2013 and earlier-Mercedes-Benz S-Class Lease Questions
CarMan@Edmunds
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Hi everyone. Please use the following discussion to post any questions that you have about leasing a Mercedes-Benz S-Class. Thanks.
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$64900 MSRP
$61627.05 cap cost (incl. destination charge)
$39663 Residual value
39 months
due at signing:
$699 first month
$3999 Cap Cost Reduction
$795 acq fee
$699 monthly
This is intriguing to me and as I am not too familiar with the money factors (etc) involved with leasing, I was wondering if it a good deal? Edmunds incentives shows that $2000 is available to the consumer if financed thru MB but it isn't clear whether these figures include that or not.
According to my one and only MB dealer, they currently have 6 or 7 S350's to pick from so I am hoping this deal may be negotiated even further.
Any insights would be appreciated!
The first thing that jumps out at me about this deal is the huge down payment. I always advise consumers against making any sort of down payment when leasing. I do so for two main reasons. The first is if your vehicle is totaled in an accident or stolen during your lease, your insurance company pays off the bank that you were leasing it through and your down payment essentially disappears. The second main reason is that down payments on leased vehicles do nothing to reduce their lease-end purchase prices. So your lease-end purchase option price for your S-Class would be exactly the same, regardless of whether you had put $4,000 down, or had made absolutely no down payment at all.
I just calculated a sample lease payment using Mercedes-Benz Credit's actual lease program and the information that you provided in your post and I came up with a 39 month, 12,000 miles per year zero down, pre-tax monthly payment of around $844. With a $3,999 cap cost reduction, the payment for an otherwise identical lease would drop to around $731. As long as the selling price is below invoice, the payment that you were quoted looks good to me.
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The cap cost reduction bothered me too. I always thought one of the reasons to lease was low out of pocket costs.
Thanks for your input, you've given me something to ponder.
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Thank you!
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How could I research the money factor, residual value and the conversion of the money factor into an interest rate?
Thanks again and Happy New Year!!
My wife's pregnant with our first child and we have two sports cars, so one has to go to make room for a 4-door. We has almost decided to buy an E500 used until I saw an eBay ad from a company called Dick Dyer MB in SC that was selling S500's for about $16,500 off the sticker.
That was yesterday. Today, the $10,000 MB money seems to be gone. Since you are an expert on leasing and seem to know a lot about MB USA programs, do you think they will introduce a new lease program or offer more cash to help dealers unload the 2006 S-Classes before the new S550's start to hit the lots?
Yesterday a $90,300 car was $73,800. Today its $83,800. I wish one of the MANY MB dealers we were talking with over the past two weeks would have told us about the $10,000. Not a single dealer tried to move us up from a $66,000 E500 to an S500.
I did a spread sheet on buying the S500 and it looks like my net cost to own the car would be something like the following. I'm trying to figure out if leasing is better than buying. If I look at keeping the car for 3 years, it would cost me about $1,350 a month is a dealer would sell the car for $1,500 over invoice. But with the extra $10,000 my cost goes down to under a $1,000 a month.
What would a lease run?
http://www.ffcobra.com/images/mbs500ver1.xls
Thanks,
Bill
I am not aware of any resource that provides information on banks' lease money factors and residual values to the general public. I should be able to give you an idea of what these numbers should be like for this car though if you let me know how long you want to lease it for and how many miles per year you need to be able to drive it. You can convert lease money factors into approximate money factor equivalents by multiplying them by 2400.
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You're in luck, Mercedes-Benz is still providing $10,000 dealer cash on the 2006 S500 Sedan in January. If I was in the market for one though, I personally would probably lean towards financing it through leasing it through an independent bank or credit union because Mercedes-Benz is not currently providing any sort of lease money factor support on it.
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I understand that newly-intro'd models typically have some sort of incentive or special lease rate. What can I expect to pay? The car will be sold at MSRP, so I know what the cost will be.
What would the typical residual value be, percentage-wise?
If the dealer gets the car I ordered, and they try to gouge me with a really high money factor or low residual value, what are my options if I walk? Will they then sell/trade the car to another dealer that I CAN strike a deal with? I don't want them to think they have me over a barrel since they'll have the exact car that I want.
Thanks for your help!
