Dealers can punch cars without putting them in loaner service but they are not reported as sales. The purpose for doing this is to “earn” bonus money from BMW now. But hopefully we will see what actually comes of this and the reasoning behind it.
It’s kind of stupid because all you’re doing is stealing sales in the future, can’t retail it twice(unless they were getting really shady and reversing sales and punching again). With Saab when I put a car in loaner service it had to stay in a set amount of time to get the loaner money and punching it for retail wasn’t done until the car was actually sold to a retail customer. Towards the end they got wise and you had to order loaner cars or take them out of the port, ie they had to invoiced as loaners(prevented you from taking crappy inventory and converting to loaners, common BMW practice). We never got into these kind of shenanigans.
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They will likely get hammered on this. Let’s assume that the dealer owns the vehicle when they receive the shipment at the dealership. Transfer of Title likely occurs from BMW Corporate to local dealership.
The local dealership when “selling a loaner” to itself, wouldn’t cause the title to transfer, unless they had their service department setup as it’s own entity. They likely wouldn’t do that because you are going to get into intercompany profit eliminations and becomes rather complex quickly, especially when you need to offload the service vehicles.
At the end of the day, the dealerships and BMW Corporate were recognizing revenue without a transfer of title and that is a no no. Under Armour is being investigated for something similar with regards to pulling sales ahead and they actually sold the products, just at a steep discount. They however would have had a transfer of title whereas BMW did not.
I would guess their entire service vehicle procedures and program will change… Maybe even before the investigation is over to try and get ahead of the SEC. Just my $0.02
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Others also do this - Volvo, MB. They don’t recognize revenue?
Won’t matter if every auto manufacturer in the world is doing it incorrectly.
There are specific accounting guidelines that ALL companies must follow. Automakers won’t be given a pass.
I understand that. My question was if others do the same accounting - are they next?
I would absolutely expect it. The Revenue Recognition guidelines recently received an overhaul. Now it’s time to enforce them which is what is causing all of this for BMW and UA
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And two with low miles are 2020 740i, with MSRPs of $95,000. I doubt they would ever use those as service loaners.
BMW has three categories of “demo” cars:
- Punched cars (still a new car)
- Punched cars with over 300 miles (warranty starts)
- Loaner cars (cars that were registered)
All these cars count twice in their sales figures. Each punch counts toward that months objective, then again when they are retailed to the final buyer. The loaner cars count toward the used car sales since they were previously registered.
Punched cars may show up as a sold item on the BS, but the metal is still sitting at dealer lot. At some point, it would need to be sold. If they are doing this with 1 car/ dealer per month, a dealer will have 12 more cars to sell than it bought…
Technically new cars don’t have a title, and loaners being titled or not is a state law thing. In some states they need to titled and plated, here in Colorado for example, you can get away without getting a title and using dealer plates(although this is a gray area). New cars have an MSO and not a title.
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The term transfer of title is not specific to automotive. It is the technical term and selling water bottles to customers technically involved the transfer of title. Just FYI
Doing anything that remotely resembles inflating sales is a big no-no for a public company. The time of recognizing the revenue is also critical, for example , you may have set the expectations in previous quarter and you may be a little short on your target . You would definitely need sales now than later in that case.
here’s what’s happening: the SEC’s investigation is about the manner in which BMW reported its US sales figures. In a practice known as “punching,” BMW could have increased its apparent sales numbers by requesting dealerships to register cars as loaners, and later sell them as used with very little mileage on them. As a result, “punching” sales can help dealers in hitting company targets, resulting in automakers achieving higher sales results.
not that there’s anything wrong with that. it would be wrong if they were reporting sales twice (once when they punched it and then when they sold it as a loaner). all of the luxury brands do it - volvo had to put a stop to it and now has very stringent loaner rules in terms of time of loaner service and mileage.
How come? If BMW reports 5k extra sales for punched cars in December, but these 5k car sit on the dealers lots for another year? It will overstate sales numbers for the month, quarter and the year.
I don’t know if Volvo does the same, or they do not report punched cars in total sales numbers and only count them for dealers’ sales figures.
Dealers don’t own the new cars either, so there isn’t a sale, and no “title transfer” in your example. They sell them on behalf of the manufacturer, and finance the cost of that via floorplan. Holdback is intended to reimburse the dealership for that cost, although can be used by the dealership to help sweeten a deal in lieu of accounting book reimbursement.
Good bye demo leases … GG
We had a good time in this decade 
A bit off topic but still somewhat relevant. I thought that the dealer buys the cars from the manufacturer? That’s what I was told many years ago by a car salesman, but perhaps he was wrong.
From a technical point, yes. That said, they are financed via floorplan, so they are still owned by the bank
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