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      08-28-2008, 07:00 AM   #1
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How do dealer profits work?

I am in line for an 09 M3 and have put a deposit down, agreed to price, and options. But now I am thinking about adding additional options. What I am wondering is whether dealer will be amenable to add those options at invoice. My guess is they make $ on options at invoice. And if I say "i want this option but I'll only add it at invoice", wouldn't the dealer take it because it does increase the absolute $ of profit on that car sold?

thanks!
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      09-03-2008, 03:00 AM   #2
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I use to sell cars and almost everything has hold back, invoice price is what dealers supposeably pay . Which is not true there is always hold back in eveything so the dealer might say that they aren't making any money on something sold at invoice, they are liars! So I am sure they will be willing to do that . . If they want to make a sale bad enough they will . . Trust me seen it happen!.
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      09-03-2008, 03:53 AM   #3
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The difference in price between MSRP and invoice on options isn't very much. I would say they will add the options at MSRP price, but instead of asking us what your dealer might do just ask them. You can get invoice and MSRP price for all the options in one of the sticky threads in this forum.
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      09-03-2008, 04:01 AM   #4
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No 'Trunk Money' on M3's. There is some on 3 series and other models.

That is why the Auto Transmission on 3 Series is free during this Summer 0.9% promotion. BMW gives the dealer the $1300 in cash for each car sold with an Auto Tranny. If they sell the car at Invoice = 0% profit they still get $1300 in the 'trunk' which is only 1-3%. Doesn't apply to M's.


Markup on M3's is 8.7%, so when you add the 10% markup on Options the markup becomes 8.8%. That is because the car cost $50K and the options only add up to $10-15K.

You will only save a few hundred dollars by paying Invoice for options. But definitely ask. Also you will get creamed on the Finance Rates for a M3 ~6-7%, which is where BMW will make the most money.


Cheers,
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      09-03-2008, 10:30 AM   #5
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Quote:
Originally Posted by colorguardrifleman View Post
I use to sell cars and almost everything has hold back, invoice price is what dealers supposeably pay . Which is not true there is always hold back in eveything so the dealer might say that they aren't making any money on something sold at invoice, they are liars! So I am sure they will be willing to do that . . If they want to make a sale bad enough they will . . Trust me seen it happen!.
According to edmunds, BMWs have no holdback. Are you saying that it's not true?

BMW might offer bonus for meeting a certain sales volume however. But I doubt that would help you much when buying an M3 unless you came in on the last day of the month and the dealer truly was desperate for that one last sale before the end of the month (or whatever the sales period is).
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      09-03-2008, 10:37 AM   #6
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I'm pretty sure BMW has a 3% holdback.
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      09-03-2008, 10:48 AM   #7
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I'm pretty sure BMW has a 3% holdback.
Depending on the dealer and region, up to 7%
Only the Owner, GM, Or their hair dresser knows for sure.
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      09-03-2008, 10:49 AM   #8
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Quote:
Originally Posted by alpineweissM3 View Post
I'm pretty sure BMW has a 3% holdback.
You could be right. If you have proof of that, I'd email edmunds, since its pretty commonly accepted on most forums that BMW does not have holdback, mostly due to their claims.

http://www.edmunds.com/advice/incent...ack/index.html

Hasn't been updated in a long time however, so yeah, if you have a solid source for that, please post it here so we can be better educated and please let edmunds know too.
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      09-03-2008, 11:03 AM   #9
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Quote:
Originally Posted by mkoesel View Post
According to edmunds, BMWs have no holdback. Are you saying that it's not true?

BMW might offer bonus for meeting a certain sales volume however.
Not true IMHO, They call it INCENTIVES, BLAH, BLAH, BLAH
Do you honestly believe an owner of a dealership or BMW would tell edmunds what HE pays for the car, or what kind of deal he has cut with BMWAG ? Showing the invoice is another story, everybody and there mother can find out if they want.

I don't think so. Just my 2 cent's, I am with the other poster, there all a bunch of liars. If memory serves me correctly, edmunds just keeps track of National programs for a particular car. Forgot to tell you I was told this by the GM of a dealership

A car salesman's motto, There's an ass for every seat

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      09-03-2008, 11:12 AM   #10
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Quote:
Originally Posted by Captain Scott View Post
Do you honestly believe an owner of a dealership or BMW would tell edmunds what HE pays for the car, or what kind of deal he has cut with BMWAG ?
Nope.

Do you honestly believe that no dealership employee other than the owner knows how much the cars cost? And furthermore, do you honestly believe that with the number of people who know the real story, the truth does not exist beyond the walls of any dealership?

You're a lawyer right, TLud? You gotta know the truth is out there.

Seems like you are having a rare day. Earlier in the "Emergency thread" you responded to me, and then deleted it. I guess you figured you knew you were being a little harsh right? Sounds like the same thing here.

Cheers to you

Quote:
If memory serves me correctly, edmunds just keeps track of National programs for a particular car.
For incentives you mean? Yeah sounds right. But we aren't talking about that.

BTW, dealership employees have chimed in on E90post saying that there is no holdback on BMWs. However, they've also elluded to other means for making the money back, such as the bonus I mention above.
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      09-03-2008, 11:26 AM   #11
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Just sent you a PM, read it and have a laugh.

P.S. And yes I did delete a post today because I could not figure out how to Put the quotes in the right spot and ran out of time as I had to go. That's if you were talking about me? I am sorry if you took it that way!... Silly me.

