Lease question..... am I stupid or is the dealer playing me?

[Glen e]

]Having been on both the dealer and the manufacturer side of things, there is one key point that everyone is missing. The dealer is not there to make the customer a great experience, it is there because the manufacturer wants it to be inserted into the formula. The reason is a factory can immediately invoice at one price cars as they come off the line and not have to worry about anything being overdue or unpaid. They can apply a linear equation to exactly what the plant can make bill and receive in funds. They can jam the dealer up with product until he literally chokes and they don’t even have to ask the dealer they just ship it. It’s smooth out the entire manufacturing process. Manufactures want no part of the retail and process where things Ebb and flow based upon demand.

And there’s only one thing wrong with the Tesla formula. And that is when things slow down. When things slow down, the manufacturer is forced to cut the price at the manufacturing level,. As long as things are hot and things are flowing the Tesla model works perfectly. However when it slows down, like it did with Saturn, it becomes a debacle

[wtwo3]

Originally Posted by Glen e

]Having been on both the dealer and the manufacturer side of things, there is one key point that everyone is missing. The dealer is not there to make the customer a great experience, it is there because the manufacturer wants it to be inserted into the formula. The reason is a factory can immediately invoice at one price cars as they come off the line and not have to worry about anything being overdue or unpaid. They can apply a linear equation to exactly what the plant can make bill and receive in funds. They can jam the dealer up with product until he literally chokes and they don’t even have to ask the dealer they just ship it. It’s smooth out the entire manufacturing process. Manufactures want no part of the retail and process where things Ebb and flow based upon demand.

And there’s only one thing wrong with the Tesla formula. And that is when things slow down. When things slow down, the manufacturer is forced to cut the price at the manufacturing level,. As long as things are hot and things are flowing the Tesla model works perfectly. However when it slows down, like it did with Saturn, it becomes a debacle

I feel like I did mention that in my post But I agree with you.

Eliminating the dealer network raises costs associated with distribution because it complicates production and distribution planning. Even more so with last-mile direct to consumer delivery. The current ability to streamline production planning and consolidate inbound shipping is a huge benefit to the manufacturer, especially, as you point out, when demand is slow and irregular.

[BGM-M3COMP]

Originally Posted by wtwo3

We're not going to agree, and that's fine, just difference of opinion.
And you're right... it's not about me or you in the grand scheme of things. But I was explaining why I personally prefer the dealer network and why savvy shoppers are able to leverage it to our benefit. Unpopular opinion like I said, but I feel I have legitimate premise for it.

In terms of cost, I think you're underestimating the added costs associated with eliminating the middle man. It's not as simple as eliminating the middle man and now you've saved a ton of money. As I mentioned before, you have to somehow compensate for the services being eliminated (and i'm not talking about services to the consumer, but services to the manufacturer). There's a reason why distribution is such a large business and typically NOT handled by the manufacturer, regardless of industry. Simply put, the added distribution cost of direct, last mile shipments rather than consolidated shipments into dealerships would be a huge expense that either the manufacturer would directly have to take on, or outsource and indirectly pay for through a 3rd party distributor.

If a car is sold to the dealer for $65k and then sold to the consumer at $80k, removing the dealer doesn't mean the manufacturer is going to gift the customer $15k and sell the car to them for $65k. I don't even think the car will be $75k. It has to make up for the gap in services the dealer offers the manufacturer, and there's cost associated with that - and in some cases (i.e distribution) much greater cost because now you're talking last-mile delivery which wasn't a factor in the dealer network.

There is a reason why companies like amazon do so well and walmart having to match amazon's 2 day free shipping. Because everyone buys stuff online. There is almost no need to even leave your house anymore.

You're using my numbers as a concrete example of the situation. I just said 80k just as a nice round number to compare. I did not say car makers will sell us an M3 at 65k if there was no dealer, i said, as an example, it could probably be 65k since we're cutting the middle man.

The dealer showroom is not needed unless you just want a place to store new cars and have people look. Every big name dealer has like 6-10+ salesman. They need to get paid. Finance people need to get paid. As well as managers of those people. There is no need.

