- According to the National Automobile Dealers Association, used-car prices are already falling at the fastest pace since 2008 and have returned to 2010 levels. Inventories are getting bloated, encouraging many automakers to aggressively ramp up incentives (which hurt margins).

- The inventory-to-sales ratio is at the highest level since June 2009, and the time it takes a car to clear a dealer lot is up 20 percent from last year. Deutsche Bank noted that lower used-car values will weigh on new-vehicle purchases since most transactions involve a trade-in.

 

Given how the engine design screw up in the 2007-2010 turbo models has (I believe) negatively affected the resale of MINIs in general (guilt by association; all people hear about are the catastrophically expensive failures and generalize to the entire marque) ... well, it's neither a good time to be holding used inventory nor offering generous trade in value.

I do like my MINIs but the N14 engine and it's associated problems has seriously tainted the brand.

Well, setting that aside: unsold inventory is helpful to us buyers, if we aren't depending on a high-value trade to do the deal.

 

Just in case anyone thinks we're making bad stuff up about the traps and snares of F&I, here's a quote from another thread:

Originally Posted by Flyinace2000
Bought a 2017 last weekend. Tire and Wheel was $1800 and the interior protection was $600. I balked at the price and he said he could do both together for $950. I still passed, but wow.

 

They say sunshine is the best disinfectant. Transparency is the friend to commerce.

So why can’t car dealers play straight with customers? Why is it all about “controlling the steps to the sale?”

And must we hear one more time that the car business is the only business where the customer feels entitled to know the dealer’s cost?

Let’s talk about real deals – deals where hundreds of millions of dollars are at stake. When a leveraged buyout firm looks to purchase a business, they do a diligence protocol that makes a colonoscopy look like a walk in the park. Teams of auditors and lawyers examine every aspect of the potential purchase. They see ALL the numbers before they even talk price or pull out their check book.

And if you’ve recently purchased a television or a washing machine, you know all about price matching which assures a customer that they are receiving the lowest price available in the current market. You can even walk into Home Depot with a Lowe’s ad and Home Depot will match or beat the best Lowe’s price.

So, in car deals, what’s there to hide?

Please don’t be offended, but car dealers count on a mix of credit-challenged buyers, laydowns who will pay full price on the car and the add-ons, upside-down trades where the balance owed, plus a wee bit more can be folded into the deal, and customer fatigue – the unwillingness of customers to go through hours at a dealer to grind out a deal and then take that deal shopping only to have to go through it all again at another dealer.

And, of course, there is the step-by-step dance that lands the weary customer into the F&I box where all sorts of fast talk, pressure, and highly refined persuasion techniques and obfuscation come into play, resulting in customer’s buying more stuff than the ever planned on or need at high mark ups.

Too many cars chasing too few customers. Too many choices. So when a dealer gets a live one – either a walk-in or an internet inquiry, or maybe a referral from a web site, it’s all hands on deck using everything the dealer has to put that customer together and move that metal right now.

Repeat after me:
“I am giving the dealer an opportunity to sell me a car.”
“I am entitled to ask any question that will give me information I need to make a fully informed purchase decision.”
“I have the right to ask for a low, reasonable price and the dealer has the right not to sell at the price I am willing to pay.”
“I can always pay more, but not if I don’t want to.”
“If the dealer won’t answer my question, I can take my business elsewhere.”

When I walk into the next dealer, I can start the negotiations by saying, truthfully, “I just walked out of Honest John’s Car Lot because Honest John wouldn’t tell me his cost on the tire and wheel protection package. So, before I buy a car from you today, which I am prepared to do, tell me, what is your cost on the tire and wheel protection package?”

Trust me. If my leveraged buyout buddy asked the controller at a company he was thinking about buying a question about cost, he would get a straight, verifiable answer, or he would walk away from the deal in a New York second.

So let’s have no more of this complaining that customers demand too much transparency from car dealers. After all, what’s there to hide???

 

Quick question about Leasing.

I started to chatting with the dealer on an existing inventory car. I was going to buy but i decided to look into leasing.

so should i finish negotiating the price with them or do i let them know that i've changed my mind from considering to buy to lease?
should i not tell them i want to lease until after i test drive it and seen it in person?

i have never lease a car before so i don't know all the right tricks...

thanks

 

Leasing is a good option if you don't drive a lot of miles per year, if you keep your cars in excellent condition, and if you enjoy having a new car every 3 years. You also need good credit to get the better lease deals.

