F55/F56 How to Buy a New Mini -- The Art of the Deal
#226
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Where Do We Put the Trade?
So you know the approximate value of your trade. Understanding, in today’s marketplace, used car values are generally decreasing fast and that, in the most dynamic regional markets, values change weekly, and sometimes change a lot, you realize that top dollar for your car isn’t likely to be found by trading it in to a new car dealer.
But you don’t want unknown persons showing up to your house or job and you’re not wild about putting your cell phone number on Autotrader or Cars.com, and you don’t want to let smelly strangers test drive your car, so you are willing to take a little less and just turn your pride and joy over to the dealer.
Let’s say you own your trade free and clear and your research tells you there’s somewhere between $5,000 and $8,000 of equity in the car. Let’s say the dealer agrees with you and says it’s worth $5,000 to him on a trade.
So, do you have him write you a check for $5,000 and keep the trade completely separate from your new car deal? Do you use your trade equity to offset drive-offs on a new lease? Do you use the trade equity as a down payment?
Or…. Do you negotiate a super low selling price of the car and tell the dealer you want, say, $1,000 credit for your trade and make an offer on the new car that reflects and additional $4,000 discount off the negotiated selling price of the new car? Some dealers won’t do the necessary bookkeeping to do this. Some will if that’s what it takes to do a deal.
Some lenders need to see more than $1,000 down. But, if your credit is excellent and you qualify for the manufacturer’s best loan/lease rate and the dealer is willing to credit your trade just enough to cover the minimum required drive off amount and you can capture the rest of the trade value as a FURTHER discount off the selling price of the car (AFTER you’ve already negotiated a discounted selling price), that may be a great way to save some money.
How? DMV fees and sales tax are calculated in most states based on the selling price of the car. If the combined cost of these taxes and fees is, say, 12% of the selling price, and you get a $4,000 additional discount on that selling price, 12% of $4,000 = $480. Out of thin air and into your pocket! Shazammmm.
It is NOT legal to intentionally avoid taxes by falsifying the taxable price paid for a car. It is absolutely legal to talk about buying a new car at a deeply discounted price as follows:
Dealer: Your trade is worth, maybe $5,000 to us.
Customer: Well, before we nail down my trade value, I was looking at getting a $6,000 discount on this new MINI, before manufacturer’s incentives. I really don’t care about the value of my trade in this deal, just so there’s enough in the trade to cover the minimum required down (or lease drive-offs). It looks like we need about $1,000 for my trade showing in this deal to make my numbers work.
Dealer: I see.
So, the value of the trade is step one of figuring out how the trade works into your deal. How that value is maximized depends on your credit situation, the dealer, and how the numbers are worked into your deal, and, most important, how the conversation is handled.
But you don’t want unknown persons showing up to your house or job and you’re not wild about putting your cell phone number on Autotrader or Cars.com, and you don’t want to let smelly strangers test drive your car, so you are willing to take a little less and just turn your pride and joy over to the dealer.
Let’s say you own your trade free and clear and your research tells you there’s somewhere between $5,000 and $8,000 of equity in the car. Let’s say the dealer agrees with you and says it’s worth $5,000 to him on a trade.
So, do you have him write you a check for $5,000 and keep the trade completely separate from your new car deal? Do you use your trade equity to offset drive-offs on a new lease? Do you use the trade equity as a down payment?
Or…. Do you negotiate a super low selling price of the car and tell the dealer you want, say, $1,000 credit for your trade and make an offer on the new car that reflects and additional $4,000 discount off the negotiated selling price of the new car? Some dealers won’t do the necessary bookkeeping to do this. Some will if that’s what it takes to do a deal.
Some lenders need to see more than $1,000 down. But, if your credit is excellent and you qualify for the manufacturer’s best loan/lease rate and the dealer is willing to credit your trade just enough to cover the minimum required drive off amount and you can capture the rest of the trade value as a FURTHER discount off the selling price of the car (AFTER you’ve already negotiated a discounted selling price), that may be a great way to save some money.
How? DMV fees and sales tax are calculated in most states based on the selling price of the car. If the combined cost of these taxes and fees is, say, 12% of the selling price, and you get a $4,000 additional discount on that selling price, 12% of $4,000 = $480. Out of thin air and into your pocket! Shazammmm.
It is NOT legal to intentionally avoid taxes by falsifying the taxable price paid for a car. It is absolutely legal to talk about buying a new car at a deeply discounted price as follows:
Dealer: Your trade is worth, maybe $5,000 to us.
Customer: Well, before we nail down my trade value, I was looking at getting a $6,000 discount on this new MINI, before manufacturer’s incentives. I really don’t care about the value of my trade in this deal, just so there’s enough in the trade to cover the minimum required down (or lease drive-offs). It looks like we need about $1,000 for my trade showing in this deal to make my numbers work.
Dealer: I see.
So, the value of the trade is step one of figuring out how the trade works into your deal. How that value is maximized depends on your credit situation, the dealer, and how the numbers are worked into your deal, and, most important, how the conversation is handled.