Have a service dept. A team of 3 to assign paperwork for the necessary purchases and have everything run off the website.

I feel like we're not going anywhere with this as i have no idea why both of us are even debating lol. You are fine in your dealer purchases and so am i actually.

I still believe and hope dealers will be eliminated in the future.

[Alfisti]

I am fully aware the dealer will do what is good for him, not me. Where i get a bit lost is he could flog a new one for 0 hassle and make excellent margin on a used one yet doesn't want to throw any equity my way to make it work.

So i will just hang onto the car and drive it 10 years.

[BMWGirlFL]

Originally Posted by Alfisti

I am fully aware the dealer will do what is good for him, not me. Where i get a bit lost is he could flog a new one for 0 hassle and make excellent margin on a used one yet doesn't want to throw any equity my way to make it work.

So i will just hang onto the car and drive it 10 years.

You haven't posted enough information to do the math but store seems to be saying your monthly payment will be more or less unchanged & that seems possible. It sounds like you may not be including remaining lease payments in your calculations.

[Alfisti]

I think all the info is there no? I think that's where the dealer and i go separate ways. It was the GM that said "use the equity in the current one to get into a new one for a lower price". I took that to mean, ignore what is owed because i'll be effectively extending the relationship at least another 2.5 yrs, and use the equity in the current one to make a new one too good to refuse.

In the end, after 4 yrs this car will have been financed at 2.3% so good value, will have 20,000KM so will pay my $30K, finance that at even 5% and my "car payment" drops significantly so to speak. So all good i guess.

[BMWGirlFL]

Originally Posted by Alfisti

I think all the info is there no? I think that's where the dealer and i go separate ways. It was the GM that said "use the equity in the current one to get into a new one for a lower price". I took that to mean, ignore what is owed because i'll be effectively extending the relationship at least another 2.5 yrs, and use the equity in the current one to make a new one too good to refuse.

In the end, after 4 yrs this car will have been financed at 2.3% so good value, will have 20,000KM so will pay my $30K, finance that at even 5% and my "car payment" drops significantly so to speak. So all good i guess.

How did they calculate the $2K you mention above? It sounds like difference between trade offer amount & current lease buyout amount. What new monthly payment was quoted? Do you want the new car if your monthly payment will be more or less unchanged?

[Alfisti]

Originally Posted by BMWGirlFL

How did they calculate the $2K you mention above? It sounds like difference between trade offer amount & current lease buyout amount. What new monthly payment was quoted? Do you want the new car if your monthly payment will be more or less unchanged?

Absolutely no idea on the 2k, it was verbal. New payment is $125 more than current due to price increase and interest rates. To be clear that'd be if i walked in off the street and just wanted the car not rolling in any equity. $950 vs the $825 we pay now.

No, my aim is to reduce payments, aggressively. This whole situation started by me asking if at lease end, i could extend the lease another 2 years based on the residual (a laughable $30K) and was told no by the GM. This was a casual chat in the waiting area. It was here he suggested "rolling in the equity fron the current one to reduce the price on a new one".

Again, i get he wants to do what's best for him but no way I am biting on that offer, in 18 months I can buy a car for $30K that will be worth damn near $50K.

[Red Bread]

Let's not forget that leasing a new car would require paying tax on the difference in value of the new and used car. So they're likely offering you more than $2k in equity, but with higher interest rates, this is just a bad deal. Buy the car at the end of lease and then trade it on another lease, provided she still has the work benefit.

[Alfisti]

Still think cheapest thing to do is just buy it and drive it no? It'll have 15K miles on it, if that.

[chassis]

Originally Posted by Alfisti

My motivation is cost, not getting into a new one so looks like best idea here is to just buy it end of next yr, drive it another 3 years or so. She does about 5k miles a yr so really, car should be fine even if it is Italian. Leasing is just easier as she writes some of it off so no question from the tax man, once you buy the whole depreciation thing is subjective to some degree so i gotta pull out the abacus.

Cost as a goal points to owning the vehicle outright, driving it until the wheels fall off, and avoiding leasing or debt/loan.

The dealer want to keep you on the slippery slope and treadmill of the lease agreement. Don't do it.