First, educate yourself regarding the mechanics of a lease. Try http://www.leaseguide.com/ for general information. They also have good ideas about how to negotiate a lease.

The main thing is that a LEASE IS JUST LIKE A PURCHASE.

You negotiate the selling price just like you do if you are buying the car.

Also, on this thread, see post #7 about leasing and read the posts about negotiating and the tricks dealers play.

Finally, be sure to visit MINI USA and look at the current lease offers.

Take your time. Keep us posted on your progress. Good luck.

 

Thanks! After some calculation, i think i will buy instead and i think i have more freedom to let it go if i need to so i am not locked down to a 3 years lease etc.
btw- this is a second car (my fun car) so i have more flexibility. i also negotiated down from 31,9 to 29,5 on a 2017 Cooper S hard top 2 door with lots of options loaded. i hope i did a good job LOL

 

Your decision to purchase at a 7.5% discount from MSRP looks like a solid deal.

Does the discount you have been offered INCLUDE any incentives or is it a straight dealer discount?

The reason this is important is you want to make sure any manufacturer incentives further discount the 7.5% discount the dealer is offering, if that's the case.

 

Lots of discussion on BMW boards about how incentives are being concealed.

Unlike the old way, where all the rebates and customer incentives are published for all to see, in the new model dealers will get to decide when and how incentives are applied -- incentives that are not always general public knowledge.

In some cases sales associates aren't given all the info -- only sales managers know all the ways incentives can be applied. So, in this new model that may become a reality for MINI shoppers, The Desk will hold all the cards, and will not be required to always reveal every possible discount -- the new model gives dealers discretion regarding when all the possible goodies are offered.

MINI may be moving to this model -- less transparency and reduced ability for shoppers to arm themselves with detailed knowledge about all available incentives before engaging with dealers. Ugh!

If everything available to the dealer in the way of incentives is not known by the customer on the front end, this changes the equation, and the negotiating strategy.

So, let's say a customer goes to a dealer and is offered a discounted price.

Is $2,000 off of MSRP a good deal?

Well, if the dealer discounts the car by $2,000 AND there is ALSO incentive money that will increase the customer's savings, this might turn out to be a great deal.

ASK QUESTIONS.

Are there any manufacturer-to-dealer incentives on the car I'm interested in that can be applied to lower the selling price?

Have you included EVERY available incentive in this offer? Please list them for me and please write down on the deal sheet "all available offers have been applied."

Then, if the customer has succeeded in getting this documented, the next area to be explored is:

"I see how you've applied the manufacturer incentives. Thank you. Now that we've got the manufacturer's participation out of the way, how much is the dealer willing to discount the car?"

BE CAREFUL. Dealers are going to represent manufacturer incentives as discounts. Yes, the incentives, if applied, will result in a discounted sale price of the car -- BUT THEY ARE NOT DEALER DISCOUNTS.

This is not to say that customers should get into deep philosophical discussions with car sales people about the meaning of different discounts. But savvy customers want all the incentives available, PLUS a discount off of MSRP from the dealer.

Ain't getting any easier. Many will say it's too complicated.

That's what BMW/MINI is counting on.

Just know, the deals are still there. Just a bit more tricky to get.

 

Okay, so let's say MINI starts putting more $ "in the trunk" where customers can't see it and dealers get to control it -- as opposed to offering traditional rebates and up front customer incentives.

Don't know that this is going to happen, but that's the trend as manufacturers search for ways to counter the effects of so much information on pricing being made available to customers on the internet.

What to do??

One option is, instead of doing all the clever sequencing of questions or trying to out-fox car dealers, just LOW BALL.

Ask for 12% or 15% off of MSRP and, if you want add-ons like extended warranties, counter-offer with half of whatever the Finance person first quotes.

Unlikely, even with all the possible hidden money, that 12% to 15% discounts from MSRP are going to happen very often, if ever. Unlikely that 50% discounts will be granted on warranties and such.