Forgot to ask, in your last post above were you directing it to me or TLud, I did not quite get it.

Thanks

Scott

Last edited by Captain Scott; 09-03-2008 at 12:01 PM.
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      09-03-2008, 11:59 AM   #12
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Quote:
Originally Posted by mkoesel View Post
Nope.

Do you honestly believe that no dealership employee other than the owner knows how much the cars cost? And furthermore, do you honestly believe that with the number of people who know the real story, the truth does not exist beyond the walls of any dealership?

You're a lawyer right, TLud? You gotta know the truth is out there.
Your average Joe Salesperson at any dealership won't know what the holdback is. The GM and the sales manager definitely would have to know to sign off on deals. The finance manager may know, but only because he's generally involved in a lot more at the dealership than just financing car sales. Your typical finance guy/gal won't know.

Even though the subject of dealer holdback is extremely taboo in the car industry and those who stand to profit from it have very significant incentive to keep such information hidden, I agree with mkoesel that too many people would have to know for it to remain a secret if BMW offered a traditional holdback program.

I can confirm that BMW does offer dealers a "Value Added Bonus," which rewards dealers for CSI scores, good service and sales facilities, and other factors. This bonus depends on the number of units that the dealer retails, and can be very significant on a per car basis. Whether or not this VAB is technically holdback is up for interpretation. In my mind, it's a cute way of offering a holdback while being able to claim that they don't offer a holdback.
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      09-03-2008, 12:09 PM   #13
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Quote:
Originally Posted by TLud View Post
Your average Joe Salesperson at any dealership won't know what the holdback is. The GM and the sales manager definitely would have to know to sign off on deals. The finance manager may know, but only because he's generally involved in a lot more at the dealership than just financing car sales. Your typical finance guy/gal won't know.

Even though the subject of dealer holdback is extremely taboo in the car industry and those who stand to profit from it have very significant incentive to keep such information hidden, I agree with mkoesel that too many people would have to know for it to remain a secret if BMW offered a traditional holdback program.

I can confirm that BMW does offer dealers a "Value Added Bonus," which rewards dealers for CSI scores, good service and sales facilities, and other factors. This bonus depends on the number of units that the dealer retails, and can be very significant on a per car basis. Whether or not this VAB is technically holdback is up for interpretation. In my mind, it's a cute way of offering a holdback while being able to claim that they don't offer a holdback.

Good morning Judge, You are such a wealth of information, How do you know so much ? Was it you who deleted a post on that gentleman this morning ? or was it me accidentally?


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      09-03-2008, 12:20 PM   #14
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Wow, TLud, I actually thought you had replied earlier in this thread, but I guess you hadn't. Must've gotten you and King Tut confused, heh. I would not have addressed you outta the blue like that. But thanks for finding the post and replying. You could be correct about the BMW's splitting hairs on their incentives and bonuses vs. the idea of holdback, sounds reasonable. It would be nice to know the details on that, but I guess the bottom line is that a BMW dealership can still make money selling cars at invoice.
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      09-03-2008, 12:34 PM   #15
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Quote:
Originally Posted by Captain Scott View Post
Good morning Judge, You are such a wealth of information, How do you know so much ? Was it you who deleted a post on that gentleman this morning ? or was it me accidentally?


Scott
Whoa?!? No deleting here. My powers to suppress the truth have limits.

Quote:
Originally Posted by mkoesel View Post
Wow, TLud, I actually thought you had replied earlier in this thread, but I guess you hadn't. Must've gotten you and King Tut confused, heh. I would not have addressed you outta the blue like that. But thanks for finding the post and replying. You could be correct about the BMW's splitting hairs on their incentives and bonuses vs. the idea of holdback, sounds reasonable. It would be nice to know the details on that, but I guess the bottom line is that a BMW dealership can still make money selling cars at invoice.
No worries, man. Just thought I'd add to the substance of the thread where I could. EDIT: It would be nice, but I don't have the formula for calculating the VAB, but based on what a number of GMs and SMs have said, it's significant and is equivalent to what other manufacturers offer as holdback.
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      09-03-2008, 04:24 PM   #16
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How did a simple thread about whether options will be added to his price at MSRP or invoice pricing turn into a hold back discussion. I know his thread title was deceptive, but can we get back on topic?
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      09-03-2008, 05:30 PM   #17
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Quote:
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How did a simple thread about whether options will be added to his price at MSRP or invoice pricing turn into a hold back discussion. I know his thread title was deceptive, but can we get back on topic?
It seems relevant to his question to me. He wanted to know if they make profit on options when selling at invoice.

The answer, based on the discussion, is "yes".

As for whether the dealer will accept the offer, well no one knows except the dealer. He'll have to ask.
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      09-03-2008, 05:31 PM   #18
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How did a simple thread about whether options will be added to his price at MSRP or invoice pricing turn into a hold back discussion. I know his thread title was deceptive, but can we get back on topic?
Yes sir, your King ship.

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      09-04-2008, 07:55 AM   #19
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this is ALL very helpful. the more info you have, the better your negotiating power and leverage. and yes, i did ask and they were amenable to discounting off MSRP if I add more option. I am week 39 so I have some time to decide what I want to add / subtract. but that'll be a subject for a new thread! cheers
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      09-04-2008, 10:34 PM   #20
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There is what's called "back of the invoice". Every manufacturer award those to dealers when promotions kicks in on certain models. In the case of E90 M3, I am positive that BMW is willing to award the dealer some $$$ ching ching to move those vehicles off the lots.
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