Since Manheim results being shared is frowned upon, I’m not sure what this went for at auction, but found wife’s previous 2016 BMW 340i on sale in AZ. I’m assuming this dealer bought the car high 20s, very low 30s.
MSRP was $60,125. Negotiated cap cost was $51,319. Contracted residual was $39,081. They had to discount that much up front and then get hosed that much at the end? How do they continue do to that on leases?
No way they bought for 30s. High 20s for sure. BMW have very inflated residuals. Once they are off lease, the dealer have to buy a certain amount of vehicles the rest go to Auction.
Financial Engineering - Just look at GE – BMW is definitely moving numbers around – the residuals makes no sense –
I wish all manufacturers would follow BMW’s path lol
Though msrp was 60k, BMW’s unit cost was probably 30k off the factory. So plenty of margin to eke a profit.
This, MSRP is so inflated they can fudge residuals to move volume and still make out.
MSRP is inflated since the majority of people are paying MSRP or over it.
Few folks (Hackr’s not withstanding) are negotiating vehicles down to actual market value. Also, we are completely over buying cars and buying too many SUVs.
Here’s a true example with the numbers rounded to the nearest $1,000 from yesterday:
2016 528xi 11k Miles $60k MSRP
Contracted for 36 months as a demo/loaner originally for 30k miles over 3 years. Brought back with 53k miles (so 12k over miles). Residual was $36k. $18k buyout to dealership provided lessee is NOT purchasing ($32k if they are). MMR is $20k.
I don’t know about you but I wouldn’t do business this way if it were MY company—Being that true wholesale is only 56% of the contracted lease residual—can’t be good for BMW FS/NA! BMW will be getting $2k back in over mileage charges which when you add to the $18k gets them $20k at lease end. I can’t imagine all the hair pulling going on if you were responsible for this crap in the lease portfolio!
Growth is a killer of profit once you reach a certain point and BMW definitely passed that stage about a half a dozen years back.
On the other hand, dealership is making out like a bandit!!!
Also since when is a 528xi [which is essentially an entry level 5 series] a 60k MSRp product. That’s M territory pricing!!!
Also you do not tell us what was the contract payment and how much DAS? Without this we cannot evaluate how BMWFS did on this. If the lessee was making payments of 700 for 36 months (which is not an unusual non lease hackr payment for a 5 series) with the regular 5k DAS that BMWFS “recommends”, BMWFS made out like a bandit too …
And if the poor guy rolled in negative equity in the lease and bought the spiffs such as key insurance and tire and wheel protection package, then the only loser is the poor guy who leased this car and was over miles by 12k. The very fact that he was that much over mileage suggests to me that this guy was not a great planner or negotiator and therefore did not get a great deal…
That’s the reason that BMW is one of the strongest automotive group worldwide with an enviable name brand and we, well, we are just lease hackrs offering free opinions on the interwebs …
OEMs are acutely aware of what the car’s real residual will be like. As previously people mentioned, most artificially inflate it using their own finance arm. Perhaps it is indicative of a bubble, but BMW much more likely knows exactly what they’re doing. There is so much margin in the cars that their business model works.
Plus both the dealer and BMWFS get a chance to sell the car twice. They will spit shine it and call it CPO and then sell it retail for 30k. Most likely, the 2nd purchaser will also finance with BMWFS and will think he is so smart that he got a “nearly-new” CPO BMW [with 100k miles warranty!!!] for 50% off MSRP.
Wouldn’t the BMW dealer capture most of the arbitrage on inflated MF, unnecessary add-ons and higher payments?
If a BMW Dealer marks up the MF or gooses the customer with thousands in BS fees, unneeded warranties and accessories, I would assume the Dealer network reaps 80%+ of the monetary benefits…
Not if they finance the bs at markup MF
Really, why would the dealer mark up MF (as opposed to shifting the customer hosing into other dealer beneficial buckets) if they don’t get the vast majority of the benefits?
Also page 38 for the June 30, 2019 earnings report is interesing on changes in lease accounting starting in 2019 on the BMW Financial Report
that’s not arbitrage, though.
Simple - for any markup deal, they get kickback from BMWFS
The first One off the line (including factory initialization for assembly and parts manufacture set-up) maybe $100MM.
The next one doesn’t cost all that much. I would ballpark it at a few grand each.
Yikes. Apples and oranges. As big as BMW is they don’t have as many units with as much volume for all that inter-company shenanigans. Jeff wasn’t content to fly private, he had to bring an empty along in case his broke down. Case study in extreme waste.
P/Es however, different story.
Next time you’re in Columbus, OH: find a BMWFS portfolio manager and buy them an adult beverage. Customers be playing checkers, they are playing chess.
BMW is the largest US auto exporter. The SC plant makes SUVs for the US market and exports the rest.
The plant is amazing and runs 3 shifts, the 4th is humans replenishing and maintaining the production and highly configurable KUKA robots.
Unions made sense when children were lockup 18 hours a day in NYC factories using their hands to $0.25/ day pay but at this point, I wouldn’t want unions in my plant either.
That is a crazy profit margin if a 60k BMW costs them 30k, unbelievable. Money to be made all around even with the incentives, trunk money, etc.