But if customers can't know what discounts are available, the only recourse is to either take the deals that are offered and don't worry about it or start the price negotiations as low as you can and test the bottom by being willing to walk if they can't come close to your low ball offers.

I have never before been an advocate for proposing rediculous low ball offers. But I've always been willing to do my homework and get the info that was available to formulate a fair, low offer.

If I can't get the info up front, then I'm flying blind and the only way to find out where the bottom is is to LOW BALL and see what happens.

 

Salesperson: So, have you got a payment range in mind?

Customer: I was hoping to keep the payment at around $350.

Salesperson: Threeee… fifty. Up to?

Customer: Well, I’m hoping to stay in that range.

Salesperson: Up to???

Customer: Well, I might be able to go as high as $375, maybe $380 if I had to.

TILT!!!

$380 is $30 MORE than $350. On a 60 month loan, $30 a month is $1,800 more that the customer just put in the dealer’s pocket. Because if a customer says he/she can go as high as $380, if they had to, they’re gonna have to because the dealer now knows they will.

So, let’s try again.

Salesperson: So, have you got a payment range in mind?

Customer: Let’s focus on the final selling price of the car I’m interested in. Once we agree on the right price, the payment numbers will take care of themselves. Let’s take a look at the invoice on the car and we can go from there. Okay?

Hey, it’s your deal. All the dealer gets is the opportunity to sell you a car. Right?

Keep it simple, but keep the ball in your court. No matter what the dealer is “up to.”

 

I asked them and they said the discount applied all together.

anyway, after years and years of looking I finally have a mini cooper! its been fun so far! i feel like i am finally part of the club now! haha

 

Welcome!

 

Just sign these documents and the keys are yours and you can drive it home now.

CAREFUL. Does one of the documents you are signing contain “subject to lender approval” language??? This is legal language that basically says you don’t have a done deal until the lender says you do AND the dealer can claw the deal back if the lender doesn’t approve of the deal as originally written.

DO NOT ACCEPT THE KEYS TO A NEW CAR UNTIL YOU HAVE WRITTEN CONFIRMATION OF LOAN/LEASE APPROVAL – APPROVAL AT THE RATE AND TERMS YOU HAVE AGREED TO AS PART OF YOUR DEAL.

This is especially important if you have anything below a top tier credit score.

Anything above a 675 should make a customer eligible for MINI’s best rates. Certainly 750 will get you there.

But if a customer is not in the Elite or Super Elite bracket, there is always a possibility that, if the customer takes delivery of a car BEFORE a lender approves the loan/lease at the exact terms agreed upon in the deal, the dealer may come back a few days after delivery saying they need a larger down payment or they need to bump the interest rate, or they need to change some other terms of the deal.

If this is of any concern to you, get written lender approval of your deal AS WRITTEN before you motor.

Don’t think there aren’t dealers who use the “subject to lender approval” clause in contracts to extract more loot from customers, because there are.

 

Negative Equity, Upside Down, Buried. This is when you are trading in a car and you owe more on it than it is worth or an insurance settlement on a totaled car is less than is owed on the car loan or lease liability. Customers who finance car purchases with little or no down payment and opt for very long-term financing are often upside down for most of the loan term.

If you’ve got decent credit, noooo problem. The dealer is here to help. They can “roll” your negative equity into the loan on your new car. The Finance Department people at the dealership have a list of lenders they can use for these sorts of situations. Some lenders will buy loans at 120% of the new car’s MSRP, and sometimes even more.

HOWEVER, the customer pays for the privilege of getting buried deeper in debt on a negative equity rollover loan. Interest rates are usually higher on rollover deals. Dealers often discount the new car less because they know you’re in a bind. Your credit score might take a small hit after the new rollover loan is funded.

AND, since the moment a new car is driven off the dealer’s lot for the first time it loses value, if the driver of that new car financed negative trade equity as part of the deal, that customer is in a double-negative equity swamp. The new car drops in value and may be immediately worth less than the amount owed PLUS that new car is towing the negative equity rollover debt behind it!!

