00 PM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by jjrandorin View Post
Actually I have a different opinion of that. they (CA / SMs) would prefer what is happening now, as its less transparent. They can pull out an invoice and tell a customer "I cant sell it lower than this to you... look here is my invoice" and the vast majority of people would buy it... while they may be making more than previous on the back end.

THAT would be a much easier sell (lower spread, "transparency" by showing every customer the invoice because they can find it online anyway, with more back end money to make up for it) than having a larger spread would. Only my opinion of course, but since back end money is not transparent, THAT is how you make money on uninformed customers, while still appearing flexible etc.
That can be a valid interpretation. There has been discussions of whether invoice plus pricing model is a shell game for the last 15-16 years(at least since the start of this forum), for all those years customers surely have been better off paying invoice plus than MSRP minus/plus(which many dealers are very willing to charge).

My thinking is that given the airbag costs BMWNA needs to curtail the incentives(e.g. buildout cash) to pay for the extra costs.

It can be possible that most of the incentives now become unadvertised trunk money. Do note a primary purpose of this Ask-A-BMW-Dealer sub-forum is for festers to get clues of such unadvertised factory-to-dealer incentives from board sponsors.
Reply With Quote
  #55  
Old 07-04-2016, 02:01 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
My wild guess is that the CAs/SMs much prefer the wide(r) gap of MSRP and invoice in the past, so they can push lucrative MSRP-minus deals to uninformed customers.
If we're talking about the salesmen ("client advisors"), that's not a wild guess, that has always been true. They don't want anything to happen that reduces their payable gross unless there is also a change to their volume bonus (assuming they even have one) but they hate that setup. It forces them to hit certain volume numbers every month in order to have a decent month at all. If they have a bad month, meaning they don't hit even their minimum volume bonus level, then it's a really bad month. The salesmen in the top third of the sales force (meaning mostly those who have been there the longest) love pay plans that are loaded with great volume bonuses, especially if they know they will hit the top bonus level every month.

Sales managers are not compensated the same way salesmen are compensated. And general sales managers are compensated on everything -- new car sales, used car sales, fleet, Internet sales and the F&I department. They usually have bonuses tied to the dealership's quarterly payout from the factory and almost always have a nice year-end bonus tied to meeting yearly volume goals and sometimes a little something based on CSI numbers, too.

Every dealership is different and chain dealers can be really different because they have their own ideas. Some are tightly controlled and other let each location's general manager run the store his way, within certain corporate guidelines. Some of them have layers of intermediate managers, usually one for each brand and often one for each region of the country who supervises all brands as long as the dealership is in his region. Try having to report to a Lexus guy whose entire experience was with that Japanese brand if you're a BMW guy. And I'm sure it's even more painful if you're a GM guy or a Ford guy. They were raised in different families, so to speak. LOL

I have talked to a couple of guys who are just regular salesmen and they think their new pay plans put more pressure on them "to move metal" regardless of the gross -- meaning amount over the new dealer's invoice price. Yet at the same time they expect them to still hold "gross." So their pay plan is tilted toward volume but they catch heat for trying to give everything away. LOL
Reply With Quote
  #56  
Old 07-04-2016, 02:11 PM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by Ninong View Post
I have talked to a couple of guys who are just regular salesmen and they think their new pay plans put more pressure on them "to move metal" regardless of the gross -- meaning amount over the new dealer's invoice price. Yet at the same time they expect them to still hold "gross." So their pay plan is tilted toward volume but they catch heat for trying to give everything away. LOL
Yes that matches with my observations, namely, moving metal is the primary goal. The pressure is on the CAs to move the metal, but the prices still need to be signed off by GSMs/SMs, who still have their incentives(from the GM) somewhat tied to gross. It seems BMWNA is moving towards a volume brand like Honda/Toyota.
Reply With Quote
  #57  
Old 07-04-2016, 02:20 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
Do note a primary purpose of this Ask-A-BMW-Dealer sub-forum is for festers to get clues of such unadvertised factory-to-dealer incentives from board sponsors.
Well, that may be a "primary purpose" of the board members but it had better not be something coming from a "board sponsor" who works for a BMW dealership or he will be told -- actually his GM or GSM will be told -- for him to chill out and give it a rest. Interesting how that works. They read all the hobbyist forums, they just can't register or post comments. What they can do is report to their superiors who will then call the dealership and report the activities of any employee of a BMW dealership who reveals, or even confirms, what they consider to be their "proprietary information." I'm sure you've seen how that works very recently on this very same forum, haven't you? Notice anyone not posting as much lately as he once did? Notice any other changes? Please don't name anyone but I think you know who I'm talking about.

