# ED Profit



## samwoo2go (Nov 19, 2006)

I was wondering if a dealer sells a ED car, they are bascially selling an extra car thats not on the lot that they never even owned and paid for and it involved no risk for them (ie having a car in the lot that can't sell). So why would they ever refuse a sell at too low of profit... say $500 over invoice and insist on say $1300 over invoice take it or leave it, if that makes sense.

Bascially why would they refuse to make $500 for a little paper work?


----------



## cwsqbm (Aug 4, 2004)

There's some time and effort involved, so I doubt you'll find a taker for the $500. For the $1300, yea.


----------



## samwoo2go (Nov 19, 2006)

So what your saying is the time and effort they spent is not worth $500...even on an extra car sales thats not on their lot?


----------



## pattjin (Jan 16, 2007)

I bet the can make some money on extended warranties or financing?


----------



## Andrew*Debbie (Jul 2, 2004)

samwoo2go said:


> I was wondering if a dealer sells a ED car, they are bascially selling an extra car thats not on the lot that they never even owned and paid for and it involved no risk for them (ie having a car in the lot that can't sell). So why would they ever refuse a sell at too low of profit... say $500 over invoice and insist on say $1300 over invoice take it or leave it, if that makes sense.
> 
> Bascially why would they refuse to make $500 for a little paper work?


ED cars don't come out of allocation, so that is a plus. They also don't have nearly as much money in them. A typical sales person only gets a tiny fraction of the overall deal. I've read it is often 17%. Sometimes there is a floor around $100 or $150.


----------



## Me530 (Feb 17, 2005)

Andrew*Debbie said:


> ED cars *(except M cars and 6 series) *don't come out of allocation, so that is a plus. They also don't have nearly as much money in them. A typical sales person only gets a tiny fraction of the overall deal. I've read it is often 17%. Sometimes there is a floor around $100 or $150.


Fixed your post.


----------



## chrischeung (Sep 1, 2002)

samwoo2go said:


> I was wondering if a dealer sells a ED car, they are bascially selling an extra car thats not on the lot that they never even owned and paid for and it involved no risk for them (ie having a car in the lot that can't sell). So why would they ever refuse a sell at too low of profit... say $500 over invoice and insist on say $1300 over invoice take it or leave it, if that makes sense.
> 
> Bascially why would they refuse to make $500 for a little paper work?


How about $100 over invoice?

The reason is that companies need to eventually recoup their fixed costs. Here are other examples of items with minimal marginal costs:

- cable/satellite service
- cell phones
- airline tickets
- restaurants

If everyone sold at or near cost, just to garner marginal revenue, they would erode their overall business generally.

Having said that, I have seen that some folk(s) from Edmunds did get $750 over invoice in LA. http://www.edmunds.com/insideline/do...ticleId=115580.


----------



## pharding (Mar 14, 2004)

samwoo2go said:


> I was wondering if a dealer sells a ED car, they are basically selling an extra car thats not on the lot that they never even owned and paid for and it involved no risk for them (ie having a car in the lot that can't sell). So why would they ever refuse a sell at too low of profit... say $500 over invoice and insist on say $1300 over invoice take it or leave it, if that makes sense.
> 
> Basically why would they refuse to make $500 for a little paper work?


Because it does not make sense to the dealer for whatever reason. Like everything in an economy, there is a market range for any product or service. This reflects the cost of doing business, and supply and demand. IMO it consumes way too much time trying to find the absolute bottom. It is better to seek a deal in the "bottom end of the doable range" for a given product and service. It is better seek a good deal rather than the best deal ever for a BMW, which has a high likelihood of failure and takes too much time. At the same time the buyer should factor in the quality of the dealership into the equation. The next step is to avoid getting dinged for hidden charges and fees, or dealer math errors, especially in the leasing or financing paperwork.


----------



## Andrew*Debbie (Jul 2, 2004)

Me530 said:


> Fixed your post.


Thanks.



samwoo2go said:


> So what your saying is the time and effort they spent is not worth $500...even on an extra car sales thats not on their lot?


