First off...I'd like to talk about big business in general, but I've already got a talking to about politics so I'll have to steer away from talk of profits and the like.

My point was that a dealership that has a statewide monopoly on a product would be pretty underhanded if they charged a mark-up. Our dealership in WI didn't and I'm greatful for it, but lets say they did, and so did the ones in the surrounding states. Aside from flying, or paying for shipping (which would almost negate the markup in most cases) your options are severly limited.

I disagree that 'state-wide monopoly' is a misused term when there is only one provider in the entire state. I can't really think of what else to call it *shrug*

While I do agree that in today's economy everyone has a 'choice' as to where they buy their car, I would think that it would be reasonable to assume that not everyone has the time, or extra money to look "at cars in several states, at distances as much as 700 miles one-way". To assume that everyone has that option is a bit short sighted the way I see it.

Also, I'm not suggesting there should be a law stating Mini dealers can't mark-up the price of their cars. They can by law do whatever they like (for the most part). What I am suggesting is that it would be great if all companies followed the lead of some of their fellow companies and stopped dealer mark up on their own.

It's not as if dealerships would go out of business if they stoped their mark-up on cars (Im talking about their preimum mark up, not the mark up from invoice to MSRP). They make plenty of money to 'pay the bills' w/o marking up cars.

 

Your options are only as limited as you are willing to make them. You don't have to fly, or pay shipping. You can take a bus, train, or just get in the car you have, and drive to the car you want to see.

And to assume that I have "the time or extra money" is not only short-sighted, but presumptuous. You'd better bloody well believe there were sacrifices involved of both time and money. I'm not someone with suitcases of cash that I sit around and count during my "spare time." I've worked plenty hard for what I have, and don't appreciate your implication one bit.

I choose to make the time, and invest the resources in doing good, thorough, and wide-ranging research, because a car is a substantial investment of time and money on several fronts.

Furthermore, your "assumption" that not everyone is "able," if you will, to do the same underestimates the capacity for individuals to make a choice. Once again, in a free market, the consumer who choses to make an investment of time and effort on the front end will come out ahead in the long run. To set up a business model on the "way you see it" is to be doomed to failure.


Again, that's not the way a free market works, nor should it be. Dealerships are independent entities, and set their own prices. To want them all to follow someone else's lead (whoever that would be) actually diminishes the capacity for competition in the market, and would verly likely result in higher prices, instead of lower ones. After all, if everybody's charging the same price, what is there to stop them from all deciding to charge more?


Have you even looked into the term "profit margin" as cited by another poster in the thread? Once again, we have a too-simplistic assumption on how a business works, whch reeks of a lack of direct experience or understanding. People just figure, "They must make a lot of money, they're a car dealership! They can drop their prices!"

Have a look at the Edmunds breakdown of the MSRP of a 2006 MINI, versus the cost they actually pay:

http://www.edmunds.com/new/2006/mini....html?action=1

The difference in the money the dealer pays BMW for a car, versus the MSRP is only - yes, I said only - $1663! That's for the entire car. And most dealerships don't sell as many cars per month as you might think, so even the monthly totals aren't a windfall by any stretch.

When you look at actual figures, a markup of a measly $500 isn't that much at all. Even $2500 isn't that exorbitant. For dealers in far-flung, relatively small markets, it may cost them more to operate the dealerships, and bring the product to you, than it would in a major metropolis with a great deal of shipping and truck traffic. For those in major cities, or places with high taxes levied on businesses at every turn (those eeeeeeevil West Coast dealers, for instance), it absolutely costs more to stay in business, making mark-ups not only more likely, but more necessary.


I'm sorry, but while your points may seem all warm-and-fuzzy in an idealistic way, when you look at the economics and methods by which a free market functions to the advantage of a consumer, they just don't work.

And again, as with any system, you get out of it what you put into it. The key to getting a better price isn't to force it through artificial market controls. They key is to be a better participant in the marketplace. The more research and homework done ahead of time, the better prepared you will be to work with (as opposed to against) a dealer to get a better price for yourself.


I think one of the prime differences in my view, versus those who don't - or won't - understand it, is that I believe individuals have the ability to educate themselves, and navigate the market more shrewdly. Through those efforts, they improve the market opportunities for everyone.

Meanwhile, some seem to think that people are by default, weak, powerless, and unable to make the same efforts that I have, and that others do, every day. Instead, they think the market has to be manipulated, and dealers controlled, to "help" those who simply don't want to put the same effort into their shopping.


That's a pretty sad way to view things, and actually rewards the less dedicated car enthusiast, as opposed to those who are more serious about them.