[TheWatchGuy]

Originally Posted by BGM-M3COMP

There is a reason why companies like amazon do so well and walmart having to match amazon's 2 day free shipping. Because everyone buys stuff online. There is almost no need to even leave your house anymore.

You're using my numbers as a concrete example of the situation. I just said 80k just as a nice round number to compare. I did not say car makers will sell us an M3 at 65k if there was no dealer, i said, as an example, it could probably be 65k since we're cutting the middle man.

The dealer showroom is not needed unless you just want a place to store new cars and have people look. Every big name dealer has like 6-10+ salesman. They need to get paid. Finance people need to get paid. As well as managers of those people. There is no need.

Have a service dept. A team of 3 to assign paperwork for the necessary purchases and have everything run off the website.

I feel like we're not going anywhere with this as i have no idea why both of us are even debating lol. You are fine in your dealer purchases and so am i actually.

I still believe and hope dealers will be eliminated in the future.

Theres about a 0% chance that if we could buy direct from the manufacturer that cars would be cheaper.

What would happen is we would be paying the full MSRP, even in normal car buying times, with some minor manufacturer incentives and no opportunity for negotiating. I get the thought process that if you cut out the middleman (dealers) you should be able to get it cheaper, but thats just not how it works.

There are several manufacturers now going with a hybrid "direct order" route, where you order direct from the factory through a dealer or through online ordering and the order goes through your closest dealer. People arent getting deals on those. Many manufacturers you can order directly from them in Canada. Those arent getting discounted from MSRP either.

[SteveinArizona]

The direct sales model won't entirely reduce distribution costs. Consumer still want to see cars and test drive them. Tesla, Lucid and Polestar are all Direct Sales models and all three have showrooms in a Scottsdale mall.

A while back Tesla announced it was closing all its showrooms but soon backed off that plan.

[Efthreeoh]

Originally Posted by BGM-M3COMP

Like i said, salesman do not work for free. I have too many friends in this business and my dad, before he passed away, has been a car salesman for over 20 years working at many different car makers. His "hussle" was to sell cars. Obviously. That's why they're there.

If we can eliminate that, the car buying experience will be much easier and everyone can basically pay a "flat rate". Where did i say if this happens we'll be paying what the dealer pays for the car? You already said it yourself, profits are made from service. I would almost bet there are more service work done on warranty alone than those who are sending their used out of warranty car, to the "DEALER" for service. A lot of more people are smarter than that. Yet these dealers are still making gigantic profits. It's from sales.

I still hope the future will eliminate dealers. There's really no need for them. They are just there to technically show you the car and allow you to test drive. Contracts can technically be done online with e-signatures.

Dealers make the majority of profit from service AND used car sales. Eliminating dealerships does not significantly lower the workforce (i.e. labor cost) that supports the privately-held automobile fleet, which means the cost has to be covered somewhere in the new car sales process. Dealerships only hassle you if you let them. Research, bring your financing, know the math on how the final price is determined, have your deal down to the calculated monthly payment. Say no to all the add-on shit, tell the finance manager the price and payment you are going to pay. It's not that difficult.

[BGM-M3COMP]

Originally Posted by Efthreeoh

Dealers make the majority of profit from service AND used car sales. Eliminating dealerships does not significantly lower the workforce (i.e. labor cost) that supports the privately-held automobile fleet, which means the cost has to be covered somewhere in the new car sales process. Dealerships only hassle you if you let them. Research, bring your financing, know the math on how the final price is determined, have your deal down to the calculated monthly payment. Say no to all the add-on shit, tell the finance manager the price and payment you are going to pay. It's not that difficult.

That's why i said have a service dept and that's it.

Sales can be done online.

Is it or is it not true more than half, or hell, probably 75%, or even more of us M owners, M3/M4 and all the variants of those have bought/leased it WITHOUT a test drive?? lol

Like i said, we don't need the dealers, at least not the showroom. Have a 3 man crew to actually monitor the place and manage paperwork. All sales could be done via online. You see a price, you like it, you click buy it now and move on to the next step.