 If I was looking at making $85 (17% of $500) on a sale, knowing the market rate is more than double that, I would politely turn down your offer. $20/hr is my personal break point for any paid work and $85 is right about there.

The high volume fixed rate sales people I've worked with are always busy. Work overtime for 3/8 commission? I'd rather have a life.


----------



## mp0i (Jan 18, 2005)

I ordered an 2007 E93 335i for $1394 over ED Invoice price. I thought it was a fair deal given the model and the amount of miscellaneous paperwork that the dealer needs to fill out in order to get me the car. I don't quite understand why everyone begrudges a dealer from making a living selling cars. I know we are all always trying to get a great deal but the dealer still has to make a living. That's my opinion.


----------



## samwoo2go (Nov 19, 2006)

mp0i said:


> I ordered an 2007 E93 335i for $1394 over ED Invoice price. I thought it was a fair deal given the model and the amount of miscellaneous paperwork that the dealer needs to fill out in order to get me the car. I don't quite understand why everyone begrudges a dealer from making a living selling cars. I know we are all always trying to get a great deal but the dealer still has to make a living. That's my opinion.


I think it is a problem dealers created for themselves. Most of time they screw whoever whenever they can, so at times when customers are really getting a great deal, deep inside they still think they getting screwed, so they pinch every last penny they can from the dealer to feel "less screwed"
just my 2 cents


----------



## cwsqbm (Aug 4, 2004)

smog said:


> I think it is a problem dealers created for themselves. Most of time they screw whoever whenever they can, so at times when customers are really getting a great deal, deep inside they still think they getting screwed, so they pinch every last penny they can from the dealer to feel "less screwed"
> just my 2 cents


I think a lot of that attitude comes from dealing with domestic car dealers that have ridiculous difference between invoice and MSRP, before you even consider hold-back and cash incentives.


----------



## bailey544 (Sep 8, 2006)

I had excellent service and frequent updates along the way on my ED and my CA spent quite a few hours on my sale. The typical purchase surely would have taken much less of his time. I paid $1200 over invoice and I had no complaints.


----------



## GOFASTR (Apr 13, 2007)

+1. I was able to go with my local CA and got what I wanted for ED invoice plus $1000 even. I *MAY* have been able to spend hours shopping around to find someone willing to do $750 over invoice, but my time was more valuable and now I've established a relationship with someone close, so they will probably be more willing to give me a loaner, etc.

My CA showed me his commission on my sale: $146 (comes close to some of the figures indicated above). With ED/PCD paperwork and my frequent calls, I know he's spent at least 5 hours working on my stuff (heck, I've spent at least 5 hours in person with him throughout the process), so that comes to a net of around $30/hr - that's fair to him and reasonable to me.


----------



## Nic3quik (Jan 3, 2005)

Don't they still have a certain number they can sell ED every month?


----------



## beewang (Dec 18, 2001)

samwoo2go said:


> .......Bascially why would they refuse to make $500 for a little paper work?


To answer your question, you need to grasp the concept of opportunity cost. As well as the Elasticity of demand.


----------



## horatiub (Aug 25, 2004)

Andrew*Debbie said:


> Thanks.
> 
> If I was looking at making $85 (17% of $500) on a sale, knowing the market rate is more than double that, I would politely turn down your offer. $20/hr is my personal break point for any paid work and $85 is right about there.
> 
> The high volume fixed rate sales people I've worked with are always busy. Work overtime for 3/8 commission? I'd rather have a life.


Even if a CA makes $200 for an ED sale, it's still on the low side. If he spends 5-6 hrs on a deal, sometimes even more with the re-delivery and everything, then it's not much at all. I agree that $40/hr might not be so bad, but....it's not like they get paid that $40/hr every day.


----------



## Andrew*Debbie (Jul 2, 2004)

Nic3quik said:


> Don't they still have a certain number they can sell ED every month?


If there is per-store limit, I doubt many, if any dealers reach it. Adrian told me he sells about 50 ED cars a year.

