# Holdback is $1033, does it apply to ED cars?



## Magna (Jan 4, 2002)

truecar.com says holdback $1033, but does it apply to ED purchase?

Thanks.


----------



## Gig103 (Sep 10, 2007)

No, ED cars do not have holdbacks. 

ED cars are not considered for CSI scores/ratings, which means there is no incentive money paid back via BMWUSA. If I interpret it correctly, the 'holdback' cash is related to this.


----------



## rmorin49 (Jan 7, 2007)

I suspect there is some amount of holdback on an ED sale but I have no direct proof. It is hard to believe the dealers aren't rewarded in some way for a successful tourist delivery. It sure helps sell cars, get folks to Europe and encourage spending our precious dollars while there.


----------



## tturedraider (Nov 11, 2005)

Magna said:


> truecar.com says holdback $1033, but does it apply to ED purchase?
> 
> Thanks.


There is ZERO holdback with BMW. Holdback implies the money is guaranteed to be paid back to the dealer just for making the sale. That is not true for BMW. BMW dealers have to earn their Customer Satisfaction Index (CSI) rebate. That is why they ask you to give them the chance to correct any part of the transaction that would prevent you from giving them all 10's on the survey. It is a stupid system, but anything less than a 10 is considered a failure on the CSI. Giving less than a 10 on the CSI survey can cost your CA from several hundred to several thousand dollars in lost income.



rmorin49 said:


> I suspect there is some amount of holdback on an ED sale but I have no direct proof. It is hard to believe the dealers aren't rewarded in some way for a successful tourist delivery. It sure helps sell cars, get folks to Europe and encourage spending our precious dollars while there.


It's true. There is no financial incentive to BMW dealers to do ED orders. That is why many of them will not budge off ED MSRP on an ED order and are not all that anxious to do them.


----------



## Magna (Jan 4, 2002)

Yes, it would make sense for BMW to give dealers "holdback" on ED cars, but then again ED cars are like "off the books" . . . doesn't count towards allocation, doesn't get charged MACO and also doesn't get charged training fee (not sure about training fee).


----------



## Magna (Jan 4, 2002)

So my CA would get $1033 if I gave him all 10s? Is that the correct amount? It seems that truecar.com had no better place to put that rebate so they put it in the holdback column.



tturedraider said:


> There is ZERO holdback with BMW. Holdback implies the money is guaranteed to be paid back to the dealer just for making the sale. That is not true for BMW. BMW dealers have to earn their Customer Satisfaction Index (CSI) rebate. That is why they ask you to give them the chance to correct any part of the transaction that would prevent you from giving them all 10's on the survey. It is a stupid system, but anything less than a 10 is considered a failure on the CSI. Giving less than a 10 on the CSI survey can cost your CA from several hundred to several thousand dollars in lost income.
> 
> It's true. There is no financial incentive to BMW dealers to do ED orders. That is why many of them will not budge off ED MSRP on an ED order and are not all that anxious to do them.


----------



## Magna (Jan 4, 2002)

I think in the good old days, they liked EDs since it didn't take away from their allocation (an opportunity to sell another car). Nowadays, that's not something they are worried about.



tturedraider said:


> There is ZERO holdback with BMW. Holdback implies the money is guaranteed to be paid back to the dealer just for making the sale. That is not true for BMW. BMW dealers have to earn their Customer Satisfaction Index (CSI) rebate. That is why they ask you to give them the chance to correct any part of the transaction that would prevent you from giving them all 10's on the survey. It is a stupid system, but anything less than a 10 is considered a failure on the CSI. Giving less than a 10 on the CSI survey can cost your CA from several hundred to several thousand dollars in lost income.
> 
> It's true. There is no financial incentive to BMW dealers to do ED orders. That is why many of them will not budge off ED MSRP on an ED order and are not all that anxious to do them.


----------



## tturedraider (Nov 11, 2005)

Magna said:


> Yes, it would make sense for BMW to give dealers "holdback" on ED cars, but then again ED cars are like "off the books" . . . doesn't count towards allocation, doesn't get charged MACO and also doesn't get charged training fee (not sure about training fee).


Correct, no MACO and no training.



Magna said:


> So my CA would get $1033 if I gave him all 10s? Is that the correct amount? It seems that truecar.com had no better place to put that rebate so they put it in the holdback column.


