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Discussion Starter #1 (Edited)
Staring with model year (MY) 2017 BMW is changing how invoice pricing and dealer compensation works. This has changed the calculations for US invoice pricing and European Delivery pricing, the new calculations are below. Read on to find out why or just jump down to do the calculations. Use our 2017 BMW pricing and ordering guides for MSRP pricing.

Back story on why BMW invoice pricing is changing
Last year BMW NA CEO Ludwig Willisch announced that changes that were coming for dealer compensation. His new plan is intended to move BMW from the bottom of the pile in customer satisfaction rating, especially around service. Under the new plan dealerships can earn up to a 1 percent bonus based on 4 criteria. This was BMW NA's way of providing incentives to dealerships to provided a better customer experience and customer loyalty. That 1 percent has to come from somewhere and we now know it is coming out of the invoice price of the car.

For MY 2016 and prior years the difference in price between MSRP and invoice was 8 percent for the vehicle and 9 percent for options and packages. Staring in MY 2017 the discount between MSRP and invoice is 7 percent for the vehicle and options and packages being 8 percent. In effect BMW has taken 1 percent out of the front end of the deal putting it in the back end of the deal as a carrot for dealerships to chase.

This means we will see deals closer to invoice pricing as dealerships push for volume to hit the back end sales targets. BMW has also increased the holdback (more back end money) from 5 percent of vehicle base cost to 5 percent of the sticker price, giving dealership more room to deal on highly optioned vehicles. What happens in the real market is yet to be seen. As 2017s start hitting the show room stay tuned to find out what Bimmerfest members are getting for deals.


BMW US Invoice Pricing calculation
Base vehicle US MSRP (from pricing sheets) multiplied by 0.93
+ MACO fee $500.00 (flat rate applied to all dealers)
= Base vehicle US BMW invoice price

To figure the invoice price of your BMW as configured add -
+ Option and packages (anything you can add to the vehicle) multiplied by 0.92
+ Training fee of $180.00
+ Destination and handling charge - Currently $995
= Total vehicle invoice price +/- $10.00

BMW European Delivery Invoice Pricing calculation
Base vehicle US MSRP (from pricing sheets below) multiplied by 0.95 gives you the base vehicle European Delivery price. For those wondering, BMW has redueced the (ED discount from 7% to 5% starting in 2016).

Multiple the base vehicle European Delivery pricing by 0.93
+ $475 fee (this started in 2016 and applies to all dealers)
= Base vehicle European Delivery invoice price

To figure the European Delivery invoice price of your BMW as configured add -
+ Option and packages (anything you can add to the vehicle) multiplied by 0.92
+ Destination and handling charge - Currently $995
= Total vehicle invoice price +/- $10.00

Big thanks to Bimmerfest member Ninong and others for helping to get this figured out.
 

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Ich liebe mein BMW
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Great info, thanks! :thumbup:
 

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340i ZMT
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Man, BMW is really resetting all the pricing to maximize profits. Such a shame. Hopefully this doesn't continue their slide in sales of 3 series.
 

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Porleau
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I feel like this will result in 'invoice + $0' deals being offered. That's where I'd start for a new 3 series. Need to recover that 1% for sure!
 

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Not sure ED deals will save buyers enough money to justify the cost of the trip. However if you want to go to Europe AND you want to buy a new BMW then it does make sense.
 

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Pm

Not sure ED deals will save buyers enough money to justify the cost of the trip. However if you want to go to Europe AND you want to buy a new BMW then it does make sense.
(Sent you a PM a few days ago.)
 

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just a fool
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I don't understand why buyers are complaining. BMW is making the dealers work harder to earn that 1%, and the customers will get better service experience at the same price. Yes, the invoice price goes up, but the purchase price will relatively stay the same (closer to invoice, hence invoice + $0).

As a customer, I like it.
 

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Discussion Starter #8
Change is scary. Also what you're saying is possible but doesn't mean it will happen. Dealer principals could cut back on deals to make up the 1% and BMW has already said that not all dealerships will get the 1% back end money.

