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Prices Paid: Buying & Leasing Experiences Mercedes-Benz S-Class Lease Questions
134 messages, Last post on Sep 30, 2009 at 8:43 AM
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Can you give me a bit of guidance on my above posts on the CPO purchase vs new purchase benefits/costs? I don't see a clear advantage of buying a CPO vs leasing a new version with the lower monthly payments even when one adds in the fact that they will own the CPO and thus have some equity at the end of the term. The reduced payments seem to make up for it and when you factor in not paying tax on the entire amount with the lease (8% on 60K for the purchase vs 8% on the lease payments only, the additional maintainance for the CPO, lower money factor on the new lease etc) at best it's a wash. Plus one has the "risk" of the CPO not holding its value as anticipated, the potential value of investing the extra money from the lower payments elsewhere etc. Please enlighten me on the high end CPO benefits IF one doesn't plan on keeping the car for more than 4 years. Thanks.
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Replying to: topspin628 (Jul 10, 2007 5:23 am) |
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Replying to: domain123 (May 31, 2006 8:16 am)
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Replying to: bmwcrzr (Jul 10, 2007 2:38 pm) |
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Replying to: bmwcrzr (Jul 10, 2007 2:38 pm)
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Replying to: mbcarbuyer (Jul 20, 2007 9:50 am) J
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Replying to: juice1220 (Jul 20, 2007 10:10 am) LET the dealer stay in business??? I don't owe that to any dealer. The dealer is responsible for staying in business; not me! Frankly, I as a consumer couldn't careless whether or not a dealership survives. In my view, car and insurance sales people are expendable (my dad and brother were in the insurance business). America is too FAT and needs to go on a diet. Unnecessary middlemen doesn't help matters. Why would I need a car sales person? Service? Baloney! The revolving door in car sales is alive and well! Know why? If you don't, you certainly should! Car sales people are usually NOT EMPOWERED to make decisions! Why? I'll leave that to you to figure out. Do I need a sales person to explain financing? To explain how GPS works? I can assure you that I have more expertise in these areas than than they do. So, why do I need them? What useful purpose do they serve? Consumers will always act in their own best interest by trying to minimize cost. Dealers, on the other hand, will act to preserve their best interests by trying to maximize revenue. And so, some negotiating needs to occur. For instance, traditionally, a lease contract is a contract of adhesion which means that it is a non-negotiable agreement between parties of unequal bargaining power. However, in order to craft a fair and equitable agreement that best preserves fair gamesmanship, good faith bargaining demands that all parties have equal access to all pertinent information including cost of money (i.e., money factors, interest rates) and residual factors. The FRBB's Reg. M does not require that money factors be disclosed. The auotmotive industry lobbyists argued that such disclosures would CONFUSE consumers. That's both insulting and very presumptuous! I'm not the least bit confused and there are many others just like me who aren't confused either. Their argument is severely flawed and amounts to nothing more that a POOR EXCUSE for non-disclosure. And that's just one example of what angers me about NADA, NVLA, etc., and their lobbyists. I always FAX/email a one page lease proposal to a car dealership... one at a time. I don't play games such as: Can you beat this? That's crap! Ball park numbers don't cut it either! If the dealer agrees, all they need to do is transplant the numbers in my proposal directly onto the lease agreement, have the papers ready for me to sign, and away I go. Yes, it's that simple. I live in Ohio and what I've discovered, also makes me very angry. Many Ohio dealerships (and others) make mistakes especially in those cases where the first payment is to be capitalized into the lease. The capitalized first payment seldom matches the remaining payments. ALL payments MUST match... it's NOT rocket science... trust me. In addition, sales tax is often computed incorrectly. I patiently worked with a leasing software developer not long ago and they finally saw the light. Obviously, there were flaws in their leasing software. I later learned that they continued with their erroneous ways. Makes me furious! Some leasing software developers do not understand leasing mathematics and neither do dealerships. Here, I'll prove it... Ask any dealership to compute monthly payments where the first of those payments is to be capitalized in the lease. I promise you that the calculation will be wrong 95% of the time. The capitalized payment will be less than the remaining payments. Now, why would I want to do business with dealerships, much less care whether they make a profit or not, knowing that they can't correctly compute lease payments??? I love it when car sales people ask me how they can earn my business. I always respond with something they've never heard before... "you can CORRECTLY complete the lease agreement. Every number must be spot on. I'll make it easy for you; here's my lease proposal."... Almost always, I have to correct them (and they don't even listen or care... it's their attitude and that makes me furious) and then, I simply move on. I'm very cordial and just want to be helpful. Usually, they'll cop an arrogant attitude. Remember, customers can have an attitude (I don't condone it)... you can't!!! Regarding pricing... Pricing is governed by supply and demand dynamics. If market conditions are such that consumers refuse to pay more than dealer cost, then you as a dealership must decide whether or not you're willing and able to sell at or below cost. Many people don't realize that Dealer Cost < Invoice. Some people are getting fabulous deals on Honda Pilots right now. Check the pilot forums. I won't apologize for spouting off. I'm sick of uncaring sales people whining and crying. All they seem to care about is making a sale and couldn't careless about academics (e.g., financial mathematics). And, please, don't give me the excuse that it's the F&I guy's responsibility. That's pure bull! Every salesmen should know how to compute payments, understand cash flow analysis, etc., and be responsible as well as accountable. Otherwise, they're nothing more than order takers. Want fries with that? John Medina, Ohio