If a board sponsor who is a BMW client advisor does post to the forum it's usually to answer a procedural question but certainly never to answer a question about invoice or mark up or factory-to-dealer incentives that are not being published by BMW. Even when they do occasionally jump into a thread started by a member looking for a certain car it's usually to say something like, "Hey, OP, contact me directly, I can help..." They're not about to say on the board exactly what they mean by that because that would be going too far. And they're not going to answer any of your questions about mark-ups or new additions to the dealer's base model invoice price. We have to figure that out for ourselves by looking at VIRs that so many client advisors seem more than willing to share with their customers in order to prove how good the deal is that they gave him. Sometimes even Google can come up with that for you.

Reply With Quote
  #58  
Old 07-04-2016, 02:48 PM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by Ninong View Post
Well, that may be a "primary purpose" of the board members but it had better not be something coming from a "board sponsor" who works for a BMW dealership or he will be told -- actually his GM or GSM will be told -- for him to chill out and give it a rest. Interesting how that works. They read all the hobbyist forums, they just can't register or post comments. What they can do is report to their superiors who will then call the dealership and report the activities of any employee of a BMW dealership who reveals, or even confirms, what they consider to be their "proprietary information." I'm sure you've seen how that works very recently on this very same forum, haven't you? Notice anyone not posting as much lately as he once did? Notice any other changes? Please don't name anyone but I think you know who I'm talking about.

If a board sponsor who is a BMW client advisor does post to the forum it's usually to answer a procedural question but certainly never to answer a question about invoice or mark up or factory-to-dealer incentives that are not being published by BMW. Even when they do occasionally jump into a thread started by a member looking for a certain car it's usually to say something like, "Hey, OP, contact me directly, I can help..." They're not about to say on the board exactly what they mean by that because that would be going too far. And they're not going to answer any of your questions about mark-ups or new additions to the dealer's base model invoice price. We have to figure that out for ourselves by looking at VIRs that so many client advisors seem more than willing to share with their customers in order to prove how good the deal is that they gave him. Sometimes even Google can come up with that for you.

The board sponsor participation(in terms of disclosing incentives and info) have dropped quite a bit in last few years, so it is not a recent occurrence.

And a while back the board founder got heat from posting RV's, so for sure BMWNA(and not necessarily GM's/GSM's) takes notice and starts to curtail disclosures of non-public info in public forums.

As far as a specific respected CA not posting recently, his last few posts had detailed explanations of his rationales.
Reply With Quote
  #59  
Old 07-04-2016, 02:53 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
The board sponsor participation(in terms of disclosing incentives and info) have dropped quite a bit in last few years, so it is not a recent occurrence.

And a while back the board founder got heat from posting RV's, so for sure BMWNA(and not necessarily GM's/GSM's) takes notice and starts to curtail disclosures of non-public info in public forums.

As far as a specific respected CA not posting recently, his last few posts had detailed explanations of his rationales.
In this particular case in question, BMWNA called up his GSM. He's no longer a sponsor and he hasn't posted anything in the past 8 days.
Reply With Quote
  #60  
Old 07-04-2016, 03:34 PM
Dennisis's Avatar
Dennisis Dennisis is offline
Officially Welcomed to the 'Fest
Location: Tucson
 
Join Date: Oct 2013
Posts: 483
Mein Auto: 2016 535i M Sport
Quote:
Originally Posted by Ninong View Post
In this particular case in question, BMWNA called up his GSM. He's no longer a sponsor and he hasn't posted anything in the past 8 days.