Could be good, could be bad. We'll have to wait and see what happens in the next few months.

Tim
 

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Jayhawk Fan
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Not sure ED deals will save buyers enough money to justify the cost of the trip. However if you want to go to Europe AND you want to buy a new BMW then it does make sense.
Saving money is only a small reason. The opportunity to see all that Europe and BMW has to offer in your own car is amazing.
 

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Change is scary. Also what you're saying is possible but doesn't mean it will happen. Dealer principals could cut back on deals to make up the 1% and BMW has already said that not all dealerships will get the 1% back end money.

Could be good, could be bad. We'll have to wait and see what happens in the next few months.

Tim
It is unlikely dealers will share the 1% loyalty bonus as it is not guaranteed, just like dealers do not share CSI-based 5% AVP.
 

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It is unlikely dealers will share the 1% loyalty bonus as it is not guaranteed, just like dealers do not share CSI-based 5% AVP.
If you change that to "it is likely that most dealers will not share the bonus" I think you are right. This has the real potential of creating even more of a "haves" and "have nots" among dealers imo. Dealers who perform well under the new guidelines will be able to get to a place price wise that other dealers simply will not be able to touch.

Will they go there for everyone? of course not... but they will be able to go there for certain deals, and you can be sure that these dealers will be trumpetting their "center of excellence" or whatever it will be called to allow them to be noticed by those "in the know".

From what has been posted, that is the model BMW is going for... high performing (with "performance" defined by BMWs criteria), will be able to stand head and shoulders above other dealers.. and drive even more business if they want to.

I agree with Tim, that we dont know what will happen. If I had to guess, I would think that on the "bread and butter" models like 3/5 (and in the US the X models), those dealers will really be aggressive on certain deals to make sure they hit their numbers.

On more Niche products, the prices will likely elevate higher, and stay there, as the high performing dealer will have less incentive / competition to lower it.

Just my opinions of course, not backed up by anything (disclaimer before people ask me for facts / figures).
 

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If you change that to "it is likely that most dealers will not share the bonus" I think you are right. This has the real potential of creating even more of a "haves" and "have nots" among dealers imo. Dealers who perform well under the new guidelines will be able to get to a place price wise that other dealers simply will not be able to touch.

Will they go there for everyone? of course not... but they will be able to go there for certain deals, and you can be sure that these dealers will be trumpetting their "center of excellence" or whatever it will be called to allow them to be noticed by those "in the know".

From what has been posted, that is the model BMW is going for... high performing (with "performance" defined by BMWs criteria), will be able to stand head and shoulders above other dealers.. and drive even more business if they want to.

I agree with Tim, that we dont know what will happen. If I had to guess, I would think that on the "bread and butter" models like 3/5 (and in the US the X models), those dealers will really be aggressive on certain deals to make sure they hit their numbers.

On more Niche products, the prices will likely elevate higher, and stay there, as the high performing dealer will have less incentive / competition to lower it.

Just my opinions of course, not backed up by anything (disclaimer before people ask me for facts / figures).
Past experience with the local "centers of excellence" was that their pricing was not that good. They probably had superb CSI scores both from sales and service sides to get the coveted titles, but the 5% AVP was off limit, as to them that's the payouts to the SAs/CAs.

The local dealers that provide the best prices are the volume leaders, they do "share" their monthly/quarterly/year sales bonuses provided your deal is among the ones that make the quotas. The volume leaders do not tend to strive for CSI scores(and probably not fully eligible for 5% AVP), but my guess is their quota bonuses are quite healthy. Usual disclaimer applies. :D
 

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If you change that to "it is likely that most dealers will not share the bonus" I think you are right. This has the real potential of creating even more of a "haves" and "have nots" among dealers imo. Dealers who perform well under the new guidelines will be able to get to a place price wise that other dealers simply will not be able to touch.
Is it confirmed this new loyalty bonus will replace 5% AVP for MY17 and on?