To be fair, there are situations where a negative equity rollover might be necessary. If half way through your loan your car is totaled by your insurance company and you didn’t add GAP insurance, the difference between what is owed on the car and what insurance will settle the claim for can leave you upside down and you will have to deal with that negative equity when you go to replace the totaled car. (TIP: If you can’t easily afford such a hit, check with your primary auto insurance company about GAP before paying too much for dealer GAP. Usually maintaining GAP for the first 3 years of a 5 year car loan covers the period of greatest risk. And most leases come with GAP. If you do buy GAP, MAKE SURE it’s “walk away” coverage, meaning the insurance company will cover ALL of the outstanding loan balance not covered in a totaled car settlement so you can walk away from the loan without liability.)

Or, let’s say you just landed a very well-paying, secure job and you need a new, reliable car now but you are upside down in the old beater you’re driving. And you know that the big bucks rolling in from the new job will get you well in a hurry – but you need the new car now. Fine, if it works out as planned, you can get yourself un-buried within a year or so by paying off big chunks of your rollover loan, and, in a few years you will have solid trade equity and, hopefully cash in the bank when you’re ready for that new car smell again.

In any case, a BIG mistake many upside down buyers make is to buy too much car, financed with loans that are too large and too many years long. If you find yourself upside down in a negative equity position and, for whatever reason, you truly NEED to replace your car, consider a CPO warrantied lease return or a less expensive, very reliable new car that you can pay down quickly to get out of the negative equity hole.

In most negative equity cases that car dealers see every week, its roll over, get more deeply buried, gonna stay broke and die broke.

We all make choices. Choose wisely.

 

A simple deal has many components and it can get complicated.

Let’s see what we can do to keep it simple while keeping all the numbers in front of us.

Buying or leasing, new or used, here’s the checklist:

• MSRP (new) or ASKING PRICE (used)

• Estimated Invoice (new) or Wholesale Blue Book (used)

• Agreed upon negotiated selling price of the car before any additional options, extended warranties, or other add-ons and BEFORE REBATES AND/OR INCENTIVES ARE APPLIED

• Agreed upon negotiated selling price of any additional options, extended warranties, or other add-ons

• Agreement as to how any rebates or other incentives are to be applied (And a complete list of any and all rebates/incentives, including the dollar amounts for each that are to be included in your deal and deducted from the above “agreed upon negotiated selling price of the car before rebates and/or incentive are applied.”)

• Agreed upon dealer added fees such as document fees, or wire fees, or anything else that’s not a government fee or is not on the MSRP or is not something else YOU are buying from the dealer as an addition to your car (such as extended warranties or stuff the dealer is putting on your car)

• All required government fees and taxes

• Agreed upon OUT THE DOOR TOTAL PRICE after ALL OF THE ABOVE are factored in

• Trade value (if you’re trading in a car)

• Interest rate/lease money factor

• Length of loan/lease (If it’s a lease, miles allowed per year and cost per mile of any overage and residual value in percent AND in dollars)

• TOTAL Down payment/drive off (and an ITEMIZED breakdown of each component of the total drive off payment)

• Monthly payment amount and remaining loan/lease balance (AMOUNT OF EACH PAYMENT AND TOTAL AMOUNT YOU WILL OWE AFTER THE DOWN PAYMENT/LEASE DRIVE OFF and, if applicable TRADE IN CREDIT, are all applied)

• Any Other Promises or Terms the dealer has agreed to (GET THEM ALL IN WRITING)


So, after all the wheeling and dealing is done, BEFORE YOU SIGN ANYTHING, pull out your check list and write down the amount for EVERY ITEM listed above.

If the numbers look and feel right to you, motor.

If the numbers don’t look right, or, upon reflection, you need to renegotiate ANY aspect of the deal, know that everything can be revisited until you are satisfied that the deal will work for you. Then you sign and motor.

REMEMBER, DON’T DRIVE A NEW CAR OFF THE LOT UNTIL YOU HAVE CONFIRMATION OF LENDER APPROVAL OF THE DEAL YOU AGREED TO.

IF YOU HAVE FOLDED EXTRA COSTS INTO YOUR LOAN OR IF YOU CAN’T COMFORTABLY ABSORB PAYING FOR THE DIFFERENCE BETWEEN WHAT YOU OWE AND WHAT INSURANCE WILL PAY IN THE EVENT OF A TOTAL LOSS, ASK YOUR PRIMARY INSURANCE COMPANY ABOUT ADDING GAP COVERAGE – USUALLY BETTER TO GET GAP ADDED TO YOUR PRIMARY INSURANCE RATHER THAN PURCHASING EXPENSIVE DEBT CANCELLATION GAP FROM THE DEALER. PRICE SHOP AND COMPARE COVERAGE BEFORE BUYING GAP. IF YOU LEASE, CONFIRM GAP IS INCLUDED IN THE LEASE AT NO EXTRA COST.