Well that just sucks.
__________________


Dennis

2016 535i M Sport / Jet Black w/ Mocha

Retired: 2014 335i M Sport / Mineral Grey Metallic
Reply With Quote
  #61  
Old 07-04-2016, 03:48 PM
rmorin49's Avatar
rmorin49 rmorin49 is offline
Officially Welcomed to the 'Fest
Location: Hagerstown, MD,
 
Join Date: Jan 2007
Posts: 4,789
Mein Auto: 2011 335d
Clearly BMW wants to retain market share. They will become just like any other dealer. Buyer beware.
__________________
COL(Ret), US Army
Hagerstown MD
2019 X5 MSport 40i
2016 Corvette Stingray (Fun Car)
2016 528ixdrive/MSport (Ret)
2013 Audi A6 (Ret)
2013 Audi A4 (Ret)
2010 Z4s30i (ED) (Ret)
2011 335d (Ret)
2009 335i vert (Ret)/ED/PCD
2007 335i vert (Ret) ED/PCD
2000 740iL (Ret)
1998 328iC (Ret)
1990 535i (Ret)
1988 635CSi (Ret)
1985 M635 Euro (Ret)
Reply With Quote
  #62  
Old 07-04-2016, 04:51 PM
rmorin49's Avatar
rmorin49 rmorin49 is offline
Officially Welcomed to the 'Fest
Location: Hagerstown, MD,
 
Join Date: Jan 2007
Posts: 4,789
Mein Auto: 2011 335d
Big Brother is watching us.
__________________
COL(Ret), US Army
Hagerstown MD
2019 X5 MSport 40i
2016 Corvette Stingray (Fun Car)
2016 528ixdrive/MSport (Ret)
2013 Audi A6 (Ret)
2013 Audi A4 (Ret)
2010 Z4s30i (ED) (Ret)
2011 335d (Ret)
2009 335i vert (Ret)/ED/PCD
2007 335i vert (Ret) ED/PCD
2000 740iL (Ret)
1998 328iC (Ret)
1990 535i (Ret)
1988 635CSi (Ret)
1985 M635 Euro (Ret)
Reply With Quote
  #63  
Old 07-04-2016, 05:52 PM
Dennisis's Avatar
Dennisis Dennisis is offline
Officially Welcomed to the 'Fest
Location: Tucson
 
Join Date: Oct 2013
Posts: 483
Mein Auto: 2016 535i M Sport
Glad I live close enough to LA - sad for those in the boonies trying to get a decent deal. At least those who don't know about ordering and shipping...
__________________


Dennis

2016 535i M Sport / Jet Black w/ Mocha

Retired: 2014 335i M Sport / Mineral Grey Metallic
Reply With Quote
  #64  
Old 07-04-2016, 09:33 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by rmorin49 View Post
Clearly BMW wants to retain market share. They will become just like any other dealer. Buyer beware.
Honestly, I don't think so. No other car manufacturer is better than BMW when it comes to wanting to look out for the interests of their customers. I wouldn't even begin to put them in the same class with a certain other very large German manufacturer that is also family-controlled. No comparison whatsoever. I won't say anything negative about our own domestic manufacturers because, in spite of some well known shortcomings, I think they have been moving in the right direction over the past few decades and are certainly doing better, especially as far as their attitude, than they were many years ago. A prime example of how bad it was would be Henry Ford II.

As far as the business of selling cars in the U.S., we have a distribution system based on an independent franchised dealer network. That's what was already in place when BMW chose to enter the American market some five decades ago. Whether they like it or not, they have to work with that model if they want to sell cars here. Obviously Elon Musk is in the process of breaking that model but he's encountering a lot of resistance.