If the 1% price hike is collected from all cars sold, it seems each of the dealer in top 20% will get 5% of loyalty bonus, assuming the loyalty bonus pool is evenly distributed among top 20%. :)

This is a significant price increase to the dealer, namely, the margin between MSRP and invoice is cut by 1%, plus there is no more 5% AVP, but a 20% chance(based on performance metrics) to get the new 5% loyalty bonus.

Another improvement observation is, BMWNA can get 5% savings from eliminating AVP. If so hopefully BMWNA will "share" that savings by lowering MSRPs, e.g. MY17 340i has M sport package as standard for $2k extra base MSRP. :)
 

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Is it confirmed this new loyalty bonus will replace 5% AVP for MY17 and on?

If the 1% price hike is collected from all cars sold, it seems each of the dealer in top 20% will get 5% of loyalty bonus, assuming the loyalty bonus pool is evenly distributed among top 20%. :)

This is a significant price increase to the dealer, namely, the margin between MSRP and invoice is cut by 1%, plus there is no more 5% AVP, but a 20% chance(based on performance metrics) to get the new 5% loyalty bonus.

Another improvement observation is, BMWNA can get 5% savings from eliminating AVP. If so hopefully BMWNA will "share" that savings by lowering MSRPs, e.g. MY17 340i has M sport package as standard for $2k extra base MSRP. :)
I have no clue on the AVP (but i am guessing that your question was not really pointed at me, but just asked out loud).
 

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I have no clue on the AVP (but i am guessing that your question was not really pointed at me, but just asked out loud).
Is it confirmed this new loyalty bonus will replace 5% AVP for MY17 and on?

If the 1% price hike is collected from all cars sold, it seems each of the dealer in top 20% will get 5% of loyalty bonus, assuming the loyalty bonus pool is evenly distributed among top 20%. :)

This is a significant price increase to the dealer, namely, the margin between MSRP and invoice is cut by 1%, plus there is no more 5% AVP, but a 20% chance(based on performance metrics) to get the new 5% loyalty bonus.

Another improvement observation is, BMWNA can get 5% savings from eliminating AVP. If so hopefully BMWNA will "share" that savings by lowering MSRPs, e.g. MY17 340i has M sport package as standard for $2k extra base MSRP. :)
Let me take a crack at answering your questions based solely on what was said publicly by Ludwig Willisch, President of BMWNA, at the Detroit Auto Show in January of this year. According to Automotive News, Willisch said that "BMW will cut its free scheduled maintenance to 3 years/36,000 miles and use the savings to pay for a new dealer bonus."

If that part about using the savings to pay for the new dealer bonus is true, then it's just a coincidence that BMW just happened to take 1% out of the spread between MSRP and wholesale on all new 2017 models by changing the 92% to 93% and the 91% to 92%. My theory last night when I was trying to figure out what they had done to the prices for the new 2017 models was that the 1% change was being done to cover the new 1% dealer bonus. Maybe my assumption was incorrect. Maybe it really is coming from the savings from the reduced free maintenance? Not that it matters because I did figure out exactly what changes they had made without any confirmation from any BMW dealership employee, since I realize why they must all remain silent on such matters. In fact, I haven't even bothered to ask anyone that question directly.

Willisch also spoke at the Automotive News World Congress in January and his comments from both appearances are being quoted mixed together in some articles. Let's hope that they quoted him accurately. You can pick this stuff up using Google.

One article quotes him as saying that the new 1% bonus was started in April 2016. Dealers who meet (1) BMW's brand standard, (2) customer satisfaction, (3) sales targets, and (4) hire Genius product specialists... will be paid a monthly bonus of 1% of the sticker price of new vehicles sold. That was said at the Detroit Auto Show.

Other highlights of the new program include changes to the dealer holdback on new vehicles sold. Starting with the 2017 model year, BMW's holdback will be 5% of the vehicle's full sticker price. Previously BMW's holdback was 5% of the vehicles base sticker price.

BMW also will let dealers transfer free scheduled maintenance to a new owner, which is now prohibited.

BMW dealers averaged a 2.6 percent return on sales last year. Such a return puts BMW dealers among the most profitable in the industry, Willisch said.