DW

 

Would all dealers make enough money selling every car at MSRP? To assume that is a bit short-sighted the way I see it. Just as BMW/MINI should be wary making assumptions concerning the circumstances of everyone who may want a MINI, you shouldn't make assumptions about the circumstances of the dealers. Lots of variables exist that would cause differences in selling prices at different dealers around the country. Depending on where they do business, dealers pay different amounts for their facilities, maintainence of facilities, labor, advertising, their stock of cars to sell, taxes and a host of other costs. They're also making a decent enough profit to provide motivation to get up and go to work in the morning to sell us our cars.

If you don't want to pay a markup on a car, you don't have to. The options have been recited ad infinitum: Fly out of state and drive it back. Have it shipped from out of state. Find a loan for the difference. There are lots of opportunities for anyone who wants a MINI to have one if they're willing to work for it. It's not the dealer's responsibility to make sure a MINI is available to everyone who wants one. If you don't have the time or extra money or motivation or whatever to go out of state to buy a MINI, or pay markup, you can't afford one.

If the businesses that sell cars at a markup are losing money because nobody buys their cars, they might lower their prices. Or, they might just have to go out of business because it's not economically feasible to sell cars so cheap.

Bottom line; I think it's a mistaken assumption to say that dealers in the most expensive parts of the country in which to do business are able to survive selling cars at MSRP.

 

Wow, Dr, Wha. You said exactly what I was trying to say, in more (but better) words, and you managed to beat me to the punch.

 

First, define enough money...

Second, few dealership owners of any brand of car are fools. Some may engage in questionable business practices, but they're not fools. None of the dealerships bought their franchise on a whim.

You can bet that business plans and market analsys were done by the potential MINI dealers. They knew walking into this deal what the potential was to turn a profit on these cars, and if they thought that they would have to sell the cars at a loss, you can bet they never would have plunked down the cash.

Along the same lines having to sell cars at a mark-up in order to turn a profit just isn't a sustainable business model. At some point demand slackens enough that the market just won't put up with the mark-up any more, and to open a business with the plan that the only way you're going to survive is to charge a markup is foolish. At some point demand will slacken (as it has in most of the country) and your pricing will be the death of your business. If your business can't survive selling at MSRP you're toast. And don't forget a mark-up is different than a margin. The MSRP price includes a margin which is the money the dealer makes off the sale. The markup is what a dealer adds to the MSRP strictly to inflate their margins.

These dealers are selling over MSRP not because they have to... But because they can, plain and simple.

 

Ooh ooh! the emotions that Capitalist Market Economics 101 can generate

Ooh ooh! How this thread morphs forth into the unknown! One of NAM's best ever

 

Thanks much!

Your post actually covers another point I would have made (eventually!), that if you can't afford the legwork, you can't afford the car. So kudos to you as well.

Sure. You're correct in everything you say...

But so what?


Doing so isn't illegal, or even wrong. If the market will bear the mark-up - and with the MINI brand, it has clearly shown that it will - so be it. That's the market. As you have astutely noted, when the market changes, the prices will indeed be adjusted. But businesses are not in business to be charities. They are in business to make money, and provide a living for the owners and employees.

Absolutely nothing you've said (nor anyone else, for that matter) shows in any way how it's "dishonest" to make a profit, or why legitmate dealers, doing a legitimate business, should be boycotted or punished in some way, simply for doing a thriving business selling a hot commodity. If you don't like the price at one dealer, take the time and make the effort to go somewhere else, or just go buy another car. Nobody is holding a gun to someone's head, forcing them to buy anything from BMW/MINI.


Remember the days when the Nintendo Game Boy came out? The manufacturer made a point of not flooding the market with massive numbers of units, thus keeping demand high, supply low, and a certain aura of "specialness" about the product. As such, those silly little boxes were commanding a price premium of somewhere around $200, if memory serves. All for the privilege of playing Tetris!

That's good, shrewd marketing, and very similar to what BMW has done with the MINI, even if somewhat by accident. BMW didn't anticipate the car selling that well in the US (indeed, initial plans didn't even include bringing them over here), nor did they anticipate the incredible numbers of sales they would have once they were introduced. How many times have we seen announcements about BMW increasing production, adding shifts at the Oxford plant, and even expanding the plant facility itself, just to keep up with demand?