The bottom line is that if you don't like the way you have to buy cars in the U.S., don't blame BMW, they're not exactly thrilled with it either but they have to work within the system that is mandated by state law in many states. For the past three decades, that I know of, BMW has been gradually nudging their dealers, one way or another, into doing things their way. Obviously we're not there yet and I don't know if we will ever get there but that's what they would like. Remember earlier this year Ian Robertson, who is British, said with a straight face that the total amount of time required to complete the actual paperwork necessary to finalize the sale and get out of the dealership should be cut to no more than 10 minutes. He used to be President of Rolls-Royce but BMW Group promoted him to VP for Sales and Member of the Board of Management.

He's talking about a total of 10 minutes from the time the salesman, sorry "client advisor," gives you his asking price until the time you are finished signing all of the paperwork. He even commented that he didn't understand why a finance contract or lease required so many signatures. Well, the exact number of signatures and their exact placement on a finance contract are determined by federal law (Reg. Z of the Truth in Lending Act) and the wording on a contract must comply with not only federal law but all of the various different state laws. We're not a single country when it comes to regulating car sales and insurance, we're like 50 different little countries.

He said his goal was to reduce the entire car buying experience to less than an hour, including less than 10 minutes for finalizing the negotiations and signing of all required documents. You and I both know that's not happening anytime soon in this country. So that's what BMW would like to see and it's probably what many of you would like to see, too?

Since this thread is about pricing of BMWs, what other product can you think of that sells for less markup than a new car in the U.S.? Certainly not new homes from housing developers unless they're caught in a credit squeeze, like they were in the early 1980's, and have to dump already built houses at a loss just to pay off their construction loans and avoid foreclosure. Some new car dealers of some brands struggle to break even in their new car sales departments. If it weren't for their used car operations and the parts and service departments, they would be in trouble. As for BMW themselves, their goal, which they routinely meet, is to keep their EBIT in the 8-10% range. That's better than some of their major German rivals who struggle for consistency in that area. I believe BMW dealers in the U.S. have an average profit of 2.6% of sales revenue and that's one of the best in the industry, according to BMW. That means that if you use $50,000 as the average sales price and 80 cars as the average volume, you're talking about $104,000/month. That's nothing compared to the amount of investment required to own a BMW dealership of that size.

Some BMW dealerships, like Crevier, are giants, but some are not all that large at all. Many of the formerly family-owned individual dealerships are being swallowed up by the large mega-dealers, who swoop in and offer prices that are hard to resist. Unless you're in a small, semi-rural area, or a state with really low commercial real estate values, it's very, very expensive to get into the new car business. That's why you see so many multi-brand dealerships at a single location, often with separate showroom floors.

Anyway, if you don't like the way cars are sold in the U.S. you have company. BMW has been fighting it for years trying to move it gradually into their own mold. They have made major changes over the past 20 years or so. Secretly they would like nothing better than to operate on the Elon Musk model but don't expect them to ever admit that.
Reply With Quote
  #65  
Old 07-04-2016, 10:07 PM
Robert A Robert A is offline
Officially Welcomed to the 'Fest
Location: Los Angeles
 
Join Date: May 2003
Posts: 5,240
Mein Auto: BMW 535d
I've often wondered what motivates dealers, regardless of brand, to put so much time, money and capital into the new car sales process. I'll walk into a dealership and see the gleaming showroom with dozens of people walking around and wonder how they can possibly make money on the ultimate transaction that might net then $1,500 of gross profit before overhead, interest or depreciation. Sure, they make more profit from service and used cars, but those departments function independently of new car sales.

I simply don't get it.

Quote:
Originally Posted by Ninong View Post
Since this thread is about pricing of BMWs, what other product can you think of that sells for less markup than a new car in the U.S.? Certainly not new homes from housing developers unless they're caught in a credit squeeze, like they were in the early 1980's, and have to dump already built houses at a loss just to pay off their construction loans and avoid foreclosure. Some new car dealers of some brands struggle to break even in their new car sales departments. If it weren't for their used car operations and the parts and service departments, they would be in trouble. As for BMW themselves, their goal, which they routinely meet, is to keep their EBIT in the 8-10% range. That's better than some of their major German rivals who struggle for consistency in that area. I believe BMW dealers in the U.S. have an average profit of 2.6% of sales revenue and that's one of the best in the industry, according to BMW. That means that if you use $50,000 as the average sales price and 80 cars as the average volume, you're talking about $104,000/month. That's nothing compared to the amount of investment required to own a BMW dealership of that size.
__________________
Robert A
BMWCCA Member