There are limits. I've read the delivery center can do about 10 ED cars a day. After all the ED production slots are used up for a model, any additional ED cars would have to come out of dealer allocation. That happened with the 3er convertibles. M cars almost always come out of dealer allocation although a there were a few extras this summer. A customer is limited to one ED car a per year.


----------



## Andrew*Debbie (Jul 2, 2004)

horatiub said:


> I agree that $40/hr might not be so bad,


No its not. I used to charge $40-$50/hr for contract work. If you can get steady 9-hour days, $45/hr is not bad at all.

I currently make less but I love my job. Its a quality of life thing.


----------



## bimmerguy288 (Feb 28, 2006)

I too like to pay as little as possible but CAs have to eat too.


----------



## zoltrix (Mar 14, 2007)

philippek said:


> I have a process:
> 
> 1) Customer tells me what he/she wants
> 2) Offer is made and accepted
> ...


Actually, you don't. What "million variations" do you speak of?

When I bought my car from carsdirect, I just filled out the boxes with my options, clicked next. Filled out my credit app, hit next. A dude called 2 hrs later to make sure the options I clicked are the options I wanted. 10 days later my car was waiting for me downstairs, the delivery driver brought the paperwork to sign with him.

That's it. I lived in Brooklyn, the car came from a NJ dealer and the dude from carsdirect that called me to verify lived in VA. *Clearly,* he could've easily been in Mumbai.

So, as you can see, human beings are most certainly NOT required to "manage the process" whatever that means. The process is ridiculously simple and if you are personally handling steps 1-7 then you are basically spending your days shoveling data back & forth like so much manure, for no reason at all other than "well, that's how it's always been done."

I get that. But this is clearly a tremendous waste of your time, your skills, your expertise. ALL of the steps above (except #7) can easily be computerized.

In fact, they have been. Just not by BMW dealers.



> You're right, people will pay more for the value _once they know what they are getting._ But that only applies to my return customers and my referral customers, who know from experience that I make for a smoother transaction.


You are saying that people have no idea what value they get from you UNTIL AFTER the sale??? Surely you jest. Isn't the process.... I dunno... backwards?

Besides, if the transaction were computerized, it's smoothness would almost be guaranteed 

Look, I don't mean to belittle what you do but so far nothing has struck me as

"Damn, that really requires an experienced, knowledgeable person to handle."

Seriously. The whole process, beginning to end, is nothing but a series of decisions made according to a predefined set of rules. A product I work with, called Business Works, can replicate your entire business logic, including verification hooks to the credit agencies, in 15 mins of dragging & dropping actions with their decisions paths.



> But some don't care about anything but price, and for that reason (and many others) I choose to avoid price entirely on my website. That's not what it's about, and whenever I deal with a delicate issue (like price) I certainly prefer to handle it personally, rather than have a computer spit out one-size-fits all answer.


Well, why shouldn't price be the same for everyone?

Why do you price discriminate? Because some customers are more of a PITA than others & you charge those more?

WELL. There's no such thing as a PITA to a computer. Just saying....



> What you are talking about is a complete overhaul of the car business, and it's gonna be an uphill battle because BMW has too many different franchisees with too many different interests.


Agreed. The dealers are the reason why we are stuck in this stone age, bumbling along this antiquated process.

Again, if I can buy this

http://www.bluenile.com/product_details.asp?oid=6159&filter_id=0&nav1=gift_channel.asp&catid=145

with a single "add to basket" click.

Why can't the same be for a BMW? 
Why is it that bluenile lists the price but you have "Email me for a quote"?
Why isn't bluenile afraid that you will take their price and run to Helzberg Diamonds demanding a price match?


----------



## philippek (Jul 31, 2003)

coontie said:


> Actually, you don't. What "million variations" do you speak of?


Ok...perhaps not a million. But here are a few wrinkles that are common:

1) European Delivery
2) Lease returns
3) Trade-ins
4) Bad Credit

You need a person to manage and make decisions over these items.



coontie said:


> You are saying that people have no idea what value they get from you UNTIL AFTER the sale??? Surely you jest. Isn't the process.... I dunno... backwards?