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I'd be happy to give you an idea of what you will have to pay to lease this car, but Mercedes-Benz has not published a lease program for it yet. Most manufacturers do not publish their money factors and residual values for vehicles until right before they are scheduled to arrive on dealer lots. I may be able to give you an idea of what this car's lease program is like if you check back with me right before you are scheduled to take delivery of it.
The dealer that you ordered your car from cannot force you to take delivery of it if you are not satisfied with your deal. However, if back out of a deal on an ordered vehicle you will likely have a hard time getting any sort of deposit that you made back, even if it was supposedly fully refundable. It is a lot easier to get your money back if you made it with a credit card because you can always dispute the charge. They probably will not let you back out of a deal with them and trade your vehicle to another dealer that you can work with.
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By the way, the lowest price I received is $57500 otd with cd at downtown.
My question is how will huge discounts on '06s affect risiduals for the '05s or earlier? Doesn't that lower the new s's residuals as well causing high initial lease payments? What were the incentives or discounts like when the w220s first bowed in 6 years ago?
Does this sound right or should I be looking for better residuals / money factors?
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FYI details:
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asking price (not negotiated) 42370 monthly payment 524 balloon payment 32340 at 7.5% interest over 24 months. Car is an 02, can buy an extra year of warranty for a total of 2 (and probably at the same price), can't imagine the car being worth much less than 32K in two years (it was like 140K new after all and is already insanely depreciated).
the equivalent 24 month lease would be 790 a month (they obviously are betting on a much poorer residual)
suggestions?
Do I assume downside risk, say the car is worth less than the balloon payment and I want to turn it in, do I have any obligation to pay the difference between the balloon payment and the determined market value? (Aside from any disposition fees)
Because the car is titled in my name (or ostensibly in the name of my business), do I get to write down the whole monthly payment less inclusions or do i have to write down depreciation? Since I'm only financing and paying for the amount used, is it still a lease as far as the IRS is concerned?
How much should i expect to pay for 2004 S500 on a 0 down 36 months 10K miles lease?
Thank you
out but you would have the risk that the car could be worth less and you would most likely have had to put in 1-2K for repairs of wear items not covered by the cpo warranty. So I'm guessing that to buy the 60K cpo S class is a more expensive prop than to lease a new 60K E class. I would welcome and clarification and correction. If so, then, cpo selling and leasing needs to change a bit for me to take part.
Please enlighten me on the high end CPO benefits IF one doesn't plan on keeping the car for more than 4 years.
Thanks.
J
LET the dealer stay in business??? I don't owe that to any dealer. The dealer is responsible for staying in business; not me! Frankly, I as a consumer couldn't careless whether or not a dealership survives. In my view, car and insurance sales people are expendable (my dad and brother were in the insurance business). America is too FAT and needs to go on a diet. Unnecessary middlemen doesn't help matters. Why would I need a car sales person? Service? Baloney! The revolving door in car sales is alive and well! Know why? If you don't, you certainly should! Car sales people are usually NOT EMPOWERED to make decisions! Why? I'll leave that to you to figure out. Do I need a sales person to explain financing? To explain how GPS works? I can assure you that I have more expertise in these areas than than they do. So, why do I need them? What useful purpose do they serve?
Consumers will always act in their own best interest by trying to minimize cost. Dealers, on the other hand, will act to preserve their best interests by trying to maximize revenue. And so, some negotiating needs to occur. For instance, traditionally, a lease contract is a contract of adhesion which means that it is a non-negotiable agreement between parties of unequal bargaining power. However, in order to craft a fair and equitable agreement that best preserves fair gamesmanship, good faith bargaining demands that all parties have equal access to all pertinent information including cost of money (i.e., money factors, interest rates) and residual factors. The FRBB's Reg. M does not require that money factors be disclosed. The auotmotive industry lobbyists argued that such disclosures would CONFUSE consumers. That's both insulting and very presumptuous! I'm not the least bit confused and there are many others just like me who aren't confused either. Their argument is severely flawed and amounts to nothing more that a POOR EXCUSE for non-disclosure. And that's just one example of what angers me about NADA, NVLA, etc., and their lobbyists.