Current
2014 535d, M Sport, Space Gray/Mocha Nappa

Prior
2007 530i, White/Black, 6MT
2001 530i, Orient Blue/Beige, 5MT
1994 325is, White/Black 5MT
1984 325e, White/Black 5MT
1983 318i, Delphin/Beige 4MT

Last edited by Robert A; 07-04-2016 at 10:09 PM.
Reply With Quote
  #66  
Old 07-04-2016, 11:14 PM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by Robert A View Post
I've often wondered what motivates dealers, regardless of brand, to put so much time, money and capital into the new car sales process. I'll walk into a dealership and see the gleaming showroom with dozens of people walking around and wonder how they can possibly make money on the ultimate transaction that might net then $1,500 of gross profit before overhead, interest or depreciation. Sure, they make more profit from service and used cars, but those departments function independently of new car sales.

I simply don't get it.
Does the $1500 of gross before cost include AVP and sales quota bonus?

Before MY17 the AVP is 5% of base MSRP, so a base $50K MSRP car yields $2500.

MY17 and on the AVP is 6%(including loyalty bonus) of base + option MSRP, so an optioned $70k car yields $4200.

On top of that, the sales quota bonuses(if eligible) have more trailing zeros than the above, albeit it is shared by all eligible employees.

If the average 2.6% profit per car is believable, then the volume leaders that move 200+ cars per month will be at a significant advantage over the small(er) dealers. And the economy of scale means the volume leaders do not need to double staff to accommodate double sales.
Reply With Quote
  #67  
Old 07-05-2016, 12:02 AM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
If the average 2.6% profit per car is believable...
What I actually said was "BMW dealers in the U.S. have an average profit of 2.6% of sales revenue and that's one of the best in the industry, according to BMW." That was a statement made by Ludwig Willisch in his public comments at the Detroit Auto Show in January 2016. In other words, for every $1 million of sales revenue a dealership generates, it earns a net profit of $26,000. That's pre-tax net profit as a percent of sales revenue for the entire dealership. That includes all sales: new cars, used cars, parts and service.

As you can see from this article I googled from two years ago, the average for all U.S. dealers was 2.2% in 2013 and 2012 and down from 2.3% in 2011, which was the highest that the NADA had seen since at least 1978: http://www.autonews.com/article/2014...s-keep-soaring
Reply With Quote
  #68  
Old 07-05-2016, 12:20 AM
Robert A Robert A is offline
Officially Welcomed to the 'Fest
Location: Los Angeles
 
Join Date: May 2003
Posts: 5,240
Mein Auto: BMW 535d
Is that after interest and depreciation?
Quote:
Originally Posted by Ninong View Post
What I actually said was "BMW dealers in the U.S. have an average profit of 2.6% of sales revenue and that's one of the best in the industry, according to BMW." That was a statement made by Ludwig Willisch in his public comments at the Detroit Auto Show in January 2016. In other words, for every $1 million of sales revenue a dealership generates, it earns a net profit of $26,000. That's pre-tax net profit as a percent of sales revenue for the entire dealership. That includes all sales: new cars, used cars, parts and service.