#227
Yeah the sales tax discount was one reason I took only $8700 for my 2007 MCS at Scottsdale Mini when I got my 2014 JCW Coupe. Realize that in AZ there's no sales tax on a private car sale though. Also there was a problem with the center display and the rear brakes were close to needing replacements. It's always easier to just hand 'em the keys and sign over the title right? They even got the custom hardwood shift ****/ebrake handle and Cocomats and swaybar. Some lucky dawg got themselves a real nice Mini.
#228
I take a lot of pride in my customers being happy to see me, and having sat on the other side of the desk several times, I know what it's like to go through the purchasing process.
So, I try to make it as painless as possible.
#229
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Zillon, can you offer any additional insight into recent changes to the way MINI USA is handling incentives and special loan rates? In BMW-land more of the $ is heading for the trunk for dealers to dole out, or not. It just sorta "feels" like the marketing strategy regarding incentives is, shall I say, evolving.
Don't want to put you on the spot -- not asking for proprietary info. Just wondering if you can give us a sense of the direction of any recent changes and any thoughts as to how potential purchasers should approach putting offers together.
Deeply appreciate your participation.
#230
+1
Zillon, can you offer any additional insight into recent changes to the way MINI USA is handling incentives and special loan rates? In BMW-land more of the $ is heading for the trunk for dealers to dole out, or not. It just sorta "feels" like the marketing strategy regarding incentives is, shall I say, evolving.
Don't want to put you on the spot -- not asking for proprietary info. Just wondering if you can give us a sense of the direction of any recent changes and any thoughts as to how potential purchasers should approach putting offers together.
Deeply appreciate your participation.
Zillon, can you offer any additional insight into recent changes to the way MINI USA is handling incentives and special loan rates? In BMW-land more of the $ is heading for the trunk for dealers to dole out, or not. It just sorta "feels" like the marketing strategy regarding incentives is, shall I say, evolving.
Don't want to put you on the spot -- not asking for proprietary info. Just wondering if you can give us a sense of the direction of any recent changes and any thoughts as to how potential purchasers should approach putting offers together.
Deeply appreciate your participation.
By keeping the funds internal, it allowed us more flexibility to close a deal and ultimately give the customer what they came in for; a great deal on the car they wanted.
Now, in terms of MINI hiding the finance rates, while it has probably prevented the 'special rate shoppers' from hitting the showrooms, it allows us to (usually) deliver good news each time we submit a finance application.
At our store, we don't mark up rates - but what we do, is when working numbers, we use an average APR. Usually 3.9% - 4.9%, unless the customer has divulged some details about credit history. Then we may use a slightly higher rate.
This allows us to deliver good news 98% of the time after submitting a credit app, as we usually find a customer qualifies for better rates than what we worked numbers on. So, the payment ultimately goes down, the customer is happy, and nobody loses a deal.
Now, this all changed for April - we're back to a more traditional 'cash back' incentive, which can be found on most dealer websites.
Hopefully that helps.
#231
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So, the setup was, at least until this month, that each dealer received an allotment of funds to dole out until the funds were exhausted, with each model getting a maximum amount per car allowed per transaction. By making the incentives less vehicle specific, or deal specific, for that matter - it prevented customers from coming in and haggling beyond the margins, which just makes everyone confrontational.
By keeping the funds internal, it allowed us more flexibility to close a deal and ultimately give the customer what they came in for; a great deal on the car they wanted.
<snip>
Now, this all changed for April - we're back to a more traditional 'cash back' incentive, which can be found on most dealer websites.
Hopefully that helps.
By keeping the funds internal, it allowed us more flexibility to close a deal and ultimately give the customer what they came in for; a great deal on the car they wanted.
<snip>
Now, this all changed for April - we're back to a more traditional 'cash back' incentive, which can be found on most dealer websites.
Hopefully that helps.
So, over at some BMW-specific blogs folks are going nuts because they can no longer use multiple security deposits to lower lease money factors (BMW is taking this rarely-used option away). And everyone's all up because so much of the incentive money is controlled by dealers.
One COULD argue that the way MINI has tried the past few months is a bit more fair in that, if done in an even-handed way, all customers get to dip their beaks into the incentive slush a little bit. Fewer killer deals for the rare individual, but good deals for everyone, and maybe a little more here and there for a loyal customer or a particularly nice customer who passes the 'attitude test' with flying colors.
Reality remains that informed, well-qualified customers ready to motor usually get better deals than most customers. The others pay more, allowing the possibility for some to pay less.
We don’t need to know how much money is in the trunk. We only need to know what a willing seller will take and what we are willing to pay for the cars we want.
Yes, less transparency regarding rebates and incentives makes it a little more complicated. But, in any good faith negotiation, the parameters are discoverable by those with the tenacity to dig until the bottom is found.
Does the New Reality require everyone to work harder to get good deals? Probably.
Is MINI risking losing some of its most loyal and ardent customers. Maybe.
Are other brands making cars that are more interesting than they were just a few years ago? Yep.
Are there too many cars, from too many brands chasing too few customers. More true all the time.
Should we be concerned that many customers will not get the best deals available because they don’t know what to look for or how to ask? Well, dealerships usually don’t hire social workers for their sales teams – they usually hire skilled, or trainable people who aren’t afraid to close and know how to do everything there is to hold gross and then snag some more in the F&I office.