I always FAX/email a one page lease proposal to a car dealership... one at a time. I don't play games such as: Can you beat this? That's crap! Ball park numbers don't cut it either! If the dealer agrees, all they need to do is transplant the numbers in my proposal directly onto the lease agreement, have the papers ready for me to sign, and away I go. Yes, it's that simple.
I live in Ohio and what I've discovered, also makes me very angry. Many Ohio dealerships (and others) make mistakes especially in those cases where the first payment is to be capitalized into the lease. The capitalized first payment seldom matches the remaining payments. ALL payments MUST match... it's NOT rocket science... trust me. In addition, sales tax is often computed incorrectly. I patiently worked with a leasing software developer not long ago and they finally saw the light. Obviously, there were flaws in their leasing software. I later learned that they continued with their erroneous ways. Makes me furious! Some leasing software developers do not understand leasing mathematics and neither do dealerships. Here, I'll prove it...
Ask any dealership to compute monthly payments where the first of those payments is to be capitalized in the lease. I promise you that the calculation will be wrong 95% of the time. The capitalized payment will be less than the remaining payments.
Now, why would I want to do business with dealerships, much less care whether they make a profit or not, knowing that they can't correctly compute lease payments??? I love it when car sales people ask me how they can earn my business. I always respond with something they've never heard before... "you can CORRECTLY complete the lease agreement. Every number must be spot on. I'll make it easy for you; here's my lease proposal."... Almost always, I have to correct them (and they don't even listen or care... it's their attitude and that makes me furious) and then, I simply move on. I'm very cordial and just want to be helpful. Usually, they'll cop an arrogant attitude. Remember, customers can have an attitude (I don't condone it)... you can't!!!
Regarding pricing... Pricing is governed by supply and demand dynamics. If market conditions are such that consumers refuse to pay more than dealer cost, then you as a dealership must decide whether or not you're willing and able to sell at or below cost. Many people don't realize that Dealer Cost < Invoice. Some people are getting fabulous deals on Honda Pilots right now. Check the pilot forums.
I won't apologize for spouting off. I'm sick of uncaring sales people whining and crying. All they seem to care about is making a sale and couldn't careless about academics (e.g., financial mathematics). And, please, don't give me the excuse that it's the F&I guy's responsibility. That's pure bull! Every salesmen should know how to compute payments, understand cash flow analysis, etc., and be responsible as well as accountable. Otherwise, they're nothing more than order takers. Want fries with that?
John
Medina, Ohio
I am sorry for all your aggravation in Ohio. I live in New York, and have worked all my life in Fairfield county Connecticut. Presently I am at BMW of Greenwich, I have been here for about 5 months and previously worked at Mercedes benz of Greenwich for almost 3 years. I am the F&I guy here. :-) I have been doing F&I for about 6 years and have been in the car business for about 15. I personally have never witnessed numbers being different on contracts, and am sorry that there are still dealers out there that take shots like that especially at the high end level of the car business. Unfortunately, there are still car sales people out there that have no clue on what they are doing, but in our area we do not tolerate this. Having a good relationship with a dealership is very important if You are dealing with the right dealership. For example, I had a customer, who was a very good customer, and bought a number of cars from me over the years, when I was still a salesperson. One of his cars ran out of warranty, and blew an engine. It would have been a $8000 job. I was able to take care of it for him, where he only had to pay a $100 deductible. So in short, if you find the right dealership, with a "truly" professional staff, and build a great relationship, they can be of alot of help. Our salespeople never ask what can i do to earn your business. Here in Greenwich, this is insulting, and people do not stand for comments like that. I guess in different parts of the country, car sales is still trying to get away with stuff, that is truely not fair, to the comsumer, but like everything else in life they take a shot, and see if they can get away with it. I agree 100% with the comsumer trying to minimize cost, but the dealership has to stay in business also. We dont walk into Sears or Best buy and try to get the 50" plasma for cost. They would laugh and show us the door. The auto industry is the only industry that all consumers dont even take into regard the MSRP, which every car really should sell for, in my eye. Why is a car different that a fridge at sears? At any other retail store we wait for a sale, or some kind of promotion, and yet everyone expects to get cars at invoice all year round. This is not fair either. The only ones getting hurt are the dealerships and not the manufacturer. They have lowered the gap between invoice and MSRP over the years, because of this, and now the profit margins are much smaller. I know every "trick" in this stupid game and know what our expeses are, and how much money a dealship produces, and you would be surprised, how hard we work for very little profit. Maybe I am whineing a little now, but being on the other side of the fence, it is upsetting, especially when I worked at Mercedes, and saw an SL65, get sold, and the dealership made $800 profit on a vehicle that is way over $150,000. That my freind is bull. But anyway, if there is any advice i can give, I will be happy to help. Hopefully I wont get blasted since I am in the car business. :-)
Julius
Many thanks for your input. I was very active in the BMW Series 3 Buying Experience forum in early April. If you were to search on delta737h in that forum, you'll see several of my posts. One such post is replicated below...