 

The method of payment should not influence the total out-the-door price of a car deal – but, if a customer isn’t careful, method of payment can and will influence the final numbers.

Some rebates and incentives are only applied if the car is leased or financed through a special dealer program. And, of course, dealers make money on providing financing of any type so, an “all cash” offer is not music to the dealer’s ears and may not be the most advantageous way to pay for a car purchase.

When the salesperson casually inquires, “How were you planning to finance this purchase?” or, “What sort of down payment were you planning on making?” or “Were you thinking of buying or leasing?” the customer’s best response would be along the lines of, “Let’s nail down your best discounted price for the car and then we can talk about incentives and financing.” This strategy separates the dealer’s discount from any other price reductions that may be available through incentives. And, this is where it gets tricky.

EXAMPLE: A dealer agrees to sell a car for $2,500 below MSRP. What the dealer didn’t reveal is that what is really happening is the dealer is discounting the car by $1,000 and using a $1,500 incentive to increase the “discount” further. All the customer has been told is $2,500 off of MSRP and the customer has agreed to this deal. Then the customer pulls out his/her check book and says they plan to pay for the entire thing in cash. Fine, unless that $1,500 incentive requires the customer to finance the purchase through a special incentive program. It happens.

So the dealer suggests that the customer finance. The customer is thinking, if there’s no prepayment penalty, they can repay the entire loan in 90 days, thus snagging the $1,500 incentive for a very modest interest charge. (NOTE: While financing to snag an incentive and then paying off the loan in 90 days is a strategy that works, it may result in a “charge back” to the dealer, which is not the customer’s problem IF THERE IS NO PREPAYMENT PENTALTY.)

But what if the customer has applied for a home loan and doesn’t want another loan showing up on the credit report? Or what if there is a divorce going on? Or what if the customer wants to pay cash and doesn’t want any aspect of the transaction showing up on a credit report for any number of private reasons?

So, the customer can take the finance offer, if their credit qualifies them for it and if there is no prepayment penalty when the customer pays off the loan in a few months. Or the customer can hold firm, whipping out the approved deal sheet that clearly states the car is to be sold for $2,500 off MSRP and the customer can simply say, “We had a deal at $2,500 off, here’s my check.”

In a perfect world, there would be more transparency. The cash customer would state his/her intention to pay cash and the dealer would lay out the advantages and disadvantages. And the basis for all so-called “discounts” would be transparent from the start. The dealer would say, “It’s $1,000 discount and, if you lease or finance, there’s an additional $1,500 manufacturer’s credit that will net a $2,500 discount before interest charges and before the $925 lease fee if you lease. You choose.”

But manufacturers are getting tricky with hidden “trunk” money and dealers are aligned with the manufacturers in a complex matrix of regional and seasonal and conditional incentives that are impossible to uncover if you’re not deep inside the dealership’s bookkeeping. And, before they can offer a customer a deeply discounted price, the dealer will need to know if the customer qualifies for the loan/lease that gets the incentive.

Thus, how a customer pays for a car can, indeed, influence the price paid. And having an honest conversation about how to get the lowest total price is not something very many dealers want to do. So, if getting the lowest possible out-the-door price is a goal, there are evermore moving parts to manage as the deal is put together.

 

Okay, now we’re getting down to deep inside baseball.

A few years ago several manufacturers focused on an incentive concept known in the industry as “stair step” incentives. Instead of just advertising rebates to retail customers, manufacturers worked directly with dealers by offering sales incentives based on volume. Often these systems are model-specific. Some dealers love it, some hate it. But it refuses to die and we never know which manufacturers are using it, or when. But when it’s in play, some customers can get real lucky for no reason other than they are at the right dealer on the right day of the right month.

The reason the system is called stair step is because it’s a tiered system – like walking up stairs. Sometimes the line sales people know none of the details but they are told if they sell x number of F56's that month they will get an extra spiff -- either cash or some other incentive.