Unfortunately, in a 2015 J.D. Power U.S. Customer Service Survey Index Study BMW was ranked 8th of 12 luxury brands. Willisch is not at all satisfied with that and wants to see it rasied and that's why he's making the changes he announced.

BMW will measure how many buyers repurchase or lease another of its vehicles because "what counts is loyalty," Willisch said. BMW has been working with its National Dealer Forum on these changes for about three years, according to Willisch. Not all dealers will qualify for the new 1% bonus, he said.

So that's about it. That's what has already been announced publicly by the President of BMWNA. It looks like the previous 5% AVP not only stays but it gets increased by being a percentage of full Monroney, including options, plus the addition of a potential 1% extra bonus based on meeting the four criteria mentioned above. I have been told that each of those four items counts for 0.25%.

I don't know how they intend to measure owner loyalty compared to how the old CSI metric worked. In particular, it would be interesting to know what Willisch meant by "how many buyers repurchase or lease another of its vehicles." One friend of mine thinks it means how many of your customers your dealership holds on to, but he's not positive. That would be a lot different from the traditional meaning of brand loyalty, which usually means how many BMW owners stick with BMW for their next car no matter where they buy it.

:)
 

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Change is scary.

Could be good, could be bad. We'll have to wait and see what happens in the next few months.

Tim
Tim,

I know you linked to the Automotive News article at the time because I remember telling you I wished you wouldn't do that because I didn't like the opening paragraph saying that it would be the changes from the free maintenance program that would be used to pay for the new 1% dealer bonus and the fact that they claimed BMW dealers told them their customers didn't really need that much free maintenance since most of them trade cars every three years anyway. Maybe that's true, I don't know, but I remember not liking the tone of the article.

Anyway, I sort of summarized it in my post above this one because people have a tendency to forget something you posted months ago and it helps to refresh their memories to just spell out the important points once more. :)

Some client advisors don't like explaining things like this to Bimmerfest members but I tend to agree with Greg Poland that a thoroughly informed customer is easier to deal with than an uninformed customer. I'm sure everyone understands that a dealer has to make a profit to remain in business. I know their opinion of what constitutes a reasonable profit is way, way too low but that's what the client advisor gets paid to do... convince them that the deal he is offering them is a fair deal. We have lots and lots of threads on the board from customers who wish they had followed the simply advice from almost 2,000 years ago: caveat emptor. And, "you get what you paid for."

:)
 

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Let me take a crack at answering your questions based solely on what was said publicly by Ludwig Willisch, President of BMWNA, at the Detroit Auto Show in January of this year. According to Automotive News, Willisch said that "BMW will cut its free scheduled maintenance to 3 years/36,000 miles and use the savings to pay for a new dealer bonus."

If that part about using the savings to pay for the new dealer bonus is true, then it's just a coincidence that BMW just happened to take 1% out of the spread between MSRP and wholesale on all new 2017 models by changing the 92% to 93% and the 91% to 92%. My theory last night when I was trying to figure out what they had done to the prices for the new 2017 models was that the 1% change was being done to cover the new 1% dealer bonus. Maybe my assumption was incorrect. Maybe it really is coming from the savings from the reduced free maintenance? Not that it matters because I did figure out exactly what changes they had made without any confirmation from any BMW dealership employee, since I realize why they must all remain silent on such matters. In fact, I haven't even bothered to ask anyone that question directly.

Willisch also spoke at the Automotive News World Congress in January and his comments from both appearances are being quoted mixed together in some articles. Let's hope that they quoted him accurately. You can pick this stuff up using Google.

One article quotes him as saying that the new 1% bonus was started in April 2016. Dealers who meet (1) BMW's brand standard, (2) customer satisfaction, (3) sales targets, and (4) hire Genius product specialists... will be paid a monthly bonus of 1% of the sticker price of new vehicles sold. That was said at the Detroit Auto Show.

Other highlights of the new program include changes to the dealer holdback on new vehicles sold. Starting with the 2017 model year, BMW's holdback will be 5% of the vehicle's full sticker price. Previously BMW's holdback was 5% of the vehicles base sticker price.

BMW also will let dealers transfer free scheduled maintenance to a new owner, which is now prohibited.