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#7611 of 8043 Re: Good 328i Offer? Need a numbers check [mpm6821] by delta737h Apr 04, 2007 (6:38 pm)
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Replying to: mpm6821 (Apr 04, 2007 5:24 pm)
Okay Michael, sorry about the last part. We'll ignore it. Here is what I have...
BMW 328i (w/options)
MSRP $36,270.00
Destination Charge $775.00
MSRP $37,045.00
Sell Price $35,680.00
Financed Amounts- TAXABLE ITEMS
1st payment 497.00
Acquisition Fee $625.00
Document Fee $499.00
Gross Capitalized Cost $37,301.00
Capitalized Cost Reduction $0.00
Adjusted Capitalized Cost $37,301.00
Residual (63%) $23,338.35
Money Factor 0.00180
Term (months) 36
Georgia Tax 7%
Monthly Lease Payment excluding tax $497.00 (Base Payment)
Monthly Lease Payment including tax $531.79
Charges Payable at Lease Origination...
Security Deposit $550.00
Tax on the Capitalized 1st Payment $34.79
License, Title, Registration Fee $39.00
Lemon Law Fee $3.00
Total Due at Lease Signing $626.79
Notice that I rolled (capitalized) the first payment into the lease. This means that you will be paying 35 payments of $497 each plus tax. In cases where the first payment is capitalized, many dealers incorrectly compute the payment because they erroneously do it in two stages. The first stage is computed in the same way that one would ordinarily compute a lease payment without regard to the fact that it is being capitalized. Next, they'll include the capitalized payment as an amount financed and compute a new payment that is obviously different from the one being capitalized. ALL payments must be identical. Next, they'll add the capitalized payment to the agreed upon value (sell price) claiming that this is the agreed upon value because they're making the first payment on your behalf. At this point, many people go with the flow but this makes me furious even though there is no financial harm. The agreed upon value is sacred ground. Never ever adjust an agreed upon value for any reason once it's been established. Finally, the dealer proceeds to incorrectly complete the lease worksheet and lease agreement which makes me even more furious. If they're in this business, they darn well better be able to do things correctly. My paper addresses the issue of capitalizing fees and 1st payment as well as tax consequences. If interested, let me know and I'll send you a copy.
That said and, to keep things simple, I elected to seperate the taxable items from the non-taxable items. I don't believe that the security deposit is subject to tax in Georgia. It shouldn't be taxable in any state although in North Carolina it is but is refundable at lease end. Note that the amounts financed are those items that are TAXABLE. Remember that Georgia sales tax will be levied on the resulting payment and so that payment can't include non-taxable items.
I constructed the proposal so that you would be paying the non-taxable items at lease signing. Tax is NOT taxable.
Because the MF equates to an interest rate of about 4.32%, it's best to capitalize as much as possible. However, paying $626.79 up front isn't that big of a deal for most folks that tool around in BMWs.
At any rate, to give you an idea, that's how it would look. Remember, none of this is etched in stone. Some of these numbers (MF, doc fee) are very questionable as we discussed. The calculated values, however, are spot on.
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My question to you, Julius, is this...
Given the exact same scenario described above, would your dealership have computed the same payment streams of $497? Note that the first of these payments is being capitalized.
Now, let me make a few comments regarding your post...
First- I've heard the Sears/Best Buy argument many many times and it just doesn't fly. I negotiated the purchase price of a 42" LG HD TV in January. Yes, I negotiated and they didn't even laugh at me or show me the door. In fact, they thanked me for my business, commended me for doing my homework, and even sent me a birthday card! Must be my charm (lol). Maybe you don't negotiate BIG TICKET items but I can assure you that there are those who do and do it very well.