Never said cars will be pennies if we eliminate showroom sales, whether new or used however if that portion gets eliminated from the equation, there is no doubt car buying could be a bit cheaper. And no haggling is needed. Whether you're a pro at buying cars or someone who knows absolutely nothing. Us and them will have the same price.

[chassis]

@BGM I agree with the sentiment but 90% of vehicle purchasers do not have the same car savvy as you (or maybe me). My elderly dad loves chewing the fat with the sales guy in the showroom, as one example.

[wtwo3]

Originally Posted by BGM-M3COMP

That's why i said have a service dept and that's it.

Sales can be done online.

Is it or is it not true more than half, or hell, probably 75%, or even more of us M owners, M3/M4 and all the variants of those have bought/leased it WITHOUT a test drive?? lol

Like i said, we don't need the dealers, at least not the showroom. Have a 3 man crew to actually monitor the place and manage paperwork. All sales could be done via online. You see a price, you like it, you click buy it now and move on to the next step.

Never said cars will be pennies if we eliminate showroom sales, whether new or used however if that portion gets eliminated from the equation, there is no doubt car buying could be a bit cheaper. And no haggling is needed. Whether you're a pro at buying cars or someone who knows absolutely nothing. Us and them will have the same price.

M cars represent a tiny fraction of car buyers. So you can't really use that as an example to suggest people wouldn't see value in having a showroom. Besides, the scarcity of cars has forced many people to purchase without a test drive. You're using an unusual economic situation as an example to indicate something consumers would be ok with on a normal basis - and that doesn't make sense. In reality, if the general consumer couldn't test drive an X3 or a GLC (I'm using higher volume, more common models where people are less likely to know exactly what they want going in), but WAS able to test drive a Q5, I'd be willing to bet a large sum of money the Q5 would see higher sales as a result.

But that's besides the point. You're still under the impression that eliminating showroom sales will somehow result in a significant decrease in cost and that car buying might be cheaper as a result. Like I've mentioned a few times before, the cost savings from eliminating sales staff and showroom floors will be eaten up by cost increases in other areas (logistics, warehousing costs, operations, inefficiencies in supply/demand/production planning as a result of not being able to leverage dealer networks to absorb a streamlined production process, additional customer service, etc). And even if by some miracle we see a slight decrease in total cost, there's no way us as consumers end up seeing that. Manufacturers are looking for every possible way to cut costs (modular platforms, replacing physical buttons with screens, using common components across models etc) yet we as customers don't see cheaper cars as a result of those cost cutting measures - so believe me, if eliminating the dealer model was a significant cost saving maneuver, they'd have done it by now.

Beyond all that, maybe you don't strive for a good deal on a car. And this is the biggest consumer benefit to the dealer model which you seem to be ignoring - you're essentially saying you're willing to give up the ability to negotiate thousands of dollars (in some cases tens of thousands) off the price of a car just because you're not willing to put in the effort (which really isn't much effort) to shop around for the best deal.

[TheWatchGuy]

Originally Posted by BGM-M3COMP

That's why i said have a service dept and that's it.

Sales can be done online.

Is it or is it not true more than half, or hell, probably 75%, or even more of us M owners, M3/M4 and all the variants of those have bought/leased it WITHOUT a test drive?? lol

Like i said, we don't need the dealers, at least not the showroom. Have a 3 man crew to actually monitor the place and manage paperwork. All sales could be done via online. You see a price, you like it, you click buy it now and move on to the next step.

Never said cars will be pennies if we eliminate showroom sales, whether new or used however if that portion gets eliminated from the equation, there is no doubt car buying could be a bit cheaper. And no haggling is needed. Whether you're a pro at buying cars or someone who knows absolutely nothing. Us and them will have the same price.

sure, people buying an M car probably arent going to be swayed by a test drive, but thats a small segment of BMWs overall lineup. most people want to test drive, or at the very least sit in the car.

and again, you thinking youll get a deal on a car because the manufacturer all of a sudden decides to drop the msrp on their cars is based on nothing. only way its cheaper is if you are buying cars for over msrp to get it now from the dealer vs waiting months to order one.

and then when you think about trade ins, how would you trade in a vehicle to a manufacturer? do i ship my car to new jersey to sit at bmw NA headquarters? if i want to buy a used car, do i not get to test drive it or see it before i buy to make sure it isnt beat up?