But we motorers are often just as skilled. And we bring the money to the deal. If we aren’t buying, MINI isn’t selling.
So, we may need to work harder and limit our dealings to the few tried and true MA’s (like Zillon) who know who we are and will help us cut through the forest of obfuscation to locate the right cars, at the right price, and ensure timely, satisfactory delivery experiences for those of us who demand more for less and are willing to support the brand, up to a point.
I still agree that the back end is really not the customer’s business. I believe, as enthusiastic customers with the cash or excellent credit, we present an opportunity for a MINI dealer to sell us a car. Our willingness to pay, or not pay, helps determine price. The dealer’s willingness to discount a car, or a warranty, or anything else, also determines price.
How low? How much of the back end are customers entitled to snag? Offer as low as you want. You might get your number, or close, or not. You may choose to make a deal, or not.
All in all, at some point it’s still about the cars, right? Your Mileage May Vary.
Last edited by 2017All4; 04-29-2017 at 11:30 AM.
#233
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Why Rich Folks Often Don’t Pay Cash
J. Paul Getty famously said, “If it appreciates, buy it, if it depreciates, lease it.” And J.P. was a billionaire.
Mr. Getty’s words of wisdom aside, there is a general consensus that the best way to extract full value from a car is to purchase a gently used, super-clean, nearly-new car that’s still under factory or CPO warranty where the original owner ate the big chunk of depreciation that occurs when a new car is first driven off the lot, and then drive that car forever, until the wheels fall off.
If a customer buys a one- or two-year-old low mileage, super clean used car that’s still under warranty and pays 75% of what that same car would cost new, that’s a nice savings. Let’s say the MSRP on a car was $30,000 and two years and 15,000 miles later the smart second owner purchases this car from a dealer as Certified Preowned for $22,500 plus tax and fees. If the car is purchased for a down payment that covers taxes and fees and the entire $22,500 is financed for five years, the monthly payment will be around $425/month and at the end of five years there is a good chance that this car will have enough remaining value to make a solid down payment on the next car.
Or, the customer can lease a brand new, custom ordered car, built just exactly as the customer wants, with a $40,000+ MSRP, and pay the minimum drive offs and, for around $400/month, drive the new car with full factory warranty for three years and then start over.
In either case, the customer has a very similar monthly cost of ownership and, with GAP protection for a nominal fee if it’s a purchase and for no extra cost if it’s a lease, the risk of liability in the event the car is stolen or totaled, is shifted to the insurance company.
If the customer pays all cash for the $22,500 near-new car, there is a savings of around $3,000 in interest over five years, but, if the car is totaled and insurance pays market value, the owner eats the equity loss and has less money to go buy a replacement car. And at some point, the car’s original factory warranty, and the CPO extended coverage, will expire.
Wealthy people look at $22,500 as capital so, as savvy capitalists, they might borrow the $22,500 to buy the car at the lowest interest rate because they can make the $22,500 they don’t pay up front for the car work hard to earn more than the $3,000 loan interest cost. Plus, wealthy folks often have ways to bury interest costs as a tax write-off and they will hedge against negative equity by carrying an inexpensive GAP rider on their car insurance.
And rich people LOVE inflation because they pay back debt with inflated dollars while they watch inflation increase the value of their leveraged real estate and other appreciating assets. Think about it. Purchase a million dollar piece of real estate for 10% down. Put one hundred thousand dollars in as the down payment and borrow the rest. Within two years that property goes up in value 10%. It’s now worth $1.1million. You just DOUBLED the value of your original $100,000 investment. Or, instead of buying the million dollar real estate, buy a $100,000 BMW for all cash. Two years later your $100,000 Bimmer is worth maybe $60,000 and needs new run flats. That’s why rich folks often don’t pay cash for new cars.
The mantra of the rich is that capital is difficult to accumulate and easy to dissipate. Thus $22,500 is viewed as $1,125 or more per year in income forever. So they often lease nice cars, keep their capital working in investments, and pay for a subsidized portion of the depreciation of those nice cars. Their wealth is invested, always growing, not losing value tied up in their daily driver cars. And, with GAP insurance, they gladly let someone else worry about absorbing the loss in the event their car is totaled, and they usually do deals where the maintenance is covered. Gas and go, and enjoy new nice rides for a reasonable, subsidized monthly cost that never ends until they stop driving altogether.
However, the motorer who snags a cool near new MINI for 75% of new car cost and then owns it and customizes it and enjoys every day of ownership and dies with less money in the bank than Richey Rich, perhaps lives life with equal or greater joy.
So, the moral to this story is, new or used, cars cost money. Having a car, whether purchased outright, bought on time, or leased, is not a very economical thing to do.
It’s all about how one manages wealth and risk, the nature of one’s values and priorities, and, ultimately, how to attain happiness in this transitory existence. Ain’t no right answer. Only choices.
Mr. Getty’s words of wisdom aside, there is a general consensus that the best way to extract full value from a car is to purchase a gently used, super-clean, nearly-new car that’s still under factory or CPO warranty where the original owner ate the big chunk of depreciation that occurs when a new car is first driven off the lot, and then drive that car forever, until the wheels fall off.