As you can see from this article I googled from two years ago, the average for all U.S. dealers was 2.2% in 2013 and 2012 and down from 2.3% in 2011, which was the highest that the NADA had seen since at least 1978: http://www.autonews.com/article/2014...s-keep-soaring
__________________
Robert A
BMWCCA Member


Current
2014 535d, M Sport, Space Gray/Mocha Nappa

Prior
2007 530i, White/Black, 6MT
2001 530i, Orient Blue/Beige, 5MT
1994 325is, White/Black 5MT
1984 325e, White/Black 5MT
1983 318i, Delphin/Beige 4MT
Reply With Quote
  #69  
Old 07-05-2016, 12:59 AM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Floorplan interest is included as an expense charged against sales. If you're asking about interest and depreciation as it might apply to the real estate the dealership occupies, I will take a pass on that because I worked for one dealer who had paid off all of his loans years before I went there and he simply had a separate real estate holding company (namely him) that each of us (meaning each department head) paid rent to on a monthly basis. This was 30 years ago and he charged us a total of $18,000/month rent. So that was paid by the dealership to the real estate holding company that owned the property (himself). That was a Chevy store. Then I worked for a BMW dealer who didn't even floor his cars. He paid cash for everything just because he had the cash to do it.

When I googled for this, I found that Canadian dealers in 2015 averaged 2.25% pre-tax net profit as a percent of sales revenue. I remember BMWNA's president, Ludwig Willisch, throwing that statistic into an interview he gave back in January in Detroit when he went into detail about how he intented to rearrange the dealer's backend compensation to add this new 1% and how it would be broken down into four components. His point was that BMW dealers shouldn't complain because they're doing better than most other dealers and the numbers prove it. All dealers are always whining about something. They all think the factory is screwing them.

Go back to that article I linked. It has a more detailed explanation. The net profit (pre-tax) as a percent of sales revenue is just a percentage number you see thrown around a lot to compare dealerships by brand, by region, or just individually to see if you're interested in buying them. They also pay a lot of attention to cash flow, which is why certain chain dealerships insist on selling all their own F&I department service contracts, etc., instead of those backed by BMW. I don't like the way that works because I have seen too many dealers play games with those and then go BK. And some so-called service contract third-party companies, including the one billed as the largest in the country at the time (less than 10 years ago) go belly up as a total scam. If you buy something with BMW's name on it, you know it will be accepted at every BMW dealership in the country. Enough said.
Reply With Quote
  #70  
Old 07-05-2016, 07:14 AM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by Ninong View Post
What I actually said was "BMW dealers in the U.S. have an average profit of 2.6% of sales revenue and that's one of the best in the industry, according to BMW." That was a statement made by Ludwig Willisch in his public comments at the Detroit Auto Show in January 2016. In other words, for every $1 million of sales revenue a dealership generates, it earns a net profit of $26,000. That's pre-tax net profit as a percent of sales revenue for the entire dealership. That includes all sales: new cars, used cars, parts and service.

As you can see from this article I googled from two years ago, the average for all U.S. dealers was 2.2% in 2013 and 2012 and down from 2.3% in 2011, which was the highest that the NADA had seen since at least 1978: http://www.autonews.com/article/2014...s-keep-soaring
With enough volume 2.6% is a healthy number even pre-tax and pre-depreciation.

Our local volume leader has at least 3 F&I guys, sometimes 4-5. Let's say the 3 F&I each averages 5 deals per day, that is 100+ deals per week, or 400+ per year, both used and new.

Let's say they sell 200 used cars(average $20k each) and 200 new cars(average $40k each). If so, the 2.6% will give about $312k/month of profit before tax and depreciation, or $4m a year on car sales alone, and that's not too shabby.
Reply With Quote
  #71  
Old 07-05-2016, 07:22 AM
jjrandorin jjrandorin is offline
Officially Welcomed to the 'Fest
Location: San Diego
 
Join Date: May 2013
Posts: 8,854
Mein Auto: 18' Tesla Model 3 Perf.
Quote:
Originally Posted by namelessman View Post
With enough volume 2.6% is a healthy number even pre-tax and pre-depreciation.

Our local volume leader has at least 3 F&I guys, sometimes 4-5. Let's say the 3 F&I each averages 5 deals per day, that is 100+ deals per week, or 400+ per year, both used and new.

