# Volvo pricing gone too high?



## Left Coaster (Feb 1, 2016)

I used to drive a Volvo and have always liked their design approach and quality. But with their current model refreshes, they have really raised prices, including a $100k SUV trim model (see pic)!

It seems their vehicles are now $15k overpriced across the board.

Am I just a grumpy old man complaining about inflation, or do others agree?

.









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## Doug Huffman (Apr 25, 2015)

My inflation benchmark is my US$18,800 new 1973 Porsche 911E Targa fully optioned.

I remember my family's first foreign luxury car, a 1960 Volvo PV-544. It was preceded by some years by a 1948(!) VW. In 1960 we also got a Land Rover 88" 1200 cc MOWOG.


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## southcoastguy (Jan 3, 2017)

Grumpy old man (me, too).


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## Bob Shiftright (Feb 3, 2006)

Left Coaster said:


> Am I just a grumpy old man complaining about inflation, or do others agree?


I'm a grumpy old man who complains about everything, but is that price in US dollars or California dollars?

From what I gather from the Volvo website the XC90 MSRP begins at $46,600 and the Hyprid at $64,950.

(Road and Track thought the 911S was a little pricey $ $7231 in 1967.)


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## Michael Schott (Dec 7, 2007)

The base version on this car is $46,900.00 and comes with panoramic moonroof, nav, LED headlights and collision control. It's more than competitive with an X5. I've never found Volvos to be overpriced. Unexciting yes.


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## Autoworld (Apr 21, 2015)

It's hard to imagine Volvo selling many $105,000 4 cylinder / electric motor T8s when you can get a much nicer X5M for that price.


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## Michael Schott (Dec 7, 2007)

Autoworld said:


> It's hard to imagine Volvo selling many $105,000 4 cylinder / electric motor T8s when you can get a much nicer X5M for that price.


Agree. I guess only a dedicated Volvo fanboi would buy that car. You can get a nice Cayenne for that kind of money.


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## Autoputzer (Mar 16, 2014)

A fully-pimped X5d is past $80k now.

The luxury SUV market is a strange place. The vehicles are worth what people are willing to pay for them, and the people buying these tanks are wealthy. A high price commands prestige, and prestige commands a high price. It's a chicken vs. egg thing. But, if a manufacturer can pull it off it's a gravy train. Behold, the $250k VW Toe Rag...

The total production cost (C) per vehicle goes down as volume goes up. The sale price customers are willing to pay (S) is also a function of sales volume. The higher the price of a vehicle, the lower the number of people willing to buy it. So, sales price and unit cost are functions of the number of cars built: S and C, where n is the annual sales (and production) volume. So, the manufacturers profit is:

P = n [(S - C]

There's a sweet spot, some particular n, where P is maximized. In this case, Volvo has bet that their sweet spot is at a relatively low "n," and a relatively high "S."


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## Bob Shiftright (Feb 3, 2006)

Autoputzer said:


> The luxury SUV market is a strange place. The vehicles are worth what people are willing to pay for them, and *the people buying these tanks are wealthy.* A high price commands prestige, and prestige commands a high price. It's a chicken vs. egg thing. But, if a manufacturer can pull it off it's a gravy train. Behold, the $250k VW Toe Rag...


Yes, people who actually buy X5s are wealthy!










But how many X5 drivers can actually buy their X5s for cash?

Even if you're at the 95th income percentile, $80K is still a big chunk of cash.

True, some buy. I can't imagine that Scott Adams leases his X5, but his might be nearly as old as my car.


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## Autoputzer (Mar 16, 2014)

Yeah, most BMW's are leased, about 55%. Although, the lower-end models are even more likely to be leased.

http://blog.caranddriver.com/the-mo...s-in-america-and-the-most-commonly-purchased/

The few people I know who lease fall into three distinct categories:

1. Business people who can slip a car lease into their business and therefore pay for it with pre-tax money, and lease to conserve working capital for operating their business.

2. People who are living beyond their means, and lease a car they couldn't afford to buy and conventionally finance.

3. People who correctly concluded that leasing a new car every three years is about the same cost as buying and selling a new car every four years, and then buy the car at the end of the lease and keep it several more years.

From the Car and Driver map, it looks like leasing a car in the rust belt is a common practice. That's one reason I'm always suspicious of used cars, particularly ones with front license plate holders on them. (Here in Florida, a front tag holder is a sign that the car and/or the owner came from up north... and both should be treated with great suspicion.)