What many people don't realize is that prices for certain items, even at major department stores, are negotiable. This includes TV's, stoves, refrigerators, expensive watches and jewelery, etc. Prices of BIG TICKET items are usually NEGOTIABLE. House prices are negotiable. It's always been that way. I haven't met a realtor yet that laughed at me or showed me the door!
Second- I don't agree that cars/trucks/TV's, etc should necessarily be sold at MSRP. MSRP means Maufacturer's SUGGESTED Retail Price. Note the word SUGGESTED. MSRP speaks for itself and I'll leave it at that.
Third- $800 profit on a $150,000 SL65? Why is that bull? Should the asking price of a good or service determine its profitability? Not necessarily so! If I owned a high end car dealership, I would consider hiring top calibre people from top schools and pay them top salaries. Of course, they would have to go through an extensive education program that would include financial mathematics, marketing, salesmanship, ethics, etc. I would emphasize, above all, SERVICE because SERVICE = BUSINESS!
Fourth- For whatever it's worth, let me give you a little advice... When you're in business and you sell a good or service to someone, you have no one to blame but yourself if you feel that you didn't earn the return to which you feel that you were entitled. As you well know being in a very competitive business, prices are market driven. From economics 101, the customer was willing an able to pay $X for an SL65 and you, the dealer, were willing and able to supply that vehicle for $X. You both arrived at an AGREEMENT or meeting of the minds. The last thing in the world you want to do is complain or cry about a deal or agreement you entered into AFTER THE FACT... especially in a forum like this where highly intelligent readers critique your every word.
I wish you every measure of continued success. Glad to hear that you're providing outstanding service.
Best,
John
Medina, Ohio
I would have questioned the $499 doc fee. Seems a little high. We charge $275. New York dealers charge approx. $45. The question is what does Georgia rule say about tax. Can it be payed upfron or does it have to be rolled in? In CT it has to be rolled in. In this scenario, if your payment is 497, your security deposit should only be 500. Always the nearest $50.
The rest of it is a bit complicated but seems right.
Now to your 4 points.
1. I try to negotiate as well on big tickt items as well, and do my shopping. But when it comes down to it if I meat someone that did their job well, and treated me right I usually give them the business, without much resistance. I guess I dont want to give out what I receive, unless the guy is a total jerk.
2. Suggested is what the manufacturer thinks that piece of metal is worth, and suggests you pay for it. Again a supply and demand question. Some dealers on certain cars will go above MSRP, and there is a reason for it. Grated a 328i is not a B7, and should not be treatd or sold the same way.
3. The big question on the $800 profit margin is hopw would you pay your sales people? And what do you consider a good salary. This is a very difficult question, for a person outside the car buisness. Salespeople are a dime a dozen, and are very easily replacable. A sales professional is not as easy to come by. Dealerships mostly do not live off of the profits generated by the sales department, but on service and satisfaction scores, when the manufacturer kicks back money. In our store the saleperson gives you all the figures and there is no going back and forth to managers. I am here to oversee that all the paperwork is done right, and the customer is happy.
4. Do not misunderstand the fact of the $800 profit on an SL. I as a finance guy really doesnt care about the front end profit. It is purely a statement of what the business has come to. $800 is not alot of money on any deal. You DO need a dealership to be there for you at some point, and be happy that you have had good vehicles, and no problems with the banks, DMV, etc. When that day comes and you need to ask for help from your local dealer, and all of a sudden he is not there anymore, but bought up by some huge car mall, that doesnt care about your problems from the past, then you will see why it is important. Its sort of like the mom and pop harware store that went out of business because of wal mart. It is just a nicer experience dealing with people that know you and care, rather than the rockbottom price and when you are over the curb you are forgotten. I personally would always pay alittle more for a person to be there in the future than be on my own. But thats just me.
By the way what do you do?
hope to hear from you soon.
Julius
Yes, the $499 doc fee seems steep to me. Typically, doc fees vary between $100-$250. Georgia taxes the payment streams. If you carefully read the scenario, the base payment is $497 and the payment w/tax is $531.79. So, the security deposit amounts to $550 ($531.79 rounded up to the next whole $50).