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Replying to: delta737h (Aug 05, 2007 3:56 pm) I am sorry for all your aggravation in Ohio. I live in New York, and have worked all my life in Fairfield county Connecticut. Presently I am at BMW of Greenwich, I have been here for about 5 months and previously worked at Mercedes benz of Greenwich for almost 3 years. I am the F&I guy here.  I have been doing F&I for about 6 years and have been in the car business for about 15. I personally have never witnessed numbers being different on contracts, and am sorry that there are still dealers out there that take shots like that especially at the high end level of the car business. Unfortunately, there are still car sales people out there that have no clue on what they are doing, but in our area we do not tolerate this. Having a good relationship with a dealership is very important if You are dealing with the right dealership. For example, I had a customer, who was a very good customer, and bought a number of cars from me over the years, when I was still a salesperson. One of his cars ran out of warranty, and blew an engine. It would have been a $8000 job. I was able to take care of it for him, where he only had to pay a $100 deductible. So in short, if you find the right dealership, with a "truly" professional staff, and build a great relationship, they can be of alot of help. Our salespeople never ask what can i do to earn your business. Here in Greenwich, this is insulting, and people do not stand for comments like that. I guess in different parts of the country, car sales is still trying to get away with stuff, that is truely not fair, to the comsumer, but like everything else in life they take a shot, and see if they can get away with it. I agree 100% with the comsumer trying to minimize cost, but the dealership has to stay in business also. We dont walk into Sears or Best buy and try to get the 50" plasma for cost. They would laugh and show us the door. The auto industry is the only industry that all consumers dont even take into regard the MSRP, which every car really should sell for, in my eye. Why is a car different that a fridge at sears? At any other retail store we wait for a sale, or some kind of promotion, and yet everyone expects to get cars at invoice all year round. This is not fair either. The only ones getting hurt are the dealerships and not the manufacturer. They have lowered the gap between invoice and MSRP over the years, because of this, and now the profit margins are much smaller. I know every "trick" in this stupid game and know what our expeses are, and how much money a dealship produces, and you would be surprised, how hard we work for very little profit. Maybe I am whineing a little now, but being on the other side of the fence, it is upsetting, especially when I worked at Mercedes, and saw an SL65, get sold, and the dealership made $800 profit on a vehicle that is way over $150,000. That my freind is bull. But anyway, if there is any advice i can give, I will be happy to help. Hopefully I wont get blasted since I am in the car business. Julius
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Replying to: juice1220 (Aug 06, 2007 4:42 am) Many thanks for your input. I was very active in the BMW Series 3 Buying Experience forum in early April. If you were to search on delta737h in that forum, you'll see several of my posts. One such post is replicated below... ____________________________________________________________ #7611 of 8043 Re: Good 328i Offer? Need a numbers check [mpm6821] by delta737h Apr 04, 2007 (6:38 pm) Bookmark | Reply Replying to: mpm6821 (Apr 04, 2007 5:24 pm) Okay Michael, sorry about the last part. We'll ignore it. Here is what I have... BMW 328i (w/options) MSRP $36,270.00 Destination Charge $775.00 MSRP $37,045.00 Sell Price $35,680.00 Financed Amounts- TAXABLE ITEMS 1st payment 497.00 Acquisition Fee $625.00 Document Fee $499.00 Gross Capitalized Cost $37,301.00 Capitalized Cost Reduction $0.00 Adjusted Capitalized Cost $37,301.00 Residual (63%) $23,338.35 Money Factor 0.00180 Term (months) 36 Georgia Tax 7% Monthly Lease Payment excluding tax $497.00 (Base Payment) Monthly Lease Payment including tax $531.79 Charges Payable at Lease Origination... Security Deposit $550.00 Tax on the Capitalized 1st Payment $34.79 License, Title, Registration Fee $39.00 Lemon Law Fee $3.00 Total Due at Lease Signing $626.79 Notice that I rolled (capitalized) the first payment into the lease. This means that you will be paying 35 payments of $497 each plus tax. In cases where the first payment is capitalized, many dealers incorrectly compute the payment because they erroneously do it in two stages. The first stage is computed in the same way that one would ordinarily compute a lease payment without regard to the fact that it is being capitalized. Next, they'll include the capitalized payment as an amount financed and compute a new payment that is obviously different from the one being capitalized. ALL payments must be identical. Next, they'll add the capitalized payment to the agreed upon value (sell price) claiming that this is the agreed upon value because they're making the first payment on your behalf. At this point, many people go with the flow but this makes me furious even though there is no financial harm. The agreed upon value is sacred ground. Never ever adjust an agreed upon value for any reason once it's been established. Finally, the dealer proceeds to incorrectly complete the lease worksheet and lease agreement which makes me even more furious. If