If a customer buys a one- or two-year-old low mileage, super clean used car that’s still under warranty and pays 75% of what that same car would cost new, that’s a nice savings. Let’s say the MSRP on a car was $30,000 and two years and 15,000 miles later the smart second owner purchases this car from a dealer as Certified Preowned for $22,500 plus tax and fees. If the car is purchased for a down payment that covers taxes and fees and the entire $22,500 is financed for five years, the monthly payment will be around $425/month and at the end of five years there is a good chance that this car will have enough remaining value to make a solid down payment on the next car.
Or, the customer can lease a brand new, custom ordered car, built just exactly as the customer wants, with a $40,000+ MSRP, and pay the minimum drive offs and, for around $400/month, drive the new car with full factory warranty for three years and then start over.
In either case, the customer has a very similar monthly cost of ownership and, with GAP protection for a nominal fee if it’s a purchase and for no extra cost if it’s a lease, the risk of liability in the event the car is stolen or totaled, is shifted to the insurance company.
If the customer pays all cash for the $22,500 near-new car, there is a savings of around $3,000 in interest over five years, but, if the car is totaled and insurance pays market value, the owner eats the equity loss and has less money to go buy a replacement car. And at some point, the car’s original factory warranty, and the CPO extended coverage, will expire.
Wealthy people look at $22,500 as capital so, as savvy capitalists, they might borrow the $22,500 to buy the car at the lowest interest rate because they can make the $22,500 they don’t pay up front for the car work hard to earn more than the $3,000 loan interest cost. Plus, wealthy folks often have ways to bury interest costs as a tax write-off and they will hedge against negative equity by carrying an inexpensive GAP rider on their car insurance.
And rich people LOVE inflation because they pay back debt with inflated dollars while they watch inflation increase the value of their leveraged real estate and other appreciating assets. Think about it. Purchase a million dollar piece of real estate for 10% down. Put one hundred thousand dollars in as the down payment and borrow the rest. Within two years that property goes up in value 10%. It’s now worth $1.1million. You just DOUBLED the value of your original $100,000 investment. Or, instead of buying the million dollar real estate, buy a $100,000 BMW for all cash. Two years later your $100,000 Bimmer is worth maybe $60,000 and needs new run flats. That’s why rich folks often don’t pay cash for new cars.
The mantra of the rich is that capital is difficult to accumulate and easy to dissipate. Thus $22,500 is viewed as $1,125 or more per year in income forever. So they often lease nice cars, keep their capital working in investments, and pay for a subsidized portion of the depreciation of those nice cars. Their wealth is invested, always growing, not losing value tied up in their daily driver cars. And, with GAP insurance, they gladly let someone else worry about absorbing the loss in the event their car is totaled, and they usually do deals where the maintenance is covered. Gas and go, and enjoy new nice rides for a reasonable, subsidized monthly cost that never ends until they stop driving altogether.
However, the motorer who snags a cool near new MINI for 75% of new car cost and then owns it and customizes it and enjoys every day of ownership and dies with less money in the bank than Richey Rich, perhaps lives life with equal or greater joy.
So, the moral to this story is, new or used, cars cost money. Having a car, whether purchased outright, bought on time, or leased, is not a very economical thing to do.
It’s all about how one manages wealth and risk, the nature of one’s values and priorities, and, ultimately, how to attain happiness in this transitory existence. Ain’t no right answer. Only choices.
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Raven99 (05-28-2019)
#234
I struggle with the lease vs. purchase every time. Only once, on our 2016 4dr did I opt for the lease as it was the wife's business car. Something about owning outright gives me a mental freedom to do as I please and not worry that I have to keep it a certain way or return it to near stock to please the leasing overlords.
If you are overtly wealthy and thinking about lease vs purchase on your cars, then you are probably not really enjoying your wealth all that much. It's often said that being wealthy is more burdensome than just having enough to get by. You constantly have to monitor it so you don't lose it all. Tough problem?
If you are overtly wealthy and thinking about lease vs purchase on your cars, then you are probably not really enjoying your wealth all that much. It's often said that being wealthy is more burdensome than just having enough to get by. You constantly have to monitor it so you don't lose it all. Tough problem?
#235
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If you are overtly wealthy and thinking about lease vs purchase on your cars, then you are probably not really enjoying your wealth all that much. It's often said that being wealthy is more burdensome than just having enough to get by. You constantly have to monitor it so you don't lose it all. Tough problem?
Yes, wealth carries burdens, and, for some, a sense of responsibility because to those who much has been given, much is expected.
One of my favorite quotes is: "I've been rich, and I've been poor. Rich is better."
#236
I've always asked myself "why have I never leased a car?" I only drive 8,000 miles/year. I think the answer is I always keep new cars about 6-7 years. But I like new cars and leasing doesn't seem that expensive to me. I remember years ago seeing an ad that said you could lease a new JustaCooper for $100/month.
#237
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May Deal Analysis
Here’s a MINI USA May offer for a 2017 Clubman JCW:
LEASE A NEW 2017 MINI JCW CLUBMAN $399/MONTH FOR 36 MONTHS.