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## Kamdog (Apr 15, 2007)

Autoputzer said:


> A fully-pimped X5d is past $80k now.
> 
> The luxury SUV market is a strange place. The vehicles are worth what people are willing to pay for them, and the people buying these tanks are wealthy. A high price commands prestige, and prestige commands a high price. It's a chicken vs. egg thing. But, if a manufacturer can pull it off it's a gravy train. Behold, the $250k VW Toe Rag...
> 
> ...


Formulas?

Spreadsheet or it didn't happen.


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## Autoputzer (Mar 16, 2014)

Kamdog said:


> Formulas?
> 
> Spreadsheet or it didn't happen.


Sorry, Dog...

I don't have a spreadsheet for this one. My employer (the federal gooberment) didn't make stuff voluntarily bought by the customers who paid the bills (taxpayers), and we certainly didn't make a profit. The end product of the group I was in was 50, 100, 200, up to 300 page .pdf files, and difficult reading at best.

I learned about this profit formula tuff in Engineering Economics (EE) class back in the 1980's. It was a core (mandatory) course back then. But, after 30 years there's a lot more technology for a BSME, BSEE, BSCE, etc. to learn in four years. So, they dropped Engineering Economics as a core course. "EE" is called "Quantitative Analysis" (QA) in the business schools. QA's considered the hardest undergrad business course. In contrast, EE was considered the easiest engineering course.

The trick with that profit formula was to find the "n" that results in the largest P.

You'll have to settle for this, a spreadsheet that calculates how much fuel is burned (gallons/hour) when idling your car. Somebody on BF asked the question. Dougie Hoffman, BF resident genius, said it couldn't be done without extensive laboratory testing. But, if you reset your on-board MPG and trip odometer at the same time, and have a stop watch (or stop watch app on a smart phone... not The Dog's Jidderbug phone), it's real easy to accurately determine the fuel use during idling. The calculation is as accurate as your MPG reading, which is actually pretty accurate. My on-board computer MPG is within 1.5% of my calculated "gas pump" MPG. I'm not sure which is more accurate, the on-board computer or the gas pumps.

Here's the formula from the spreadsheet: =IF(G3="","",D3*((1/(F3+0.05))-(1/(E3+0.05)))/(G3*24))

The IF(G3="","" thing keeps a divide-by-zero error message from showing if there is no input data.

My 2.4 liter Cobalt burns about the same amount at idle as my 3.0 liter 535i, about 0.4 gallons/hour with the air conditioner on. My 535i has Dynamic Handling Package. So, it has a hydraulic pump that powers the active anti-roll bars. I turned off the active anti-roll system by putting the car in "Comfort +" mode, a.k.a. "Buick Mode."

Here's the BMW active anti-roll system under test...

https://www.youtube.com/watch?v=XybOyg-2A2w


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## Bob Shiftright (Feb 3, 2006)

Autoputzer said:


> Yeah, most BMW's are leased, about 55%. Although, the lower-end models are even more likely to be leased.
> 
> http://blog.caranddriver.com/the-mo...s-in-america-and-the-most-commonly-purchased/
> 
> ...


My guess is that Reason Number 2 predominates. I am a small business and I once asked my accountant/tax lawyer if I should lease a car. He looked at me like I had suddenly morphed into a three headed space alien.

The true lease number is probably difficult to come by, since all cars that are leased are not leased through their manufacturers. The source below claims 70% of new BMWs are leased.

https://www.cartelligent.com/blog/which-car-brands-do-people-lease-or-buy

I do know when I bought my BMW, the dealer seemed a tad unfamiliar with the process. They demanded a certified check -- a personal check has been fine for all the Hondas we've purchased. They sent the title and registration to me via mail, but required that I drive in to the dealership to pick up the license plates. Weird, because I know that the plates, registration and title all come from the state in the same plastic envelope. This lead me to believe that they don't sell too many cars for cash.

Our Honda dealer -- physically next door to the BMW dealer -- has never even raised an eyebrow about a cash sale.










https://dqydj.com/income-percentile-calculator/

If you are at the 99.9th income percentile, can you write a check for $80,000 without flinching?

I wonder.

@ $1,000,000 gross income let's presume that our very successful BMW buyer lives in a tax-favorable state and nets 2/3 of that amount or $733,333.

That's $61,111 monthly. Can you casually and unemotionally write out a check for more than a month's net income? For something as dumb as a car? (I can't.)

And my guess is that there a lot more BMW X5s around than there are people who earn $1,100,000.


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## Autoputzer (Mar 16, 2014)

Bob Shiftright said:


> My guess is that Reason Number 2 predominates. I am a small business and I once asked my accountant/tax lawyer if I should lease a car. He looked at me like I had suddenly morphed into a three headed space alien.


Yeup.