I don't know what your CA would get and neither does truecar.com. The money is paid to the dealership and it is up to them how it is distributed.

The 7% ED discount off U.S. MSRP is roughly equal to the amount of money the dealership has the potential to get paid in CSI money for a U.S. delivery sale.



Magna said:


> I think in the good old days, they liked EDs since it didn't take away from their allocation (an opportunity to sell another car). Nowadays, that's not something they are worried about.


I'm not sure about the good old days. For the most part ED cars still don't come out of the dealer's allocation, with a few exceptions. But as far as I know the ED discount has always come directly out of the dealership's potential bottom line. BMW makes ED an unattractive proposition for their dealerships.


----------



## rmorin49 (Jan 7, 2007)

OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


----------



## b-y (Sep 14, 2004)

rmorin49 said:


> OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


I have to admit I have no inside information on this. But even if there were no other ways of compensating the dealer on an ED sale, this could still be a "reasonable" deal in some sense of that term. First, few buyers pay cash, so there is the opportunity to make money on the financing. Second, there is the four years of "free" maintenance and warranty service. This is another profit line for the dealer. Not to mention the money that can be made when an ED fanatic turns in a perfectly maintained vehicle after 24 or 36 months and it gets CPO'd.

To put this in terms that may resonate with your experience...aircraft manufacturers generally sell aircraft, both commercial and military, at low or even non-existent margins. But the upgrades, repair parts, maintenance items, etc., can be very profitable. Even better if you have a pool of customers who want OEM parts, everything inspected and top quality, etc. They don't put serial number plates on all those body panels just for fun.


----------



## enigma (Jan 4, 2006)

rmorin49 said:


> OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


Why would you think we are cheating the dealer out of a decent living? It's all free economy doing its work. They aren't forced to do the deals, but supply and demand dictates how much a customer is willing to pay and how much a dealer is willing to accept.

Most ED customers know exactly what they want, and I don't think a CA spends more than 10 hrs on the entire transaction. That's $100/hr at $1000 over invoice, with no additional expense for the dealer (e.g. there is no interest payment on unsold inventory). If that's low pay, next time you go to the barber shop of your choice, make sure you tip him a fifty.


----------



## rmorin49 (Jan 7, 2007)

b-y said:


> I have to admit I have no inside information on this. But even if there were no other ways of compensating the dealer on an ED sale, this could still be a "reasonable" deal in some sense of that term. First, few buyers pay cash, so there is the opportunity to make money on the financing. Second, there is the four years of "free" maintenance and warranty service. This is another profit line for the dealer. Not to mention the money that can be made when an ED fanatic turns in a perfectly maintained vehicle after 24 or 36 months and it gets CPO'd.
> 
> To put this in terms that may resonate with your experience...aircraft manufacturers generally sell aircraft, both commercial and military, at low or even non-existent margins. But the upgrades, repair parts, maintenance items, etc., can be very profitable. Even better if you have a pool of customers who want OEM parts, everything inspected and top quality, etc. They don't put serial number plates on all those body panels just for fun.


You guys could be right, but it's good that there are lots of other customers willing to pay a lot more for their cars because at $500 - $1000 over cost, not many dealers would stay in business long given the cost of doing business. If they are paying health care and other benefits it is going to get lot more costly in the coming years, but that's another story.

As far as military sales go, yes some do sign a contract knowing that they might lose money on the initial order only to make it up later on changes, maintenance, parts, etc.


----------



## Tanning machine (Feb 21, 2002)

tturedraider said:


> It's true. There is no financial incentive to BMW dealers to do ED orders. That is why many of them will not budge off ED MSRP on an ED order and are not all that anxious to do them.


Untrue. They earn the difference between what you pay and invoice price. That's less than what they'd earn on sale price less invoice price on a US sale because there's no CSI money. But they still have a financial incentive to make the transaction.



tturedraider said:


> I'm not sure about the good old days. For the most part ED cars still don't come out of the dealer's allocation, with a few exceptions. But as far as I know the ED discount has always come directly out of the dealership's potential bottom line. BMW makes ED an unattractive proposition for their dealerships.


Also untrue, as above. When BMW dealers were selling all their allocated cars, ED was "bonus" profit--they were making small profit on cars they otherwise could not sell because they had sold their allocation. If a dealer is not selling its allocation, it may look at an ED sale as substituting for a sale from its allocation, in which case they may consider it a "lost" sale, or at least a lost opportunity to make the larger profit on a US delivery car that comes with CSI money.