Offer not valid in Puerto Rico. Lease financing available on new 2017 MINI JCW Clubman models, from participating MINI Dealers through MINI Financial Services through 05/31/17 to eligible, qualified customers with excellent credit history who meet MINI Financial Services' credit requirements. Monthly lease payments of $399 per month for 36 months is based on an adjusted capitalized cost of $34,015 (MSRP of $37,700 including Automatic Transmission and destination and handling fee of $850, $0 security deposit, and $1,500 Lease credit). Actual MSRP may vary. $675 Dealer contribution may vary and could affect your actual monthly lease payment. Lessee responsible for insurance during the lease term and any excess wear and tear as defined in the lease contract, $.25/mile over 30,000 miles and a disposition fee of $350 at lease end. Cash due at signing includes $1,510 down payment, $399 first month payment, $0 acquisition fee, and $0 security deposit. Not all customers will qualify for security deposit waiver. Tax, title, license, registration and dealer fees are additional fees due at signing. Advertised payment does not include applicable taxes. Purchase option at lease end, excluding tax, title and government fees, is $22,620. Offer valid through 05/31/17 and may be combined with other offers unless otherwise stated.
Here's what the fine print tells us:
MSRP on this example is $37,700
Adjusted Cap Cost is $34,015
Lease Credit (rebate) is $1,500
Dealer Contribution (dealer discount) is $675
Residual is $22,620 (22,620/37,700=.60) Residual is 60%
And there is $0 acquisition fee on this deal!! That’s $925 gone!
But let’s say you want to buy, not lease. Well, in this deal the manufacturer is putting $1,500 into the deal and the dealer is putting $675, for a total discount of $2,175 (1,500+675=2,175).
So, the MINIMUM discount a buyer should ask for is $2,175 on this deal.
AND 2,175/37,700=.0577, or 5.77%, so a MINIMUM discount a buyer should ask for on a Clubman JCW would be 5.77%. MINIMUM.
On a $45,000 loaded Clubman JCW that would be about a $2,600 discount from MSRP. MINIMUM.
Given this is where MINI USA is starting, it might be reasonable to ask for more.
Where is the $675 dealer contribution coming from? The dealer’s gross? Or maybe money MINI USA is handing to dealers on the back end (trunk money)? Who knows?? EDIT We have it on good authority that "That $675 'dealer contribution' comes from the gross, FWIW."
But if the margin between Invoice and MSRP is around 8% and there’s back end money and additional trunk money MINI USA financial support for dealers…. Well, I’d be asking for a lot more than 5.77% off of MSRP. I’d probably start at about a grand, or two, back of invoice and see where things went.
And, if I were buying instead of leasing, I’d be looking at MINI USA discounted financing rates, which I wouldn’t ask for or discuss until AFTER I had an agreed upon out-the-door selling price.
In any case, on this Clubman JCW, no way would I accept less than a 5.77% discount. And I’d want more.
It’s all in the May numbers.
Happy May Day. Power to the People.
LEASE A NEW 2017 MINI JCW CLUBMAN $399/MONTH FOR 36 MONTHS.
Offer not valid in Puerto Rico. Lease financing available on new 2017 MINI JCW Clubman models, from participating MINI Dealers through MINI Financial Services through 05/31/17 to eligible, qualified customers with excellent credit history who meet MINI Financial Services' credit requirements. Monthly lease payments of $399 per month for 36 months is based on an adjusted capitalized cost of $34,015 (MSRP of $37,700 including Automatic Transmission and destination and handling fee of $850, $0 security deposit, and $1,500 Lease credit). Actual MSRP may vary. $675 Dealer contribution may vary and could affect your actual monthly lease payment. Lessee responsible for insurance during the lease term and any excess wear and tear as defined in the lease contract, $.25/mile over 30,000 miles and a disposition fee of $350 at lease end. Cash due at signing includes $1,510 down payment, $399 first month payment, $0 acquisition fee, and $0 security deposit. Not all customers will qualify for security deposit waiver. Tax, title, license, registration and dealer fees are additional fees due at signing. Advertised payment does not include applicable taxes. Purchase option at lease end, excluding tax, title and government fees, is $22,620. Offer valid through 05/31/17 and may be combined with other offers unless otherwise stated.
Here's what the fine print tells us:
MSRP on this example is $37,700
Adjusted Cap Cost is $34,015
Lease Credit (rebate) is $1,500
Dealer Contribution (dealer discount) is $675
Residual is $22,620 (22,620/37,700=.60) Residual is 60%
And there is $0 acquisition fee on this deal!! That’s $925 gone!
But let’s say you want to buy, not lease. Well, in this deal the manufacturer is putting $1,500 into the deal and the dealer is putting $675, for a total discount of $2,175 (1,500+675=2,175).
So, the MINIMUM discount a buyer should ask for is $2,175 on this deal.
AND 2,175/37,700=.0577, or 5.77%, so a MINIMUM discount a buyer should ask for on a Clubman JCW would be 5.77%. MINIMUM.
On a $45,000 loaded Clubman JCW that would be about a $2,600 discount from MSRP. MINIMUM.