BMW dealers averaged a 2.6 percent return on sales last year. Such a return puts BMW dealers among the most profitable in the industry, Willisch said.

Unfortunately, in a 2015 J.D. Power U.S. Customer Service Survey Index Study BMW was ranked 8th of 12 luxury brands. Willisch is not at all satisfied with that and wants to see it rasied and that's why he's making the changes he announced.

BMW will measure how many buyers repurchase or lease another of its vehicles because "what counts is loyalty," Willisch said. BMW has been working with its National Dealer Forum on these changes for about three years, according to Willisch. Not all dealers will qualify for the new 1% bonus, he said.

So that's about it. That's what has already been announced publicly by the President of BMWNA. It looks like the previous 5% AVP not only stays but it gets increased by being a percentage of full Monroney, including options, plus the addition of a potential 1% extra bonus based on meeting the four criteria mentioned above. I have been told that each of those four items counts for 0.25%.

I don't know how they intend to measure owner loyalty compared to how the old CSI metric worked. In particular, it would be interesting to know what Willisch meant by "how many buyers repurchase or lease another of its vehicles." One friend of mine thinks it means how many of your customers your dealership holds on to, but he's not positive. That would be a lot different from the traditional meaning of brand loyalty, which usually means how many BMW owners stick with BMW for their next car no matter where they buy it.

:)
If the new 5% holdback is not conditional(e.g. not tied to CSI like the outgoing 5% AVP) that will be more significant than the new conditional 1% loyalty bonus. Is this any link/reference to confirm the new 5% unconditional holdback will replace the CSI-based 5% AVP? If this is confirmed, then customers should expect to share some/all of this guaranteed 5% holdback. :)

Also it is interesting that the performance-metrics based loyalty bonus is 1%. So BMWNA collects 1% from every car sold, but only distributes 1% loyalty bonus to top 20% dealers, and keeps the remaining 80% to pad its profits? :dunno:
 

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If the new 5% holdback is not conditional(e.g. not tied to CSI like the outgoing 5% AVP) that will be more significant than the new conditional 1% loyalty bonus. Is this any link/reference to confirm the new 5% unconditional holdback will replace the CSI-based 5% AVP? If this is confirmed, then customers should expect to share some/all of this guaranteed 5% holdback. :)
I assume that there were no changes to the AVP other than basing it on the total MSRP of the car instead of just the base model MSRP. I think we should assume that it did NOT change and the requirements are the same as before.

Also it is interesting that the performance-metrics based loyalty bonus is 1%. So BMWNA collects 1% from every car sold, but only distributes 1% loyalty bonus to top 20% dealers, and keeps the remaining 80% to pad its profits? :dunno:
Read it again. Maybe only 20% of dealers will qualify for the full 1% by meeting all four individual requirements but each of those requirements counts for 0.25%, so a dealer might qualify for three of them and receive 0.75%, just not the full 1%.

Customers can "expect to share" whatever their little hearts desire. That doesn't mean the dealership will agree with them. :D
 

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I assume that there were no changes to the AVP other than basing it on the total MSRP of the car instead of just the base model MSRP. I think we should assume that it did NOT change and the requirements are the same as before.


Read it again. Maybe only 20% of dealers will qualify for the full 1% by meeting all four individual requirements but each of those requirements counts for 0.25%, so a dealer might qualify for three of them and receive 0.75%, just not the full 1%.

Customers can "expect to share" whatever their little hearts desire. That doesn't mean the dealership will agree with them. :D
Your previous posts said CSI-based AVP will be replaced, but your latest post says CSI-based AVP remains, so which is correct? Please clarify.

On the loyalty bonus, if 20% gets 1%, while the remaining 80% gets less than 1%, the total is still less than 1% that BMWNA gets from all cars sold. So BMWNA does get some extra margin from this new 1% price increase.

From another angle, if the reduced free maintenance can pay for this performance-based 1% loyalty bonus, it will imply that extra year plus brakes + clutches + wipers do not cost BMWNA that much(less than 1% of MSRP). :)
 
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