One other thing to note--my understanding is that even though ED sales don't get CSI money they do count towards overall sales for purposes of increased allocations. So if a dealer sells lots of ED cars in future years their allocation may go up, which of course means the possibility of additional profits.


----------



## mason (Jun 8, 2006)

tturedraider said:


> It's true. There is no financial incentive to BMW dealers to do ED orders. That is why many of them will not budge off ED MSRP on an ED order and are not all that anxious to do them.


I don't the 'not budge' is really due to lack of financial incentives. I think a lot of them see it as much more paperwork, hence, not discount to justify the price.



Tanning machine said:


> Untrue. They earn the difference between what you pay and invoice price. That's less than what they'd earn on sale price less invoice price on a US sale because there's no CSI money. But they still have a financial incentive to make the transaction.
> 
> Also untrue, as above. When BMW dealers were selling all their allocated cars, ED was "bonus" profit--they were making small profit on cars they otherwise could not sell because they had sold their allocation. If a dealer is not selling its allocation, it may look at an ED sale as substituting for a sale from its allocation, in which case they may consider it a "lost" sale, or at least a lost opportunity to make the larger profit on a US delivery car that comes with CSI money.
> 
> One other thing to note--my understanding is that even though ED sales don't get CSI money they do count towards overall sales for purposes of increased allocations. So if a dealer sells lots of ED cars in future years their allocation may go up, which of course means the possibility of additional profits.


Sometimes I do suspect the invoice price. Is it really the price BMW charging dealer? Or, it is more like a benchmark? Would #1 dealership by volume get a little better price?


----------



## tturedraider (Nov 11, 2005)

Tanning machine said:


> Untrue. They earn the difference between what you pay and invoice price. That's less than what they'd earn on sale price less invoice price on a US sale because there's no CSI money. But they still have a financial incentive to make the transaction.
> 
> *OK, so there is no additional incentive. I stand by my statement that BMW makes doing ED sales an unattractive proposition for their dealer's.*
> 
> ...


And I thought I was nit picky.


----------



## M FUNF (Apr 2, 2008)

rmorin49 said:


> OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


On the surface this would appear to be true, however profitability of a dealership is in the service area, and when you are negotiating to buy an existing dealership that ratio is critical to the negotiation. It gives the purchaser of the dealership an idea of how profitable the dealership is or the future potential in that dealership. Just one of the factors but a critical one. Many dealerships live on the service bays, and look at anything over invoice plus holdback gravy. I have had dealerships sell at invoice and split the holdback with me. I consiedered that an exceptional deal.:thumbup: The ratio is based on sales income versus service income, and service had better be better by a great deal. Several years ago Honda dealers would not budge off sticker price because the cars were in demand and so well put together that they required little service so the profit had to be in the sale.


----------



## BMWofBloomfield (Nov 7, 2008)

rmorin49 said:


> OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


ED's are a courtesy to a customer. Your numbers are correct. The only thing a dealer gets on an ED is the selling price minus the invoice cost (cost of the full tank of gas comes out of that BTW). They are not profitable deals under say $1K when taking into account the cost of doing business per each new vehicle sold. Unless the vehicle is sold at or close to ED MSRP, it just represents a unit to add to the retail delivery count in a given month and a way for the customer to experience BMW as brand and not just as a vehicle. It's not a profitable deal by any stretch of the imagination.


----------



## mason (Jun 8, 2006)

Very true that dealership today makes a lot of profit on repair. Just think how easily your repair goes north of $1000 these days. Of course, trade-ins as well. Just read an article posted by Beewang. It was a good read.


----------



## beewang (Dec 18, 2001)

mason said:


> Very true that dealership today makes a lot of profit on repair. Just think how easily your repair goes north of $1000 these days. Of course, trade-ins as well. Just read an article posted by Beewang. It was a good read.


Thanx for the prop... but I have no idea which post of mine you are referring to...:eeps:


----------



## mason (Jun 8, 2006)

beewang said:


> Thanx for the prop... but I have no idea which post of mine you are referring to...:eeps:


I think it was from Edmunds. The guy went undercover to work as a car salesman for a couple of weeks, explaining where the dealerships make money and how salesmen make money.