In my experience, people are always waiting for the other shoe to drop in a car deal. They're always thinking I'm going to pop up, just before signing, and say something like, "Oops, I screwed up. Your payment is actually $200 more."

So when I'm delivering the car to them, and they realize that there were no games, no b.s., and that they're actually DONE buying a car in less than 2 hours...that's when they realize the value of my services and how much I saved them. And it's not apparent until after the sale is done.

Also, when they call me 2 weeks later because they can't figure something out...and I actually pick up the phone AND I know the answer...that's usually when they become true believers.


coontie said:


> Besides, if the transaction were computerized, it's smoothness would almost be guaranteed


:rofl: :bustingup :lmao: You can't...be serious...can you? :rofl: :bustingup :lmao:

Coontie, you've got some very big ideas, and I commend you for them. But the longer I stay in this business, the more I realize that there's a large portion of this business that will stay brick-and-mortar for a long time, maybe forever. Whether those barriers are "artificial," as you put it, or "natural" or "emotional" or irrational or whatever...they exist and it will be difficult to dismantle this house.

And I'm not copping out by saying this. I certainly wish I could move back to Manila and sell hundreds of BMWs from the comfort of my dirt-floor shanty :brent:

But I'm gonna keep my day job, just in case that doesn't work out.


----------



## Tanning machine (Feb 21, 2002)

coontie said:


> Again, if I can buy this
> 
> http://www.bluenile.com/product_details.asp?oid=6159&filter_id=0&nav1=gift_channel.asp&catid=145
> 
> ...


What percentage of diamonds are sold by blue nile vs. in a more traditional store (whether Tiffany or Zales)?

The problem, coontie, is that while some people, like you, might want to buy with basically no service, the vast majority of customers do not. BMW can't have multiple business models, because if they sold direct, online, then dealers would never sell any cars, just let people test drive them. It's different with diamonds. Blue Nile can sell you a 1 ct. diamond because you don't need any service. meanwhile, the guy who doesn't know everything can go to Tiffany and pay extra for the service. In the end, you'll both have a functionally identical 1 ct. diamond. But BMW can't divide its sales that way.


----------



## zoltrix (Mar 14, 2007)

philippek said:


> In my experience, people are always waiting for the other shoe to drop in a car deal. They're always thinking I'm going to pop up, just before signing, and say something like, "Oops, I screwed up. Your payment is actually $200 more."


Absolutely. In that, you are merely "reaping the benefits" of being in the same business as your fellow car salesmen. Very few are honest. Very few.



> But the longer I stay in this business, the more I realize that there's a large portion of this business that will stay brick-and-mortar for a long time, maybe forever.


Probably. But the business as it currently stands depends a lot on the information asymmetry between the client and the dealer. That will go away. The trend is unmistakable. A few years ago, a car's invoice price was a closely guarded secret. Most dealers STILL act indignant when you mention it. The term "holdback" is STILL a dirty one among the dealers that get it. They all act like it doesn't exist.

But none of these things have put the dealers out of business. And I don't think letting people order their own BMWs online will render your job obsolete. It will be DIFFERENT, sure but I think it's still gonna be there. And I can't imagine that you enjoy shoveling paperwork back & forth, there's nothing interesting about that.

People are reluctant to change how they do business because they think they will have nothing to do once the tedious stuff is automated. Nothing can be further from the truth. Instead, it will free up a lot of time for you to help your clients & think of new ways to make their experience more enjoyable. I've seen it dozens of times in my job, I know it works.

With that, I think we have to wrap up because beewang, the forum's self-appointed econ professor, is getting his panties in a bunch.