Regarding the other issues...
#1. We agree.
#2. You're absolutely right. The MSRP is a first cut and reflects the manufacturer's "best estimate" not withstanding market demand/supply factors.
#3. As I've already indicated, if I owned a high end dealership, I would want the very best people who graduated from top colleges and universities. I'm particularly interested in those with very strong quantitative backgrounds much like myself. They would need to have completed rigorous course work in calculus as well as calculus based statistics and regression analysis. ALG residual factors are derived via regession analysis that capture historical depreciation time-line profiles. The money factor equation is derived via a binomial expansion. My front line business associates would be required to understand this and much more. Most run of the mill sales people couldn't careless and that's very sad. Only the academically accomplished need apply. I don't want order takers.
After completing an academically rigorous education program (financial mathematics, economics, accounting, marketing, salesmanship, etc) and demonstrating exceptional people skills and awesome communication skills, these gifted people will be empowered to make good business decisions... that's why I'm paying them the BIG BUCKS. So, they won't be running back and forth to some sales manager... that's a lot of horse dump. In short, my staff will be the gurus of the automobile sales industry. No one in the industry will surpass them in terms of their knowledge and their ability to structure deals.
A dealership needs to do a good job managing both the revenue side and cost side of the ledger and that's what these folks will be hired to do... manage the business and make quality decisions. As far as starting salaries are concerned, I haven't a clue. I would need to do considerable research. However, I would anticipate that the salary structure would be tiered with annual step increases coupled with PERKS (health care benefits, profit sharing, bonuses, etc). Those who work smart and survive after, say, five years would most likely be making a six figure income. I'll be working right along side them and it will be a privilege and an honor to work with such accomplished people. I'm not going to hide in some back office. I want to be on the front line with my business associates. Say, Julius, you want to work with us?
#4. Personally, I wouldn't give a hoot whether I made $0.05 of $5,000 off someone. Regardless, I'm going to treat them the same and give them the best of the very best in terms of service. Under no circumstance will I gouge someone even if they're willing and able to pay an amount such that my profit would be outrageously high. I don't think you would do that either. I'm going to be a straight shooter and play the game fair. I live by the golden rule... treat others as you would want them to treat you AND always do the right thing regardless of the consequences.
My guess is that one profit center for the F&I folks is reserves. I know that the cost of money structure, whether from banks or the captives, are generally tiered... 6% +0% reserves (buy rate or base rate); 6.5% + 1% reserves; etc. I always try to get the buy rate with 0% reserves. If they refuse, I simply deduct the dollar amount of the reserves from the agreed upon value... I bet you would just love me.
As for my background, I teach mathematics/physics part-time at a local university and have been writing a series of college level math texts for Addison-Wesley Publishing in Boston. Once this series is completed, I plan to write an extensive textbook on car leasing. My first love, of course, is aviation. I am a certificated commercial pilot with instrument and multi-engine ratings. My undergrad work was done in aero engineering and mathematics and my grad work done in math, econ, and operations research. I plan to write a book on quantitative methods for the aeronautical sciences as well.
So, I keep myself very busy in addition to working out everyday... that's a constant battle. At age 57, I guess you can say that I'm semi-retired. I only teach one class per semester as I don't have the time (nor desire) to teach a full time load anymore.
Julius, you sound like very nice guy. I've never been to CT but if I ever get up there, I'll have to drop in to meet you. It would be my pleasure.
Best,
John
PS #1: I became interested in economics after leafing through the 1970 edition of the University of Connecticut course catalogue. The word econometrics caught my eye. I had no idea what the hell it was until I read the description. Up until then, I never knew that one could apply math and stats to economics. After that, econ became my new best friend.
PS #2: Sorry for this long winded response.