Given this is where MINI USA is starting, it might be reasonable to ask for more.
Where is the $675 dealer contribution coming from? The dealer’s gross? Or maybe money MINI USA is handing to dealers on the back end (trunk money)? Who knows?? EDIT We have it on good authority that "That $675 'dealer contribution' comes from the gross, FWIW."
But if the margin between Invoice and MSRP is around 8% and there’s back end money and additional trunk money MINI USA financial support for dealers…. Well, I’d be asking for a lot more than 5.77% off of MSRP. I’d probably start at about a grand, or two, back of invoice and see where things went.
And, if I were buying instead of leasing, I’d be looking at MINI USA discounted financing rates, which I wouldn’t ask for or discuss until AFTER I had an agreed upon out-the-door selling price.
In any case, on this Clubman JCW, no way would I accept less than a 5.77% discount. And I’d want more.
It’s all in the May numbers.
Happy May Day. Power to the People.
Last edited by 2017All4; 05-02-2017 at 12:43 PM.
#239
That $675 'dealer contribution' comes from the gross, FWIW.
Pretty good deal. Wonder what my employee deal is...
#242
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What I really hope is that this isn't about "grind the dealer," but rather about encouraging people to educate themselves to be wary of some of the unsavory antics some dealers pull. It should also have the effect of helping customers appreciate a good MA and a good dealership -- because, after following this thread, one should be able to tell the difference.
#243
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How Much Off???
Back of invoice?? What makes you so entitled to that???
Let’s do the math on a $500 “over invoice” deal that includes $1,500 factory incentive cash and see where it takes us.
$45,000 MSRP
(($45,000 – $850)*.92+$850)=$42,250 Estimated Invoice
$42,250+$500-$1500=$41,250 which is $1,000 BELOW INVOICE and gives the dealer $500 OVER INVOICE PLUS 100% of whatever back end money the manufacturer provides.
We don’t know what exactly the back end is, and it really isn’t our business, but let’s say it’s 2.5% of MSRP, less the $850 delivery, which on a $45,000 MSRP car = $1,104.
So, are we comfortable with the dealer making $1,104+$500=$1,604 gross before commission and other overhead costs? Not for every deal. But for my deal, my answer is absolutely yes. Because I’m thinking, if I finance or lease through the dealer there’s a little more in it for them, and if I return for service there’s a bit more still.
You bet I’m gonna insist on buy rate or subvented rate for lease money factor or the lowest available special financing APR and if they insist on adding “document fees,” or other dealer packs, I won’t argue, but I will insist on a discount offset or some other valuable perk to match those fees.
But wait! What if the dealer is doing a stair step program and every unit they move gets them closer to more bonus money. Well, good for them.
Always glad to help by giving them the opportunity to sell me a car and move another unit closer to their goal. Glad to give all 10's on the survey. Win-win. Everybody's happy.
Let’s do the math on a $500 “over invoice” deal that includes $1,500 factory incentive cash and see where it takes us.
$45,000 MSRP
(($45,000 – $850)*.92+$850)=$42,250 Estimated Invoice
$42,250+$500-$1500=$41,250 which is $1,000 BELOW INVOICE and gives the dealer $500 OVER INVOICE PLUS 100% of whatever back end money the manufacturer provides.
We don’t know what exactly the back end is, and it really isn’t our business, but let’s say it’s 2.5% of MSRP, less the $850 delivery, which on a $45,000 MSRP car = $1,104.
So, are we comfortable with the dealer making $1,104+$500=$1,604 gross before commission and other overhead costs? Not for every deal. But for my deal, my answer is absolutely yes. Because I’m thinking, if I finance or lease through the dealer there’s a little more in it for them, and if I return for service there’s a bit more still.
You bet I’m gonna insist on buy rate or subvented rate for lease money factor or the lowest available special financing APR and if they insist on adding “document fees,” or other dealer packs, I won’t argue, but I will insist on a discount offset or some other valuable perk to match those fees.
But wait! What if the dealer is doing a stair step program and every unit they move gets them closer to more bonus money. Well, good for them.
Always glad to help by giving them the opportunity to sell me a car and move another unit closer to their goal. Glad to give all 10's on the survey. Win-win. Everybody's happy.
#244
FWIW, $1500 factory incentive cash that's published and advertised isn't 'back end' profit. That's just a publicly published factory incentive.
With MINI, there is no 'back end.' The profit margin is a % over invoice (actual margin is about 5%), plus customer cash/lease cash/finance cash/whatever cash. That's all the profit there is, unless there's a unit bonus tied to a sales goal, which are usually completely arbitrary and impossible goals to hit.
And doc/processing fees are part of the deal. I apologize for being blunt here, but if you don't like them, find another place to buy a car from (you'll probably find that everyone in the area charges a similar fee, so deal with it). Personally, I don't like charging them, but I don't have any negotiating room there.
There are a lot of moving pieces to negotiating a car deal, but please... please make sure you've got your information right before you step into the showroom with your info-guns blazing thinking you know the path to the rock-bottom deal. Be reasonable, and be respectful. Just because you read something on an internet forum doesn't mean it's true.