Let’s say a specific dealer is assigned a sales quota of 50 F56 MINI’s for the month of April. If the dealer books 50 F56 orders in April, the manufacturer will send the dealer a bonus payment of, say, $250 per car. 50 cars multiplied by $250 = $12,500 in extra bonus money.

But it gets so much better for dealers who exceed their quota. The stair step program may pay $250 per car for the first 50 cars and then add an additional $250 for every car over 50, for a total of $500 extra for the dealer for every car sold from car number 51 on. Or, in some stair step schemes, if the dealer hits half the quota during the first half of the month, there may be an additional $100 for those first 25 cars, on top of the $250 for every car if the 50 car monthly quota is met, plus the double bonus on all cars over the quota.

Where this gets interesting is, let’s say a customer happens to visit a dealer on the 14th day of the month and the dealer is two cars away from hitting their mid-month bonus. The dealer is looking at an extra $100 for the first 25 cars sold, or $2,500 if they sell 2 more cars, PLUS they are almost half way to their goal of an extra $12,500 if they manage to move 50 cars that month. And if they can keep things moving and get into the double bonus, by climbing all the steps on this bonus stair case, they are looking at a fair amount of extra money for the dealership if they can move more than 50 F56’s. And this stair step money is ON TOP OF all the bucks they get for writing loans and leases, and all the CSI survey money, and the standard back-end bonus money, and, and, and….

So let’s say the customer who walks in on the 14th of the month has calculated estimated invoice and is armed with all the current rebate and retail incentive info and that customer says, just for the hell of it to see what happens, “If you’ll sell me this F56 for $1,000 back of invoice plus give me the rebate and the low APR financing and sell me the extended warranty at your cost plus $50, I’ll do the deal right now.” This customer knows nothing of stair steps or anything else. He’s just taking a shot in the dark, hoping for an insane deal.

Well, on April 1st, the dealer would have said to this customer, “Very funny. April Fools to you too.” But on April 14th, the sales manager might walk out from the sales tower, introduce himself to the customer and say, “Here’s what we can do if you are ready to go right now. We will meet your price and throw in weekly car washes and you can go into our boutique and select a cap or coffee mug or T-shirt of your choice and we will deliver this car to you this afternoon if you like. And if you will honor us with all 10’s on the survey you will receive, and if our records show you did indeed give us all 10's, you can come on in, with the gas tank in your new MINI on empty and we will fill that tank for you, and wash your car, for free.”

Sometimes stair steps can be a stairway to heaven. You never know. But the dealer does. This helps explain why one person is lucky to get a $1,500 discount off of MSRP and another customer, shopping the same dealer for an identical car, but on a different day or a different month, might just ride the stairway to heaven and drive off with a killer deal on the MINI of his dreams. Ain’t no tellin’. But it happens.

 

In the previous post the stair step incentive process was examined. The take away is that, if such a hidden program is in effect and a customer hits it right, insane deals, usually unavailable, can and do happen.

Like crack, stair step incentive programs are highly addictive and can easily lead to a death spiral. Here’s why.

First of all, if a high volume dealership is willing to roll the dice to hit a big volume bonus, the cut-throat pricing that dealer may allow will put extreme downward price pressure on any other neighboring dealers who must price match or lose business. And while the high volume dealer might be willing to make a bunch of low or no margin deals to hit a goal, because hitting that goal might mean a six figure bonus payment, the lower volume dealer a few towns away is going to have to settle for crumbs.

If the smaller dealer matches the big guy’s deals, and even manages to hit the goal, the bonus check will be smaller due to the lower total sales volume, and the risk for the small dealer is that, in order to compete with the high volume guy, too many cars will be sold at little or no profit. And if the low volume dealer fails to meet the sales goal, it could be devastating, whereas the big volume dealer can afford to take a hit if the goal isn’t reached, or the big volume guy can afford to pull out all the stops to hit the goal, even if it means selling a bunch of cars at ridiculously low pricing.