Even so, it'd be ludicrous to respond to a market with a hot demand by flooding it with cars, and losing out on the momentum of the "buzz." You keep up, sure, but just barely. Going overboard with the production response would satisfy the demand too quickly, dry up your market, and cut those (*gasp!*) mean, evil, nasty profits some people can't stand to see being made. (Oh no! The PROFIT boogeyman!! )


I'm sorry to burst the righteous indignation bubble, gang, but again: Neither BMW, nor the MINI dealers that mark up their prices, are doing anything even remotely close to "wrong." A hot market will bear prices with a mark-up. When it doesn't do so any more, it won't. That's how things work. And more often than not, the motives of those that can't stand to see it do so really have nothing to do with economics, but are rooted more in envy and hatred of those who make better financial decisions than they do. So you get whining about profits, and calls for "boycotts," just because somebody heard that word on the news, and thought it sounded cool.


But you need to ask yourselves, in the bigger picture, what's better? A thriving market, and a healthy company to stand behind your products, with a steady supply of parts, maintenance, mechanics, and improvements to the car?

Or would you prefer a Yugo-like existence, with everything done on the cheap, a product that is near-junk when it's bought, and utterly obsolete within a year of its introduction?


Anyone who would choose the latter is either truly ignorant, or simply delusional.


Meanwhile, the healthy market marches on, fueling the economic engine that keeps BMW and MINI running so well. But if you really want to sit on the sidelines and stew, cursing free enterprise, and those horrible dealers, fine. Absolutely no one will notice, because guess what happens while you sit and wait out your lonely "protest?"

Someone else will walk into that dealership, and buy what would have been your MINI. And then, someone else. And another "someone else," and so on, and so on.

They'll be out motoring, having fun, enjoying their car, and the open road. With good financial planning on your own part, thorough research, wise buying decisons - and a chip-on-the-shoulder-ectomy - maybe you can join them sometime.

Until then...


I hear it's going to be a gorgeous day for a drive.

DW

 

long waits/large markups will loose sails that could have gone to Mini, without loosing that "specialness" factor. I'm sure we all could agree that the allocations to dealers aren't really representative of local demand.

Also, large mark-ups can have a negative long term affect. The new Thunderbird was marked up massivly, so much so, that production volume was decreased, and the cars didn't hit the road in the numbers it could have, and it lost the opportunity of having cars on the road be it's best advertising source. The buzz died down, as did demand, and a real nice highway cruiser died an early death.

Also, the dealers that are selling at a mark up are trading $ today for $ tomorrow. I remember who wanted to put their hands deeper into my pockets, and I won't be buying from them in the future! So screw 'em now, and screw 'em later! If and when I get another Mini (or Acura, or whatever) it won't be from someone asking for a premium, and it won't be from someone who asked me for a premium in the past!

While that's all fine and good, I'll admit that it all goes into the Excel profit spreadsheet to figure out what's "best" from the dealer perspective. But they do two things.

1) Export sales to other dealers.
2) Loose customer who don't want to deal with that, and choose to buy different cars.

Depending on volumes and demands, it's an open question whether it hurts the overall marque or not.

ps, did you see the article that Mini sales actually fell in Feb this year?

Matt

 

First...you don't loose sails...at least not on land...

Second, MINI will sell less cars this year than last because they are going to build less cars this year. The US market will see about 4000 less cars this year because of the plant expansion.

This car is actually going to be more scarce for the foreseeable future.

Cars are one of the few things on the planet that have an MSRP that everyone challenges. Also, why is it that one store can charge one price for a shirt, and another store sells exactly the same shirt for more. Should we boycott that store because they feel they need a bit more profit in that shirt to make a living? Or. should we boycott the manufacturer of that shirt for not keeping there independent store owners in line with pricing?

Heck...look at gas prices...when was the last time you saw an MSRP on a gallon of gas. Not to even mention why one gas station on the other side of the road has a different price for basically the same product.

Have you ever seen the markup on diamonds! WOW!

It's simple. There are people in this world with an entitlement mentality, and those who work for living, earn what they have, and choose to put some homework into purchase decisions.

The folks with the entitlement mentality want everything to be given to them, and if not, then have it legislated that everything should be given to them.

Good luck

 

This isn't even close to the same thing; the diamond market is artificial, with 90% of the controlling interest, the DeBeers company, only releasing a set number of diamonds 10 times per year. Threats of releasing diamonds from Siberia have scared everyone in the industry for years. If the market were not so controlled, the value of a diamond would be naught. We're all getting screwed on this one...sorry to go off on a rant, but, hey, it's my post.

 

is pointing out other potential consiquences of mark ups. I"m not saying that dealers shouldn't do it, but there are other potential consiquences of changing the price of the supply curves than had been discussed previously.

I"m not saying dealers shouldn't do it.

I'm not saying let's start a biatch fest over the fact that it happens.

I'm not saying that the gov ought to get involved.