What could work is a hybrid model, which again, several manufacturers are going to. Dealers have stock of cars, or you can order a new car. Right now im on month 4 of waiting for the car i ordered though with no end in sight, and would much rather go to a dealership to get one now, but there just isnt any inventory.

[E46ZHP2]

Dealer is playing you. The concept of equity and a lease don't go together. It's like putting money down on a new lease. Leasing 101 says you never do that. One of the benefits of leasing vs purchase outright is that you keep your money working for you instead of taking $50-100k out of an investment account to purchase it. New trends in interest rates may change that. Also, if the car was ever totalled, you lose that "equity". Keep the car and buy it outright at lease end. You would likely not be able to purchase that car for the buyout/residual in your current agreement.

[tranquility]

Originally Posted by chassis

Cost as a goal points to owning the vehicle outright, driving it until the wheels fall off, and avoiding leasing or debt/loan.

The dealer want to keep you on the slippery slope and treadmill of the lease agreement. Don't do it.

+1 exactly. Look how relatively confusing leasing is, and amazing still many ppl argue in its favor. It's just common sense, anytime someone lends money, they're gonna have make profit outta that also.

[PittsDriver]

We all know that there are different ways to finance an auto: buy it outright, finance it, lease it, finance it with a ballon payment, etc. The question you have to answer is not which financing deal is best but what your attitude is about what you drive. You are a person, for whatever reason, wants to drive a new car every 2 or 3 years and you're ok with the perpetual payments that result then one of these deals will look better to you than another. If you keep your car for 4 or 5 years or longer then another financing method will look better. The only customers "getting boned" are the ones that choose poorly on the manner in which they buy the car not fitting their attitude about ownership. There are all kind of shoppers out there and anyone that doesn't share your method of ownership is not an idiot. They might just have different criteria (like payments made by their company or typically own cars for a long time). The only idiots are people who buy a more expensive car than they can they should.

[BGM-M3COMP]

Originally Posted by TheWatchGuy

sure, people buying an M car probably arent going to be swayed by a test drive, but thats a small segment of BMWs overall lineup. most people want to test drive, or at the very least sit in the car.

and again, you thinking youll get a deal on a car because the manufacturer all of a sudden decides to drop the msrp on their cars is based on nothing. only way its cheaper is if you are buying cars for over msrp to get it now from the dealer vs waiting months to order one.

and then when you think about trade ins, how would you trade in a vehicle to a manufacturer? do i ship my car to new jersey to sit at bmw NA headquarters? if i want to buy a used car, do i not get to test drive it or see it before i buy to make sure it isnt beat up?

What could work is a hybrid model, which again, several manufacturers are going to. Dealers have stock of cars, or you can order a new car. Right now im on month 4 of waiting for the car i ordered though with no end in sight, and would much rather go to a dealership to get one now, but there just isnt any inventory.

I'm talking about sales as a whole. Not so much what goes on with the logistics of it.

Sales = most profit made

That's why they're there. They aren't necessarily there to sell you a car. They are there to SHOW you the car, allowing you to test drive (or sometimes not as per my M car example), and then the battle of pricing follows.

If they have a team of people to manage a place that STORES the cars, they won't need 10+ salesmen to see who can sell the most cars, because they want to bank on that awesome commission check, just so someone can drive their dream car home.

I think people are misunderstanding what i'm saying about eliminating dealers. I am talking about the equation of where buyer meets seller. We do not need dealers per say. But obviously if we want to buy an M3 for example, there has to be a facility to store the M3 to attain it. Or have it delivered to your house with a non refundable deposit that offers a test drive, and if you agree, or don't, they keep the deposit and you either keep the car at your house after all the paperwork is signed, or they take the car back to the facility, along with your deposit.

There is NO need for sales. Like i said already, have a service dept and a team of 3 or so to manage the facility and paperwork.

You do not need a basketball roster of salesmen all competing with each other on who can make the most sales, at the expense of the buyer who might or might not know how to car shop. That shouldn't be the way.

Everyone should pay the same price.