Let's say they sell 200 used cars(average $20k each) and 200 new cars(average $40k each). If so, the 2.6% will give about $312k/month of profit before tax and depreciation, or $4m a year on car sales alone, and that's not too shabby.
In Northern california that will get you a condo in the city

All kidding aside, 4million sounds like a large number, sorta, but not when you figure in fixed costs like rent / mortgage on the real estate location and storage location of the cars, having parts on hand, run rate of the building utilities, and salaries.
__________________

2019 X3 M40i Phytonic Blue |Blk Leather W/Blue Stiching | Alu. Rhombicle trim | Adaptive Suspension | Premium Pack | Drivers Assist | Drivers Assist + | Wireless Charging | 21" 718 Wheels| | Executive Pack | HK Stereo (hers)

18' Tesla Model 3 Performance |blue /blk|Perf. pack|FSD

BMW CCA #477341
Reply With Quote
  #72  
Old 07-05-2016, 07:55 AM
Stevarino's Avatar
Stevarino Stevarino is offline
Officially Welcomed to the 'Fest
Location: Annapolis, MD
 
Join Date: May 2002
Posts: 834
Mein Auto: 2008 335 / 2014 X-3
Unsolicited quick note to Ninong.

You are truly an asset to this message board! Your posts are always interesting and I have learned a lot from them over the last several months.

You need to write a book based on your knowledge of the facinating car business. I know it would sell.
__________________
Current Vehicles:

2018 X-3 M40i (PCD 2 FEB 2018)
2017 440i Cv ED Sept 1, 2016 (ED #6)(PCD Oct 24 2016)
2008 E-93 335i Cv (ED #3) (Keeper)

BMW CCA #272524
Reply With Quote
  #73  
Old 07-05-2016, 08:12 AM
namelessman namelessman is online now
Officially Welcomed to the 'Fest
Location: northern california
 
Join Date: Dec 2004
Posts: 11,819
Mein Auto: bimmer
Quote:
Originally Posted by jjrandorin View Post
In Northern california that will get you a condo in the city

All kidding aside, 4million sounds like a large number, sorta, but not when you figure in fixed costs like rent / mortgage on the real estate location and storage location of the cars, having parts on hand, run rate of the building utilities, and salaries.
The 2.6% quoted in post#67 says it is pre-tax net profit, it is unclear if it includes all fixed cost and depreciation and salary and commission/bonus and such, my guess is it is net profit after all cost, but before paying taxes.

Also the $4m guesstimate is on car sales alone, parts + service may bring in additional net profit on top.

BTW, making $800 to $1000 per customer net profit before tax is not bad compared to tech companies making $10 net profit per user, across a billion users.

Last edited by namelessman; 07-05-2016 at 10:32 AM.
Reply With Quote
  #74  
Old 07-05-2016, 12:05 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by namelessman View Post
... and that's not too shabby.
That's absolutely nothing and it's the reason there is only one BMW dealership inside the City limits. And he got that location at a steal because the previous dealership there went BK and the bank was desperate to get the loan off their books regardless of loss. That used to be the Foremost Dairy building, if you remember. Any idea what that spot cost? Know what it's worth today? I'm familiar with most of the BMW stores in the Bay Area, including which families owned them over the past 30 years and how they changed hands and how much they're worth. Also, who ran them and what happened. So when it comes to that area, I pretty much know (make that knew) the numbers. That was ages ago. Things have changed a lot since then but the history hasn't.

You guys, most of you, have no clue how expensive it is to operate an automobile franchise, especially in an expensive city. I'm trying not to be argumentative, just throwing out a different opinion. Even if you can pick up a franchise in the Central Valley when the founding dealer principal dies and the heirs can't agree on who's going to get it and one of them files a partition suit to split it up, it's still a huge financial risk. You have to move new cars to keep the operation working because it's the rest of the operation that will save you in slow times. And then when things do slow up (like 2008-2009), people stop coming into the service department, too. If it's free factory stuff they'll come but not if it's going to cost them money.

Remember back in the late 1970's and early 1980's when the prime rate went to 20%? It was so expensive to floor cars that many dealers were stocking less than half the inventory they really needed, which only made matters worse. Then after losing money three or four years straight they gave up and sold out to a chain dealership looking for just such situations to scoop up another store. They didn't make money, they lost money. Some of them lost almost all they had earned in the previous ten or fifteen years in just three or four years before throwing in the towel.