----------



## TeeZee (May 17, 2004)

mason said:


> I think it was from Edmunds. The guy went undercover to work as a car salesman for a couple of weeks, explaining where the dealerships make money and how salesmen make money.


Confessions of a Car Salesman
http://www.edmunds.com/advice/buying/articles/42962/article.html


----------



## pharding (Mar 14, 2004)

mason said:


> ...I think a lot of them see it as much more paperwork, hence, not discount to justify the price.....


The paperwork is not much different from ordering a BMW for US delivery.


----------



## mason (Jun 8, 2006)

pharding said:


> The paperwork is not much different from ordering a BMW for US delivery.


I know that............One sense, it is relatively more, in another sense, that is what they say to people.


----------



## rmorin49 (Jan 7, 2007)

BMWofBloomfield said:


> ED's are a courtesy to a customer. Your numbers are correct. The only thing a dealer gets on an ED is the selling price minus the invoice cost (cost of the full tank of gas comes out of that BTW). They are not profitable deals under say $1K when taking into account the cost of doing business per each new vehicle sold. Unless the vehicle is sold at or close to ED MSRP, it just represents a unit to add to the retail delivery count in a given month and a way for the customer to experience BMW as brand and not just as a vehicle. It's not a profitable deal by any stretch of the imagination.


Having just witnessed a family member lose their Dodge dealership that had been in the family for over 60 years, I can tell you that the main profit center of a new car dealership is not new car sales, it's used cars and service. Everyone has access to all the information they need to negotiate a deal that leaves the dealer with little net profit on each unit sold. For those of us that buy ED at around $1K over invoice are taking advantage of a program that really does favor the buyer. I, for one, am thankful there are CAs and dealers willing to sell cars at this price. God bless capitalism and the USA!


----------



## rmorin49 (Jan 7, 2007)

Double post, sorry.


----------



## Shadyg (Jan 23, 2008)

I believe M cars come out of the dealer's allocation slots.


----------



## M FUNF (Apr 2, 2008)

They do not.


----------



## okc329 (Sep 7, 2009)

*If one knew .....*

for a fact what the ED invoice for a well equipped 2011 535i was and offered the dealer $1000 moree than that, would that be fair and should I be able to find a dealer that would accept it?


----------



## Tanning machine (Feb 21, 2002)

okc329 said:


> for a fact what the ED invoice for a well equipped 2011 535i was and offered the dealer $1000 moree than that, would that be fair and should I be able to find a dealer that would accept it?


Probably, yes. Maybe not in your specific locale, but if not, one of the board sponsors is a good bet.


----------



## sivert (Jun 11, 2010)

Shadyg said:


> I believe M cars come out of the dealer's allocation slots.





M FUNF said:


> They do not.


I am looking at doing ED this summer/fall. So I've been reading here. Thanks for all the info.
The wiki says *"Cars sold through European Delivery do not come out of the dealer's allocation (except for M cars, and sometimes newly introduced models where supply is limited, e.g. coupes and convertibles in 2007)."*

I'm debating between an M3 and a 550i. I am wanting to know if the M3 for sure will be out of the dealer's allocation before I go to deal. Can anyone say for sure?


----------



## TGray5 (Jan 22, 2002)

sivert said:


> I am looking at doing ED this summer/fall. So I've been reading here. Thanks for all the info.
> The wiki says *"Cars sold through European Delivery do not come out of the dealer's allocation (except for M cars, and sometimes newly introduced models where supply is limited, e.g. coupes and convertibles in 2007)."*
> 
> I'm debating between an M3 and a 550i. I am wanting to know if the M3 for sure will be out of the dealer's allocation before I go to deal. Can anyone say for sure?


 The Wiki needs to be updated, as of now, M cars for ED do not come out of allocation. It was changed awhile back. My guess is when the economy picks up again it will revert to the previous policy


----------



## gekisai29 (Jan 13, 2007)

just remember there is a difference betwen dealer profit & CA income. be fair with uor Ca if he is being fair with you. omtimes good & reliable service is worth extra


----------



## pharding (Mar 14, 2004)

rmorin49 said:


> OK, so if a dealer sells a brand new BMW for $500 over ED invoice, they only receive a total of $500 over the actual cost they paid BMWNA for the car. Sorry, I cannot believe this is true. If it is, all of us who are doing EDs for less than $1K over invoice are truly cheating the dealer and our CAs out of a decent living. I don't believe this is all they make on an ED car. I doubt even the board sponsor CAs know, or perhaps will reveal, what the actual profit is over the published ED invoice so we may never know the "whole truth".