With all of this going on, consumers start to learn about the great deals their friends and neighbors got and they start to walk into dealerships asking for the same killer deal their neighbor bragged about. It’s pretty darned hard for a salesperson to look a referral customer in the eye and say I can’t do that deal – a customer who came in saying, “You sold my neighbor Joe Smith a car last month for $1,000 back of invoice with an extended warranty at $50 over your cost and you gave him a coffee mug and free car washes and an extra free tank of gas and if you’ll do the same for me I’m interested in buying a car from you today.”

When I did the amazing deal described in post # 169 of this thread, the GSM told me to tell all my friends how well I was treated at his dealership but to please not disclose all the numbers of the deal he gave me for at least a year. He said my deal could not be replicated and until the last of the models I bought was sold out, he didn’t want to have to explain to a new customer why he couldn’t match what he gave me. Fair enough. But one sees the problem.

So, it never hurts to ask for a crazy deal. Sometimes one might be handed to you on a silver platter if the timing is right. But all of this does raise the nasty issue of what the true cost and the true value of a new car really is. Is it invoice? Is it MSRP? Is it less than invoice? One is reminded of when Payton Manning was asked the meaning of “Omaha.” He said, “Well, it’s a pass, or it could be a run…”

All I can say is, pick the middle or end of month, or end of fiscal quarter, know the numbers as best you can, start low, be ready to walk, and see what happens. And don’t trip on the stairs!

 

Living well in modern society involves some amount of risk management. The consideration of whether or not to purchase protection products offered from a MINI dealer falls into the risk management rubric – and the variables differ among individuals.

Category 1 – The self-assured and self-insured. This is a small group who can easily write checks for any amount required to maintain or repair a car. Many people in this category purchase extended warranties, scratch and dent coverage, tire ‘n wheel, and lease protection simply because the cost doesn’t matter and their view is “one less hassle if anything happens. I’ll just go to the dealer, tell them I’m covered, and have them fix it.” Or, the other extreme in this group thinks, “I can easily afford anything that comes up IF it comes up. The dealer knows I’m a good customer and they’ll take care of me at reasonable cost. And, if nothing comes up, then I’m that much ahead.”

The only problem with “the dealer will take care of me,” for Category 1 people is, as we all know from the various tales told by fellow motorers, not all dealers are created equal and sometimes the MA who sold the car ain’t there no more when one returns to the dealer with an issue. However, Category 1 folks are usually a confident bunch, accustomed to having things go well in their lives and their expectations are usually met, sooner or later, and savvy dealers understand how to take care of those folks.

Category 2 – Peace of minders. These people could probably afford to self-insure for most reasonable warranty risks but would prefer not to have to think about it one way or the other. Given a reasonable (in their minds) cost, they will often purchase protection add-ons just so they don’t have to worry if a repair or lease-end charge of a few grand pops up. This group is a target rich environment for Finance Managers.

Category 3 – Make me an offer I can’t refusers. These people would prefer to have maximum protection but don’t want to pay for it. Skillful manipulation of finance numbers or rock bottom pricing will often snag these folks.

Category 4 – Refusers. No matter how compelling the offer, these folks are certain they are being ripped off and, on principle, won’t buy add-ons, unless they’re thrown into a deal.

Category 5 – Toyota drivers who want MINI’s but don’t fully grasp the MINI ownership concept, with all its accompanying quirks and aggravations. They want a car that starts, runs, gets 50,000 miles from a set of tires, and they can gas and go until it dies. These folks are often better served by driving a Camry until the wheels fall off. They are part of the “everybody wants to go to heaven but nobody wants to die” cadre of people who want the “different” car but don’t understand that the ability to absorb the costs and responsibilities of ownership of a MINI is part of the ‘joy’ of ownership. They care about every dime, not because it’s their approach to life, but because they have too.

So, for anyone, in any category, are protection plans a good value? At full list price, probably not. Why? Because too much of the full list price cost isn’t purchasing protection; it’s putting extra dollars into the dealership coffers.

Having said that, in many situations, for peace of mind, reduction of hassle, prudent financial risk management, or other existential factors, specific protection packages may be of solid value, at the right price.