The overhead expenses to operate a dealership can be enormous, especially in an expensive area, so any talk of what's too much per car depends on where you are. That's why there are very, very few individually-owned gas stations in San Francisco, The real estate they occupy is too valuable for a gas station and the owner can sell to a developer and retire. So the major oil companies own most of those stations themselves. It's hard to talk about what's too much profit per car when the real estate the dealership occupies is worth more than $20 million.

Even if all cars in the U.S. sold for full MSRP, that still wouldn't be "too much." We're all talking about getting another 1% or 2% off on a car that is selling for $50,000-$100,000. It would be different if we were talking about another 10% or 15% but we're chasing nickels and dimes. People think saving $1,000 by driving 300 miles away is no big deal. It's absurd. The most important objective should be to choose a client advisor and dealership, close to home, that you can get along with, then price should be secondary, within reason. I'm not saying you should pay $5,000 more for that car than what you can get elsewhere but the idea of chasing a deal just because it's 1% or 2% cheaper someplace else doesn't seem to make sense to me. Of course, some of you may be faced with local dealerships that just don't have much of anything to look at or test drive, or maybe they're not all that knowledgeable about their product, so there are those issues, too.

Just read some of the threads on this board if you want to see what can happen if you try to deal with a dealership just because they beat your other cheapest quote by $500. Especially if they over-promised on an order for an M car that is in high demand. Or if they're thousands of miles away from you and are inexperienced at doing out-of-state sales. Nothing but headaches in those situations.

Anyway, try to keep things in perspective when you think about what's too much profit per car. Other than their volume bonuses, assuming their pay plans have them and assuming they actually hit at least the minimum number of cars that month, the salesmen (pardon, "client advisors") are getting 20% to 22% of the payable gross over dealer's invoice, subject to whatever mini commissions they may have. As Greg Poland pointed out on a couple of occasions when he was being brutally honest with you guys, that's not much for the amount of work involved in handling a European Delivery deal. Yet we see people on Bimmerfest all the time complaining that they can't seem to get $750 over invoice on a brand new 2017 something or other for European Delivery.

Just like BMW's new 1% bonus to dealers is designed to reward the top performing dealers and not the bottom ones, most dealers' pay plans are designed to reward the top performing sales people and not the bottom ones. In fact, the ones who can't meet their minimum monthly volume bonus will usually take the hint and check out other career opportunities before being told that might be a wise decision.

I need another cup of coffee....
Reply With Quote
  #75  
Old 07-05-2016, 12:13 PM
Ninong Ninong is offline
bimmerfest Supporting Member
Location: USA
 
Join Date: May 2014
Posts: 5,464
Mein Auto: M3
Quote:
Originally Posted by Stevarino View Post
Unsolicited quick note to Ninong.

You are truly an asset to this message board! Your posts are always interesting and I have learned a lot from them over the last several months.

You need to write a book based on your knowledge of the facinating car business. I know it would sell.
Thanks for your kind comments. I'm sort of not going anywhere at the moment, so it gives me something to do. And I'm old enough to not care what I say anymore.
Reply With Quote
Reply

See More Related BMW Stories

Tags
2017 bmw invoice pricing, 2017 bmw pricing, 2017 bmw wholesale pricing, bmw 2017 pricing, bmw invoice pricing, bmw news, bmw pricing


Forum Navigation
Go Back   Bimmerfest - BMW Forums > BMW Buyers Guide - Dealers, resources, pricing, tips and trick > Ask-A-BMW-Dealer
Today's Posts Search
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On



Forum Jump


All times are GMT -7. The time now is 11:32 AM.


Powered by vBulletin® Version 3.8.8
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
vBulletin Security provided by vBSecurity v2.2.2 (Pro) - vBulletin Mods & Addons Copyright © 2020 DragonByte Technologies Ltd.
© 2001- VerticalScope Inc. All rights reserved.