----------



## JSpira (Oct 21, 2002)

Tanning machine said:


> What percentage of diamonds are sold by blue nile vs. in a more traditional store (whether Tiffany or Zales)?
> 
> The problem, coontie, is that while some people, like you, might want to buy with basically no service, the vast majority of customers do not. BMW can't have multiple business models, because if they sold direct, online, then dealers would never sell any cars, just let people test drive them. It's different with diamonds. Blue Nile can sell you a 1 ct. diamond because you don't need any service. meanwhile, the guy who doesn't know everything can go to Tiffany and pay extra for the service. In the end, you'll both have a functionally identical 1 ct. diamond. But BMW can't divide its sales that way.


I would use a watch rather than a diamond for this example. I buy my watches at Wempe. I could buy them over the Net and save some money but I have found that the post-sales service from Wempe to be of great value.

When I have needed something, the people at Wempe (both in Munich and in New York) have gone out of their way to be helpful.

I have purchased (let me count) 8 BMWs from Ricki at DiFeo plus 3 for my business partner. Whenever I've needed something, Ricki & Co. have gone out of their way to be helpful.

I've referred countless people to them because of this.

I think it boils down to one thing: relationship. You can't have a relationship with a faceless Web site the same way you have one with people at a BMW store. And people want that for certain types of purchases.


----------



## zoltrix (Mar 14, 2007)

Tanning machine said:


> What percentage of diamonds are sold by blue nile vs. in a more traditional store (whether Tiffany or Zales)?


Well, I don't know where bluenile falls into that category but I do know that WalMart is the nation's largest jewelry retailer. #4 is QVC (internet/phone orders) and #6 is JC Penny. Clearly, service is not as important as you think (unless you equate WalMart with good customer service.)



> The problem, coontie, is that while some people, like you, might want to buy with basically no service, the vast majority of customers do not.


First of all, why is it that streamlining a cumbersome process must imply a loss of customer service? That makes no sense. If anything, it will IMPROVE customer satisfaction because the customers won't have to endure the whole circus of a salesman going to "check with his floor manager" for every $100 he discounts.

Second of all, who said I don't want service? I DO want service! I want MORE service. But fighting with a sales guy over his above invoice markup or a MF bump or an acq fee is NOT my idea of "service", that's a pain in the ass. Why do you like this so much???



> BMW can't have multiple business models, because if they sold direct, online, then dealers would never sell any cars, just let people test drive them.


What's the problem with that? Convert dealerships to showrooms. What is the problem?


----------



## beewang (Dec 18, 2001)

JSpira said:


> ....When I have needed something, the people at Wempe (both in Munich and in New York) have gone out of their way to be helpful.
> ....


Hey Hey!!! I buy my watches from Wempe as well!! (Berlin, DE) What a coincidence!! Service is ALWAYS outstanding!!:thumbup: Man!! Our saleswoman... man!! That chick is hot !!


----------



## zoltrix (Mar 14, 2007)

JSpira said:


> I have purchased (let me count) 8 BMWs from Ricki at DiFeo plus 3 for my business partner. Whenever I've needed something, Ricki & Co. have gone out of their way to be helpful.


I'm not saying Ricki is not helpful, she is.

But the process of even getting to Ricki is fraught with peril. If you hadn't recommended her, who knows where I'd end up or whether I'd be getting screwed or not.

Why should this whole process be such a PITA??? Why should having a pleasurable experience of buying a BMW depend on some dude on the internet who may or may not be there and who may or may not know an honest dealer? Doesn't make any sense.


----------



## pharding (Mar 14, 2004)

There is too much DUPLICITY in the auto purchase experience even with supposedly high quality BMW dealerships experienced in ED. Uninformed people clearly pay more. Naive, trusting people pay the most of all. In small market areas served by several dealerships or less, they take on a hard line on going beneath ED MSRP. Leasing is a snake's pit. All things considered I rather deal a real live human being CA. I have gotten the best deal, and best buying experience with quality local dealerships in 2 large metro areas without much ED experience. LA for my son's 330 and my recent ED deal here in Chicago. You just need a responsible CA period. ED is not rocket science. You still need to do your homework prior to going in to negotiate well. And you need to always check the dealer's math every step of the way.


----------