The question is, at what price? And to this question, there is no single correct answer. One would think, for a modest, fully-disclosed, reasonable margin, various protection packages might be items MINI purchasers and leasees would like to have an opportunity to consider. NOT at the end of a lengthy sales negotiation, NOT in a high pressure sales environment, NOT without the ability to price shop and product compare in a leisurely fashion…

What would be great is if, for example, the MINI USA web site had a complete listing of all MINI sponsored protection products, along with their suggested retail prices. And if each dealer listed on their individual web sites all the products they offered, so a customer could price shop and compare 3rd party products with MINI products. This would make shopping for protection add-ons less fraught and would give shoppers an opportunity to start thinking about costs and product features, just as we do when shopping for the cars and doing builds on the web site.

Okay, you’re laughing. Fine. But ask yourself, why is it done the way it’s done? Could it be that dealers don’t want customers to shop for price and don’t want customers to be sophisticated consumers of protection options?

And what IS a reasonable profit for a dealer to make on a protection add-on? A hundred bucks? Two hundred bucks? Or, as is the case with many regional and national dealer chains, where they have F&I add targets per unit of $1,500, should add-ons be viewed as legitimate vehicles for clawing back margins that have been reduced to get customers to agree to buy cars? And you can bet that, just like with stair step plans for selling cars, finance people have lots of incentives to sell more add-ons at high dollar margins.

In the end, we can all agree that protection add-ons have value for some at various price points. I hope we can also agree that, in most instances, the way they are explained and sold is not usually in the customer’s best interest.

Can’t wait to hear comments!

 

I'm of the opinion that people should figure out the total dollar amount of a car they can afford then subtract a certain percentage from that to cover future contingencies and buy a lesser ride. Rarely happens I bet, but that's how I'd do it if I was a paycheck to paycheck guy. I've never bought more than I could handle, except maybe that 635 CSI back in the long ago past. Had to sell that baby to fund a new business.

 

Good points.

Let's say a dealer offers tire 'n wheel protection for $1,250 and, after a bit of back-and-forth the final offer is $895. For some, this is a more than fair value, especially if it's a run flats in New York City deal on a 36 month lease.

Now perhaps a better way to go is, instead of paying $25/month extra on the lease, or $895 cash up front added to the drive off, the customer could put aside $25/month in a bank account and self-insure. If he wins and has, say, only one wheel thrashed, he's ahead. If no tires or wheels go bad, he's $895 plus a little interest ahead. But if he manages to mangle 2 wheels and tires, he should have bought the insurance.

To me, the main point remains, risk management strategies vary among individuals based on risk tolerance, convenience, peace of mind, self-discipline, and on and on.

My beef is the way the add-ons are sold, using high pressure word tracks at the end of what is often a fatiguing car purchase process.

I just don't like the idea that the products are marketed as "insurance" and "protection," when their primary purpose is to fatten the dealer's bottom line. They may, in fact, offer good value at the right price. Me, I like to shop, just like I do for my cars. And it takes a little more time, and a few more phone calls than the friendly F&I person wants to give me.

 

Great point, but few people are actually this responsible.

The average person can't afford a $400+ blow to their savings account that a tire (that's not counting the wheel, either) blowout will incur.

And of course, you may ask why they're buying a car they can't afford... well, that's their decision to do so. Usually I'm not privy to such financial details, so I'm not inclined to offer any input.

However, when a customer is looking to roll a large amount of negative equity into a vehicle purchase (usually a result of making one bad decision after another), I usually do provide my recommendation to ride the loan out for a while and pay things down instead of rolling the debt into more debt. Eventually depreciation curves do flatten out.

While it may cost me a sale from time to time, I won't let this job cost me my integrity.

 

Always appreciate your input and informed perspective Zillon

Regarding negative equity, if you haven't already, please check out post #215 on this thread for my take, which I summerize by saying, "In any case, a BIG mistake many upside down buyers make is to buy too much car, financed with loans that are too large and too many years long. If you find yourself upside down in a negative equity position and, for whatever reason, you truly NEED to replace your car, consider a CPO warrantied lease return or a less expensive, very reliable new car that you can pay down quickly to get out of the negative equity hole.

In most negative equity cases that car dealers see every week, its roll over, get more deeply buried, gonna stay broke and die broke.

We all make choices. Choose wisely."

 

Don't really see that kind of car salesperson anymore, you must be Unicorn amongst your fellow MA's. My wife is in real estate and does similar to you, only wants client to get the right house as opposed to just selling them something.