I'm not supporting restraint of trade (which is what forcing the dealers to sell at a set price would be).

And while Mini's take on the reduced sales in Feb was plant closure for re-configuration, that doesn't make sense if people are willing to wait for delivery, or there is inventory on the lot!

Matt

ps, if you're going to correct my spelling, you have a very, very large task ahead of you!

 

Not if you don't buy jewelry!

 

I'm not saying that the February numbers are because of the plant closure...that affects the total number of cars available for the whole year.

MINI runs on an odd supply curve. Last year in February the US market received more cars than this year. Some months the US gets 2000 cars, some months we get 4000 cars. It has to do with demand curves from around the world that affect how many units can be shipped to each country.

MINI dealers live on what's called days supply. Meaning...how long the number of cars in there pipeline will last based on past sales, if no more cars entered the pipeline. Each country goes through waves of production increases and declines to maintain an optimum days supply.

There are distributors around the world that watch these numbers very carefully and fight for every car they can get. If one country's days supply get out of whack, the other distributors pitch a fit.

It's very difficult to compare year over year results on a monthly basis with this particular car company because of the worldwide demand and production constraints.

It is a fact that the US will receive less cars this year than last. The entire plant is shutting down for the month of November, and part of December for construction as well as the change over to the new model.

Therefore...no cars produced, means no cars shipping anywhere.

By the end of this year it will be very difficult to find a car on a dealer's lot anywhere in the world.

 

Dude ... you have ALWAYS had the right to walk. Just walk away.

Its called "free enterprise" and what the market will bear.

Don't like it, don't buy ... I dont see anybody forcing anyone to buy from any dealer

 

Rabid "free market"ers make me ill.
If a dealer can't survive on MSRP, they're in the wrong business. What about all of the brands who sell at less than MSRP?
Add-ons and mark-ups are nothing more than gravy, pure and simple.

As to the "one state monopoly", what are the costs of buying from another dealer to get a more favorable price? Will you get a loaner car when in for warranty work? Not likely. Will you get the standard answer of "it's normal", or "unable to duplicate" more often than someone who bought from the servicing dealer? Very likely.
This is greed, pure and simple. Just because someone can charge more for a product, does that make it right? Especially in a limited market, where choices are restricted?

 

Since when did Ethics have anything to do with free enterprise?

 

At the risk of sounding defensive, I'll say I don't characterize myself as a "rabid free-marketer." In fact, as my real-life friends all know I've consistenly preached against "free market fundamentalism." Price controls can be beneficial when we're talking about necessities, like electricity or housing for poor families. We aren't, however, talking about the postal service or road repair or cheap housing here. We're not even talking about a run-of-the-mill, point-A-to-point-B ordinary auto. We're talking about a MINI Cooper--a car that nobody really needs. I consider a MINI to be a luxury purchase.

I should have stressed my other point a little harder in my previous post. Profit is what gives everyone involved with MINI the motivation to get up in the morning to design, build and sell and then improve great cars. Call me weird, but I'm willing to pay MSRP (or more) to get that.

Regarding the "monopolies" in particular states, just weigh your options and find what works best for you. If you'll need a loaner if your car is being serviced, you should probably fork over the bread to buy locally.

Quite simply, you're going to get what you pay for.
edit: clarification

 

http://www.motortrend.com/features/a...s67/index.html

Matt

 

Oh, up until about the 90's. I'm old enough to remember Business Ethics classes being taught at University.
Greed: it's one of those Seven Deadly "things we don't talk about here".

 

I feel that in a free market, the dealer should be able to ask for whatever price the market is willing to get (as applied to autos, not all commodities). If the price is too high, we can shop elsewhere or buy a competing brand (I know, there is not an equivalent to the Mini!).

The converse is also true- there should not be a minimum price that the auto company imposes on the dealers.

However, with the Mini, the market is distorted because of the limited number of Mini dealers.

I am not an economist, this is just my opinion.

 

The market is also somewhat distorted with the right and left coasts (minus the NW) and the SE getting the lion's share of MINI dealerships, as compared to the midwest and west, which, BTW, is the fastest growing region of America in terms of population. Jimbo

 

Distortion in markets isn't equal to scarcity. Distortion is unfair access to the market, or market manipulation (like Enron), or distortion in product information (untrue or fraudulent product claims).

Scarcity relative to local demand is what allows the few that are available to be sold for higher than MSRP!

Matt

 

personally I see it as part of the free market process. It may not be good business to the average consumer, but if it works....*shrug*.

As for you Doc you never get off the soapbox. ;-)

 

where ever they be found!

Matt