Your long winded message are a relaxing thing for me, and I enjoy my job as a finance manager, so you would be a customer that I would enjoy talking to because I can learn from you. You are not a typical customer. Typical customers have no idea of money factors or how deals are structured and are just going on hear say, and what they heard from someone. I would enjoy having you sit on the opposite side of my table, and we could play some mind games. :-) Which is basically all the car business is. A game. If the words are played out right, it is a beautiful ballet, and the right salesperson, will know what to say next, and what button to push. Like chess. But as you said most dont care, or have the patience or know how, and are just looking for the lay down. That is exactly why I became a finance manager. I didn't enjoy selling cars anymore, and the "game" didn't give me any satisfaction. Here I basically do the same thing, except in 5 minutes. I try to upsell the customer on products, which by the way, I tell people upfront, which ones i recommend to their particular needs. I do not force things i do not believe in myself. For example, road hazard tire coverage. If your car comes with run flat tires, this is a very good product, because the smallest thing as a nail, will cause you to replace a tire. Which on a 3 series is about $350 per tire and about $600 per rim if you hit a pothole. I sell it for $599. I have a slight profit in that, but will negotiate because I would rather see you have it and have worry free driving than to be angry about how expensive bmw tires are.
To get back to your "uber team" of sales people. It sounds great and would gladly join your team, but you will have some issues finding "intelligent" salespeople with those qualifications. With all that knowledge I think the last place you will look is the car business. :-) I consider myself a fairly intelligent person, but if I had all that background I would jump out of the car business, quicker than you could say F&I. Just to give you an example on my payplan. My salesmen structure the deals and do not get pais on lease reserve or finance reserve. I get paid on reserve and aftersales. So since they are structuring the deal, and dont get paid on reserve guess how much is in there. You got it $0. So i have to rely on selling product, and looking for ways to pick up some reserve here or there. We sold 121 new cars, and 20 used last month, and i am at $577 a car with a 78% product penatration. there are 2 F&I guys here, and we split the deals. So in short it isn't easy. The hours are brutal, and the stress is sometimes way to much. But its a living, and I can support my family, and pay the mortgage and all my bills on time. So thats me in a nutshell. Hopefully, I also am not too long winded.
If you ever do come up this way, i would be happy to meet you.
See ya,
Julius
Ps : If you ever do write a book, dont bash us. There is enough bad press out there about the car business
You're absolutely correct; the car buying process is a game. In fact, if the game is played fairly it can be described as a zero-sum game. Operations research folks are very familiar with this term. Basically, it means that one's gain (+) is another's loss (-) so that gain + loss = 0. However, one needs to recognize that there are gains and losses on both sides that are effectively neutralized. Unfortunately, some folks choose to play the game unfairly. It's always in everyone's best interest to preserve the integrity of the game and play fair. As I had previously indicated, the game is played with the following objective...
Dealer: Max{Revenue}
Customer: Min{Cost}
Of course, there are also those intangible benefits (customer satisfaction, repeat business, etc.) that are difficult to quantify.
As far as car sales is concerned, I think it's all in the approach and presentation. Some dealerships need to take a much more professional approach. I can spot a faker faster than you can blink and that's why I find it convenient to FAX/email lease proposals. My instructions are crystal clear: Transplant the numbers to the lease contract, have the papers ready for me to sign and the keys ready for me to go! Proposals have saved me a lot of time, money, and aggravation. They are professionally done by me and send the dealer a very strong message: I know a lot about leasing so let's cut the bull and get down to business because my time is valuable and so is your's.
Should they ask silly questions such as how I arrived at the agreed upon value, I politely tell them that it is irrelevant. What is relevant is whether or not they can do the deal. The only response I want to hear is either:
(A) YES, WE CAN DO THE DEAL OR;
(B) NO, WE CAN’T DO THE DEAL.
I want to be sure that they are in complete agreement with every last bit of detail described in the proposal and want to make it virtually impossible for them to claim that they made a mistake once I’ve arrived at the dealership. If they say that they made an error once I’ve arrived, they’re going to look awfully silly. Afterall, one of the purposes of creating a proposal is to prevent mistakes. Years ago, the GM of a dealership once told me he forgot the tax on the bank fee. I reminded him that there is no tax on this fee in the state of Ohio. Unfortunately, some dealers are like children. Either the GM was lying or; he was just plain incompetent. Either way, it didn't reflect well on him. I was gone because I have zero tolerance for deceit or incompetence.
I have heard that maintenance costs associated with BMW's is sky high compared with similar makes. I have no idea whether or not that's true. I actually heard that from a BMW mechanic who works for a local BMW dealership.
