Last post on Sep 16, 2012 at 11:07 AM
You are in the BMW 7-Series
What is this discussion about?
BMW 7 Series
#899 of 1317 Relative depreciation
Oct 15, 2003 (12:54 pm)
is somewhat of an economic fallacy. You maximise profit by placing the least amount of money in depreciating assets. Percentages are irrelevant If you buy a $70,000 BMW and it only depreciates by 50% in 8 years, you have lost $35,000. If you bought a $25,000 Buick and it depreciates to zero in the same 8 years, you still are $10,000 ahead, even though the depreciation percentage is 100% compared to 50%.
So let's face it. When we buy these things we are buying toys, not making investments.
My experience with 7-series depreciation is similiar to Tasillo's. I bought a 1993 750 in 1997. Only 27k and about 1 month left on the warranty. Priced at $36,000 (original retail $88,500--really).
Now, at 10+ years old and 90,000 miles, I'd be happy to get $8,000 for it (and at that price I'll take my 750 any day, thank you).
Why so "cheap," relatively speaking? Because (1) there is little market for a $50,000 used car, and (2) people are scared to death of the maintenance costs, especially with a V12.
And, to be frank, BMW contributes to this situation with its "black box" approach to auto repairs. An example: the headlight relays are contained in a box called the "LKM." It is located in the fuse box and easily replaced. If your LKM acts up and you bring it into the dealer, the service tech will dutifully hook it up to the diagnostic computer, or will consult a diagnostic flow chart. When he gets to the end of the chart, the instruction will be "Replace LKM."
Thanks, that will be $400 for on "black box" (LKM) plus $150 for the labor. To fix a headlight. Add to that the hassle of scheduling a dealer appointment, etc. No wonder people are scared of these cars!
What will the artful do-it-yourself'er do? He'll pull the LKM, pry it open, spray the sticky relays with contact cleaner, put it back in and drive another 100,000 miles. Time spent: less than 30 minutes. Cost: about a nickle.
Since most (all?) BMW's use LKM's, you'd think those in charge of fixing the cars would know this. But they don't because BMW discourages this sort of repair. There are several reasons.
First, there is no money in it. If an LKM is replaced, BMW earns a fat markup on the part, as does the dealer. Also the dealer gets to charge "book" time of one hour labor for an operation which took less than 15 minutes. More profit. So there's no money in imaginative repairs intended to save the client money. The money is in "black box" repairs with big parts markups and overblown labor charges.
The above is typical in the whole industry and not just BMW. The high-end German manufacturers, however, have more of this because their cars are so cutting-edge complex. They manufacturers really don't want service techs opening up the "black boxes," cause who knows what some yahoo in Oshkosh might do? And there is big money in fixing these expensive technological toys when they break.
Getting back to the E 65, it is telling that last year BMW began forbidding aftermarket publication of repair data about their cars (by Chiltons, Haynes, Alldata, etc.). Part of the reason probably is concern over technical neophytes messing with such complex machines. But I think it has more to do with profit--this baby is going to be a serious money maker, because the dealers will have a complete MONOPOLY on repairing it--independents and DIY'ers will not even be able to get a manual.
Sorry BMW, but that's the last straw. I'll pass.
Oct 15, 2003 (7:02 pm)
F1Buick, Tasillo, and BMWseller. Nice, informative and analytical posts. They probably should be compulsory reading before entering any high end showroom.
What do you think though, do you get your cake and eat it too with a CPO used 7 Series with up to 100,000 miles of available warranty?
#901 of 1317 There are no free lunches
Oct 16, 2003 (10:21 am)
With a CPO and an extended warranty you are just paying, up front, for the risk associated with holding a used car. Its like buying insurance in a hurricane zone: If that risk is high, then the premium associated with the insurance will be comenserately high.
Which leads one to wonder if it wouldn't be cheaper to live somewhere else or, in the case of a used car, to buy something without such a high maintenance risk associated with it.
In the case of an E65, this risk analysis contributes directly to the rapid depreciation. So what you end up with is a car with a low relative market value compared to, say, a Lexus, but with a high premium tagged on for the CPO/extended warranty, so the cost seems to be the same, or even higher.
To me, the real cost in this situation is the ancilary cost of having your vehicle serviced. In my job I bill by the hour, so the cost of trudging up to the dealer, dropping the car off, farting around with alternate transportation for 1-3 days, and then returning to pick up the car easily adds up to $1000 or more in lost time. I vastly prefer a car which is reliable or, if it breaks, I can fix myself during my time off. From this point of view, a reliable car is a better deal than a car with questionable reliability, even if the questionable one comes with an extended warranty.
Why do you suppose Honda gets off with the crummy warranty it gives on its vehicles? Because given the choice between a reliable car with no warranty and an unreliable one with a warranty, the rational consumer will minimize his/her costs by picking the reliable car. So Honda outsells Kia despite the huge warranty difference.
Since the ultimate subject is the BMW 7 series, I want to add that my old E32 750 is reasonably reliable for its age and complexity. By the 6th year of production the bugs were pretty much gone. If it was totalled in an accident I would buy another. A used E38 should be solid as a rock. I would not hesitate to buy one without a warranty. And why buy a BMW over a Lexus? Because the former is a driving machine and the latter is not. The Bimmer is a better toy.