With MINI, there is no 'back end.' The profit margin is a % over invoice (actual margin is about 5%), plus customer cash/lease cash/finance cash/whatever cash. That's all the profit there is, unless there's a unit bonus tied to a sales goal, which are usually completely arbitrary and impossible goals to hit.
And doc/processing fees are part of the deal. I apologize for being blunt here, but if you don't like them, find another place to buy a car from (you'll probably find that everyone in the area charges a similar fee, so deal with it). Personally, I don't like charging them, but I don't have any negotiating room there.
There are a lot of moving pieces to negotiating a car deal, but please... please make sure you've got your information right before you step into the showroom with your info-guns blazing thinking you know the path to the rock-bottom deal. Be reasonable, and be respectful. Just because you read something on an internet forum doesn't mean it's true.
#245
Join Date: Aug 2016
Location: California Native still livin' in LaLa Land
Posts: 2,162
Received 507 Likes
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383 Posts
FWIW, $1500 factory incentive cash that's published and advertised isn't 'back end' profit. That's just a publicly published factory incentive.
With MINI, there is no 'back end.' The profit margin is a % over invoice (actual margin is about 5%), plus customer cash/lease cash/finance cash/whatever cash. That's all the profit there is, unless there's a unit bonus tied to a sales goal, which are usually completely arbitrary and impossible goals to hit.
And doc/processing fees are part of the deal. I apologize for being blunt here, but if you don't like them, find another place to buy a car from (you'll probably find that everyone in the area charges a similar fee, so deal with it). Personally, I don't like charging them, but I don't have any negotiating room there.
There are a lot of moving pieces to negotiating a car deal, but please... please make sure you've got your information right before you step into the showroom with your info-guns blazing thinking you know the path to the rock-bottom deal. Be reasonable, and be respectful. Just because you read something on an internet forum doesn't mean it's true.
With MINI, there is no 'back end.' The profit margin is a % over invoice (actual margin is about 5%), plus customer cash/lease cash/finance cash/whatever cash. That's all the profit there is, unless there's a unit bonus tied to a sales goal, which are usually completely arbitrary and impossible goals to hit.
And doc/processing fees are part of the deal. I apologize for being blunt here, but if you don't like them, find another place to buy a car from (you'll probably find that everyone in the area charges a similar fee, so deal with it). Personally, I don't like charging them, but I don't have any negotiating room there.
There are a lot of moving pieces to negotiating a car deal, but please... please make sure you've got your information right before you step into the showroom with your info-guns blazing thinking you know the path to the rock-bottom deal. Be reasonable, and be respectful. Just because you read something on an internet forum doesn't mean it's true.
Are you saying that MINI USA has done away with all CSI and benchmark based added value manufacturer to dealer back end money? That position is not consistent with what I was told. I am willing to stand corrected, and I am willing to also be corrected on the invoice/MSRP margin. The invoice I was shown on my deal in October of 2016 had about an 8% spread, which was confirmed by the data on Edmunds. But this may only be for Clubman and it may have changed.
Finally, I agree that many dealers will not move on the doc fees. However, these are not fees required by law and are, in fact, dealer packs which can be lawfully negotiated. The best way I know to deal with these fees is not to argue with the dealer but to negotiate an offset. Or, before the fees are ever mentioned by the dealer, to get a complete out-the-door final price in writing from the sales manager. I did this one time and when the F&I person printed the documents and the doc fee was there, she removed it when I pointed out that the final agreed upon drive off price the SM had approved did not include the fee. She didn't like it, but she did it.
You are so right about not walking into a dealer, "guns blazing," looking for and expecting to get a back of invoice deal. I have found that polite, professional, straightforward negotiations, done in good faith by a well-qualified buyer who is prepared to complete a deal on the spot, often do, indeed, result in superb deals. Sometimes these deals are, indeed, only netting the dealer back end profit plus a tiny amount of front end gross. That was the case with my deal, and the GM assured me he was not losing money on my deal which, after the rebate was folded in, took us well back of invoice.
#246
Join Date: Aug 2016
Location: California Native still livin' in LaLa Land
Posts: 2,162
Received 507 Likes
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383 Posts
Show me the Invoice!
Customer: I’ve calculated a deal I’m ready to say ‘yes’ to right now.
Salesperson: Alright….
Customer: I’ve calculated the invoice on this car to be $36,200 and I’m willing to pay $500 over that amount, less the rebate.
Salesperson: Your invoice numbers are way off…
Customer: I understand I might have miscalculated. My offer for this car is $36,700 less the rebate, plus tax and license. Take that offer to your manager.
Salesperson: Well, I’d be surprised because your numbers are off...
Customer: I see. Why don’t you get the actual invoice and we can see what the correct numbers are and go from there. If I’m way off, I may need to rethink my offer, but if we’re close enough I will still consider going $500 over invoice, less the rebate. Go get the invoice so we can see where we are.
So, if the customer is clueless or has been misinformed from internet forums about the correct invoice number, the dealer can straighten it out in about two minutes by showing the actual invoice. Then the customer can decide what to do next.
No blazing guns, no hard feelings. The customer politely and sincerely presents the dealer with an opportunity to sell a car. The dealer can play it straight or go into the crazy game.