A friend of mine is a classic example. He's leased cars for 40 years, including Porsches, BMW's, and Corvettes. After 40 years, he's broke. But, he can't maintain his luxury car habit without leasing. He couldn't afford the conventional financing, even getting a used car loan on the BMW he's about to turn in for another one. He makes between $95k and $100k a year (top ~15th percentile on your graph), and he lives paycheck to paycheck. About 15 years ago, his roof shingles blew off in a hurricane. He had to borrow the $3500 to have them replaced. But, he has a leased BMW and a financed Harley-Davidson in his garage, and a $5000 watch on his wrist.

I got some advice a long time ago: Only finance your first car, which should be a safe, reliable, appliance car. Every car (boat, motorcycle, RV, airplane, etc.) after that should be paid for with cash after you earned the money and saved it up. Sign-and-drive is easy. But, handing over that $30k, $50k, or $80k after it has taken years to accumulate it is psychologically much harder to do.

My first "adult" car was a 1992 Nissan Sentra SE-R (the M3 of Sentra's). After that, all my cars have been paid for with a cashier's check. I did get a $10k loan from BMW FS on my second BMW. But, that was only to get the $1000 additional rebate.

I had a psycho' boss when I bought my first BMW, a 2002 M3. He asked me how much it cost. That's generally considered rude, but also unnecessary with the advent of the Internet. But, I told him, $58k. He asked my how much my payments were. "Payment, singular... $58k." He was pissed. He then said that I'm paid too much. I told him that I had other sources of income outside of work, and that I can splurge now because I pretty much paid for my previous cars by using them for business travel with reimbursement at the IRS/GSA rate. Then, he was really pissed. I was transferred away from him shortly afterwards (after a special prosecutor got involved). But, after that he wouldn't allow anybody under his supervision to drive their own cars on business trips.

Along coastal Floriduh, a lot of doctors, lawyers, and Indian chiefs have multiple offices along the coast, up to 100 miles apart, and they commute between them. That'd be a legitimate reason to lease a car. A lot of them also have multiple condo's near their multiple offices and they do a circuit during the work week. Some of them have multiple hotties staying on those multiple condo's, too. 

It seems like the IRS looks the other way for cars leased through a business. Scamming the tax man is a big reason to lease. One of my doctors leases a 740i. He only has one office, so I can't really see where the car is a legitimate business expense. He also admits that he just likes getting a new car every three years. He said he likes new stuff, and new BMW's are a lot cheaper than new wives.

I have the cashier's checks made out to "Autoputzer or XYZ BMW/Honda/Chevrolet of wherever." I calculate the final costs of my cars to the penny before getting the check. When a slippery fish salesman tries to slip in a processing fee at the last minute, I show him the check and tell him "One of us will be depositing this check today. I might not be you."

My BMW leasing friend's 2018 M240i is coming in this week. He ordered it back in July. The slippery fish called him up this week saying that there's a problem... the residual has gone down $4k and he's not eligible for the $2k incentive after all. Surprise! They backed off on the residual thing (locked in when he ordered the car back in July). The $2k incentive was only for 2017 M240i's. They just put that out there as a trick, knowing he'd never see it. He can't really tell them "Fornication upon you," because he's on a lease extension of his M235i until the 2018 M240i is here. "Fornication upon you" would mean he'd have to immediately turn in the M235i and go car shopping on his Harley-Davidson.


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## Justin T (Oct 10, 2006)

It is all dependent on the deal in front of you. If you had the opportunity to lease a 550 that stickered for $75K for $586 a month all in with just MSDs down, would you? I did. $21K for a three year rental on a 550. You think my 550 that I leased in 2014 is worth $54K today?? Hmmm... I would put it at maybe low $40K range if lucky. I turn it in and walk away...MSDs come back in the mail in a few weeks

Before that we leased an E90 335 that stickered for $56K for $431 a month; again with just MSDs down. $15.5K to rent for three years. 2011 model...think it was worth $40K at the end of the lease??? How many people on this board got amazing lease deals over the years on ZM Roadsters in 2006-2008, outgoing 3, 5 and 7 series, some of the X models...

Now, I know this is not the norm in terms of leasing customers and I fully aware that BMW is making leasing less attractive.

I also know that most leasing customers are likely as you guys are saying - idiots that get tricked by X payment for Y car that they really want but otherwise cannot afford. But there are deals from all manufacturers out there. My father leased a G37 for $300 with just MSDs and then a Volvo S60 for $330 with just MSDs. If the manufacturer is giving the cash away and inflating the residual on top of giving the dealers and end customer incentives, leasing can be quite smart.

To sit there and say leasing makes no sense period is asinine and ignorant.


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