Oct 16, 2003 (10:36 am)
I like the CPO 7-series option. Be aware however that the CPO warranty is not the same as the new car warranty. Get the details so you don't have any surprise. Certainly, you can spend less and get a car with a better frequency of repair number but each car will have it's own service history and everyone doesn't have big problems with 7's. Besides that big grin that a 'bimmer gives you is worth something, right?
As far as service goes, our center and I would guess that the majority of the others around the country have scheduled loaner cars available and pick-up and delivery service. You can't beat that for convenience and then you don't have to be driving your honda around wishing that you'd gotten your very own "Ultimate Driving Machine".
#903 of 1317 7 Series wilth CPO = Lexus w/o??
Oct 16, 2003 (4:44 pm)
F1Buick, I (usually) like your line of reasoning: analytical, mindful of opportunity costs, etc. Most dealers don't view these things as a Caterpillar dealer would: an expensive captial investment that should be available 24/7. So, parts are ordered by UPS, there is no great BMW inter-dealer courier service, etc. (The CAT dealers in the East run an 18 wheeler out of a factory CAT parts depot in PA up into New York and New England visiting every dealer every night before 8AM so no CAT customer is left with a machine down because of parts. This NightHawk Service is one reason why CAT can charge more than Terex for virtually the same machine.)
But, do you really think that a used 7 Series with a CPO is the same price as a Lexus? What is the CPO premuim? 3K or so?
#904 of 1317 CPO Premium's
Oct 20, 2003 (2:50 pm)
When I bought my '00 740, I compared CPO prices with non-CPO cars. I found the differnce close to $5k! I rolled the dice and bought the non-CPO car, figuring I could buy either a great warranty from an independent for less, or just take the chance with no warranty. My first reality check was that BMW treats the second customer a little different than the original, despite still being in factory warranty. No loaner car, questions about maintenance, etc. One firm discussion about repeat business and standing behind their product regardless of who owns it seemed to clear some issues up, but still no loaner!
Anyway, my '00 E38 with 58k is running like a freight train, just the usual minor issues. I'm feeling lucky!
#905 of 1317 5 Series Vs. 7 Series in Snow
Oct 20, 2003 (7:38 pm)
Bmwseller and others, which 2002 model when properly equipped with four winter tires like Blizzaks is better in the ice and snow of say a far Chicago suburb?
#906 of 1317 blockislandguy
Oct 22, 2003 (7:21 pm)
"But, do you really think that a used 7 Series with a CPO is the same price as a Lexus? What is the CPO premuim? 3K or so?"
You'll have to answer that for yourself. I really have no idea. I do know that in comparison to a Lexus 400, my 750 cost a lot more new and is worth a lot less used. I think BMW 7-series depreciates faster because BMW lacks the reliability rep that Lexus has built for itself. Further, the reputation for technological advancement may create more sales for new cars, but used car seekers translate that same rep into words like "complex" and "expensive."
I can't disagree. My '93 750 has this gizzmo on the firewall plumbed into the brake system. I couldn't figure out what it was. Then I found out it was the "traction control module." Seems that in 1993 the Bosch ABS pump couldn't effect traction control because it didn't allow separate manipulation of the rear brakes. So BMW built a custom ABS module, plumbed into the rear brakes, which allows for traction control. The unit costs $2495 if it breaks (mine hasn't) and is almost impossible to access (add another $800 for the labor).
But I agree with bmwseller on one issue: ain't nothin quite like a BMW when running down the road. These are driver's cars with a veneer of luxury--iron fists in velvet gloves. The top of the door sill in my 750 is the same height as the sill for a C5 corvette. At a stop light I find myself looking UP at drivers in Mustangs and Civics. Can you say "low center of gravity?" My 7 is a 160mph sports car that happens to be a luxury car. A Lexus is a luxury car and nothing else (can you say "boring?")
#907 of 1317 ??? for f1buick
Oct 23, 2003 (7:58 am)
750 guy, how many miles on your '93? I ask because my '00 740 is fast approaching 60k and I'll put another 50k on it in the next 2 years. Trying to decide if I should keep it and "run it into the ground" or bail out now while it still has a shred of value. Any significant problems with your 10 year old 7? I'm more concerned about major accessory systems, etc. I think the 7 series drive train is pretty bullet proof, but I hate those nickel and dime (or in a BMW, $500 and $1000) frequent repairs on things like power windows, cruise control, A/C, etc. What' your experience been?
By the way, couldn't agree more about the "drivers car" statement. On the interstate or rural secondary roads, nothing compares to a big, fast German car!
#908 of 1317 traction in chicago..............
Oct 23, 2003 (12:38 pm)
Handling in the chicago suburbs will be fine in either car with the proper tires and technique. Maybe with the 5 weighing less it would have an advantage if it was to be said one way or another but there are plenty of sevens running around up there, pull someone over and ask.
You'll do great!!! I like the size of the 5 but would certainly "settle" for a seven.