+1 I have no proof but I suspect that the dealer is rewarded indirectly.


----------



## beewang (Dec 18, 2001)

You are wrong and you couldn't be more wrong on this...:eeps:

From a dealer's perspective... any one who are willing to sell a BMW ED for $500 needs to have an alterior motive. No one can sustain selling cars at $500 profit (NO!! There are NO "holdbacks" , "kick-backs" and watever you want to call it on BMW ED) 

Selling a BMW ED on $500 over is much like an architect selling him/herself out at $8.00 per hour. I suppose you can get alot of business at that rate... but you'd work to death before that and this is assuming that the market demand is elastic. We know that is NOT the case with the demand of BMW's and there is a finite of interested buyers out there at a given time frame.


----------



## TGray5 (Jan 22, 2002)

beewang said:


> You are wrong and you couldn't be more wrong on this...:eeps:
> 
> From a dealer's perspective... any one who are willing to sell a BMW ED for $500 needs to have an alterior motive. No one can sustain selling cars at $500 profit (NO!! There are NO "holdbacks" , "kick-backs" and watever you want to call it on BMW ED)
> 
> Selling a BMW ED on $500 over is much like an architect selling him/herself out at $8.00 per hour. I suppose you can get alot of business at that rate... but you'd work to death before that and this is assuming that the market demand is elastic. We know that is NOT the case with the demand of BMW's and there is a finite of interested buyers out there at a given time frame.


So why do some dealers do it? :dunno:


----------



## Andrew*Debbie (Jul 2, 2004)

TGray5 said:


> So why do some dealers do it? :dunno:


There is room for profit on other parts of the deal.

Finance markup
F&I add-ons like wheel insurance 
Documentation fees
Trade-in

I find $500 over invoice with no other mark ups hard to believe despite the posts.


----------



## Andrew*Debbie (Jul 2, 2004)

BMWofBloomfield said:


> (cost of the full tank of gas comes out of that BTW).


Dealers in the UK charge for 3/4 tank of fuel. Some mark it up. Others don't.


----------



## TGray5 (Jan 22, 2002)

Andrew*Debbie said:


> Dealers in the UK charge for 3/4 tank of fuel. Some mark it up. Others don't.


 Aren't we stretching a wee bit here? You saying a dealer will do ED sale so they can SELL a tank of gas at a profit? Please. I've always gotten it free...so that's $50 bucks out of their $500 markup. Lease financing was at base rates as well and I lease so no trade in.

Perhaps BMW Finance has a holdback type reimbursement? And perhaps ED sales contribute to next period's allocation of cars for the dealer...so that could be a reason.


----------



## pharding (Mar 14, 2004)

BMW European Delivery Purchasers are a definite asset to BMW. As a group we are very loyal to the brand with repeat purchases and often repeat European Deliveries. We are also good for the German economy in some small way, especially Bavaria. BMW spent $500 million on the Munich Delivery Center for a reason. Many but not all dealerships welcome the business and extend competitive pricing. BMW is doing quite well in a difficult world economy and is one of the most respected brands in the world. Their owner loyalty and leasing strategies are working quite well. BMW European Delivery is an important part of owner loyalty. Using me as an example, I leased 5 BMW's between July 2001 and July 2010 doing European Delivery. I like the cars, the company, the Euro Delivery experience, and the culture in which the cars are created and manufactured. BMW European Delivery played a big part in that for me.


----------



## Andrew*Debbie (Jul 2, 2004)

TGray5 said:


> Aren't we stretching a wee bit here? You saying a dealer will do ED sale so they can SELL a tank of gas at a profit? Please. I've always gotten it free...so that's $50 bucks out of their $500 markup.


Not at all. Dealers in the *UK* charge for fuel. Its a line item on the sales invoice. Cost to fill up a 325i from the 1/4 factory fill is about $85 at current rates. Some charge it out at cost. Some of the more greedy ones have found a way to pad an extra £20 or so into every sale. Most people won't notice it.



> Perhaps BMW Finance has a holdback type reimbursement?


The acquisition fee mark up and the MF mark up are split with BMW FS. Since many customers are not even aware that dealers can mark up the finance, perhaps you could call that a holdback.

I


----------