Or the customer can get all up and crazy, which makes it miserable for everyone and reduces the likelihood of any sort of good deal happening.
No need to argue about whether or not back end money, or Santa Clause, exists. The dealer knows the numbers and knows what they can or can’t do on a particular deal.
The difference between what a dealer can do and what a dealer might be willing to do on a given day on a given deal … well, some days are better than others.
Customer: I’ve calculated a deal I’m ready to say ‘yes’ to right now.
Salesperson: Alright….
Customer: I’ve calculated the invoice on this car to be $36,200 and I’m willing to pay $500 over that amount, less the rebate.
Salesperson: Your invoice numbers are way off…
Customer: I understand I might have miscalculated. My offer for this car is $36,700 less the rebate, plus tax and license. Take that offer to your manager.
Salesperson: Well, I’d be surprised because your numbers are off...
Customer: I see. Why don’t you get the actual invoice and we can see what the correct numbers are and go from there. If I’m way off, I may need to rethink my offer, but if we’re close enough I will still consider going $500 over invoice, less the rebate. Go get the invoice so we can see where we are.
So, if the customer is clueless or has been misinformed from internet forums about the correct invoice number, the dealer can straighten it out in about two minutes by showing the actual invoice. Then the customer can decide what to do next.
No blazing guns, no hard feelings. The customer politely and sincerely presents the dealer with an opportunity to sell a car. The dealer can play it straight or go into the crazy game.
Or the customer can get all up and crazy, which makes it miserable for everyone and reduces the likelihood of any sort of good deal happening.
No need to argue about whether or not back end money, or Santa Clause, exists. The dealer knows the numbers and knows what they can or can’t do on a particular deal.
The difference between what a dealer can do and what a dealer might be willing to do on a given day on a given deal … well, some days are better than others.
The following users liked this post:
Raven99 (06-09-2019)
#247
Are you saying that MINI USA has done away with all CSI and benchmark based added value manufacturer to dealer back end money? That position is not consistent with what I was told. I am willing to stand corrected, and I am willing to also be corrected on the invoice/MSRP margin. The invoice I was shown on my deal in October of 2016 had about an 8% spread, which was confirmed by the data on Edmunds. But this may only be for Clubman and it may have changed.
Attempting to include those in your negotiation figures is a bit... troublesome. They're impossible to track and vary quite a bit from month to month, and sometimes we don't see them at all, depending on how the month has gone.
Also, we've spoken on the invoice/MSRP margin - 5% is generally where I draw the line in the sand on negotiations, sometimes 6% if it's a more expensive car. Once you factor in our back-end inventory costs (detail, PDI, gas, etc.) the margin decreases. This is no different at other stores. The cheaper models, like the hardtops are a bit tighter - 3.5-4%.
For example, I've taken 3.5% off a new 2017 Cooper hardtop before and been dead even on cost.
#248
Join Date: Aug 2016
Location: California Native still livin' in LaLa Land
Posts: 2,162
Received 507 Likes
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383 Posts
Any sales benchmark or CSI based bonuses are exactly that - bonuses. Let them be. Focus on the known - invoice and customer incentives.
Attempting to include those in your negotiation figures is a bit... troublesome. They're impossible to track and vary quite a bit from month to month, and sometimes we don't see them at all, depending on how the month has gone.
Also, we've spoken on the invoice/MSRP margin - 5% is generally where I draw the line in the sand on negotiations, sometimes 6% if it's a more expensive car. Once you factor in our back-end inventory costs (detail, PDI, gas, etc.) the margin decreases. This is no different at other stores. The cheaper models, like the hardtops are a bit tighter - 3.5-4%.
For example, I've taken 3.5% off a new 2017 Cooper hardtop before and been dead even on cost.
Attempting to include those in your negotiation figures is a bit... troublesome. They're impossible to track and vary quite a bit from month to month, and sometimes we don't see them at all, depending on how the month has gone.
Also, we've spoken on the invoice/MSRP margin - 5% is generally where I draw the line in the sand on negotiations, sometimes 6% if it's a more expensive car. Once you factor in our back-end inventory costs (detail, PDI, gas, etc.) the margin decreases. This is no different at other stores. The cheaper models, like the hardtops are a bit tighter - 3.5-4%.
For example, I've taken 3.5% off a new 2017 Cooper hardtop before and been dead even on cost.
#249
Join Date: Aug 2016
Location: California Native still livin' in LaLa Land
Posts: 2,162
Received 507 Likes
on
383 Posts
We don’t know what exactly the back end is, and it really isn’t our business.
What if the dealer is doing a stair step program and every unit they move gets them closer to more bonus money. Well, good for them.
Always glad to help by giving them the opportunity to sell me a car and move another unit closer to their goal. Glad to give all 10's on the survey. Win-win. Everybody's happy.
#250
If you check Kelly Blue Book, the person-to-person sale price of a used car is typically 150% of the dealer trade-in value. Unless you owe a whopping sum on a loan or you just can't sell your old car, the best route is to sell it yourself. Of course it's easier and more convenient to trade in, since you drive in with one car and drive out with another, but it can cost you thousands