I was pretty sure that you guys were paid on reserves and aftersales (warranties, term life insurance, etc). I also know that it's far from a glamorous life... I certainly don't envy you. Frankly and, to be very candid, I'm not really a people person. I tend to have a short fuse. I'm very direct and am like 20 bulls in a china shop. I have absolutely no diplomacy whatsoever and I hate the term "politically correct" as it doesn't apply to me. I have no problem with confronting people and holding them responsible and accountable. And so, yes, I have some pretty rough edges. In our politically correct society, it seems that no one wants to point fingers or hold each other accountable. That's a lot of horse sh*t! If I screw up, believe me, I'll be the first to admit it as I am my own worst critic. I remember when I worked in my dad's insurance business when I was in high school. I understated a customer's auto insurance premium by $67. My dad docked me $67 and said: "when you're in business and you make mistakes, you EAT your mistakes". It was a great lesson and one that I will never forget. God bless that man; rest his soul!
As far as my lease book and "bashing" dealers is concerned, that's out of the question. It's both tasteless and classless. My book is going to be more like a college level textbook complete with some pretty high powered mathematical discussion. It's not going to be like the pop books that you see at Barnes Noble or Borders. Those books are worthless conversation and amount to no more than a very long drink of water (kind of like my posts... lol). By the time one finishes reading my book, they're going to be extraordinarily knowledgeable about leasing and will know much more than most dealership personnel. Knowledge = Power! This is in no way meant to impugn your background as I'm sure that you are exceptionally well versed in the F&I field; certainly much more so that I am.
At any rate, it has been a pleasure to dialogue with you, Julius. I hope that we can one day meet.
Regards,
John
Just a quick response, because I am having a day from hell in the car buisness. :-) Everything that can has gone wrong, and I am about to tear my hair out, walk, and flip burgers in Mcdonalds.
Your book sounds like very good reading, and I certainly would buy it. BUT, the average consumer, wouldnt care becaus it would be too in depth. The average customer would buy the book, on how to screw the dealer when leasing a car. But most people dont want to know how to compute a lease. Its sad, but that is the state of todays society. Hence we have hours and hours of media coverage about trainwrecks like Lyndsay Lohan, and Paris Hilton. That is what sells. Making people better and more intelligent is blah blah blah today. Anyway, I gotta get back to my nightmare day, but thanks for the refreshing break.
Julius
Sorry to hear about your day from hell. Anything I can do to help (lol)? I do hope that things are going much smoother for you now.
Regarding my book; I couldn't agree with you more. Many people are just brain lazy and have their priorities all screwed up. Academics in this country takes a back seat to everything else and sports occupies all the front row seats which is why we have to import all that magnificent foreign brain power (Asians) to do our math, science, and engineering. How this nation is going to compete in a very tough and competitive global market 10 or 15 years downstream is a mystery to me. We have some very fine young talent but the problem is that we don't have enough of them to meet future demand.
Anyway, I refuse to cater to the ignorance of the masses in this country even though it will severely compromise my royalty income. So many authors pacify their readership by over simplifying complicated concepts. Anytime you simplify something that is inherently complicated, you necessarily risk distorting it and that I will not do. I cringe when I browse through the "pop" books on car leasing. You can't begin to imagine the number of mistakes that I see and that goes for just about any other "pop" book. I'm sick of a nation loaded with sports fanatics and World Federation Wrestling TV-watching morons. TV programming, newspapers, and advertisements speak volumes about the intelligence of a nation. My book is not meant for everyone. Anyone who reads it will have to have a strong academic orientation, be disciplined and motivated, and commit themselves to some very serious study. It will be no Sunday afternoon stroll in the park.
Wishing you a better tomorrow...
John
Well a new day is here, and hope it will be much better than yesterday. For some reason when the morning starts with a bad thing, it just keeps building and every deal has something wrong. A car we had to deliver had a scratch magically appear in the rear bumper, and we wont deliver like that. Not fair to the customer. Then my tinting guy showed up an hour late with the customer waiting here, drivers license got lost from a deal, so literally everything went as smoothly as as a bad case of acne. But today is a new day, and hopefully a few "good" deals come my way, with some rate and aftersales in them. For me by the way a good deal is how much money is on the backend, I could care less if they give the car away at triple net. I hope you have a great day ! Hey, do you think anyone else reads our daily chats?
Julius