they're in this business, they darn well better be able to do things correctly. My paper addresses the issue of capitalizing fees and 1st payment as well as tax consequences. If interested, let me know and I'll send you a copy. That said and, to keep things simple, I elected to seperate the taxable items from the non-taxable items. I don't believe that the security deposit is subject to tax in Georgia. It shouldn't be taxable in any state although in North Carolina it is but is refundable at lease end. Note that the amounts financed are those items that are TAXABLE. Remember that Georgia sales tax will be levied on the resulting payment and so that payment can't include non-taxable items. I constructed the proposal so that you would be paying the non-taxable items at lease signing. Tax is NOT taxable. Because the MF equates to an interest rate of about 4.32%, it's best to capitalize as much as possible. However, paying $626.79 up front isn't that big of a deal for most folks that tool around in BMWs. At any rate, to give you an idea, that's how it would look. Remember, none of this is etched in stone. Some of these numbers (MF, doc fee) are very questionable as we discussed. The calculated values, however, are spot on. ___________________________________________________________ My question to you, Julius, is this... Given the exact same scenario described above, would your dealership have computed the same payment streams of $497? Note that the first of these payments is being capitalized. Now, let me make a few comments regarding your post... First- I've heard the Sears/Best Buy argument many many times and it just doesn't fly. I negotiated the purchase price of a 42" LG HD TV in January. Yes, I negotiated and they didn't even laugh at me or show me the door. In fact, they thanked me for my business, commended me for doing my homework, and even sent me a birthday card! Must be my charm (lol). Maybe you don't negotiate BIG TICKET items but I can assure you that there are those who do and do it very well. What many people don't realize is that prices for certain items, even at major department stores, are negotiable. This includes TV's, stoves, refrigerators, expensive watches and jewelery, etc. Prices of BIG TICKET items are usually NEGOTIABLE. House prices are negotiable. It's always been that way. I haven't met a realtor yet that laughed at me or showed me the door! Second- I don't agree that cars/trucks/TV's, etc should necessarily be sold at MSRP. MSRP means Maufacturer's SUGGESTED Retail Price. Note the word SUGGESTED. MSRP speaks for itself and I'll leave it at that. Third- $800 profit on a $150,000 SL65? Why is that bull? Should the asking price of a good or service determine its profitability? Not necessarily so! If I owned a high end car dealership, I would consider hiring top calibre people from top schools and pay them top salaries. Of course, they would have to go through an extensive education program that would include financial mathematics, marketing, salesmanship, ethics, etc. I would emphasize, above all, SERVICE because SERVICE = BUSINESS! Fourth- For whatever it's worth, let me give you a little advice... When you're in business and you sell a good or service to someone, you have no one to blame but yourself if you feel that you didn't earn the return to which you feel that you were entitled. As you well know being in a very competitive business, prices are market driven. From economics 101, the customer was willing an able to pay $X for an SL65 and you, the dealer, were willing and able to supply that vehicle for $X. You both arrived at an AGREEMENT or meeting of the minds. The last thing in the world you want to do is complain or cry about a deal or agreement you entered into AFTER THE FACT... especially in a forum like this where highly intelligent readers critique your every word. I wish you every measure of continued success. Glad to hear that you're providing outstanding service. Best, John Medina, Ohio
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Replying to: delta737h (Aug 06, 2007 8:40 am) I would have questioned the $499 doc fee. Seems a little high. We charge $275. New York dealers charge approx. $45. The question is what does Georgia rule say about tax. Can it be payed upfron or does it have to be rolled in? In CT it has to be rolled in. In this scenario, if your payment is 497, your security deposit should only be 500. Always the nearest $50. The rest of it is a bit complicated but seems right. Now to your 4 points. 1. I try to negotiate as well on big tickt items as well, and do my shopping. But when it comes down to it if I meat someone that did their job well, and treated me right I usually give them the business, without much resistance. I guess I dont want to give out what I receive, unless the guy is a total jerk. 2. Suggested is what the manufacturer thinks that piece of metal is worth, and suggests you pay for it. Again a supply and demand question. Some dealers on certain cars will go above MSRP, and there is a reason for it. Grated a 328i is not a B7, and should not be treatd or sold the same way. 3. The big question on the $800 profit margin is hopw would you pay your sales people? And what do you consider a good salary. This is a very difficult question, for a person outside the car buisness. Salespeople are a dime a dozen, and are very easily replacable. A sales professional is not as easy to come by. Dealerships mostly do not live off of the profits generated by the sales department, but on service and satisfaction scores, when the manufacturer kicks back money. In our store the saleperson gives you all the figures and there is no going back and forth to managers. I am here to oversee that all the paperwork is done right, and the customer is happy. 4. Do not misunderstand the fact of the $800 profit on an SL. I as a finance guy really doesnt care about the front end profit. It is purely a statement of what the business has come to. $800 is not alot of money on any deal. You DO need a dealership to be there for you at some point, and be happy that you have had good vehicles, and no problems with the banks, DMV, etc. When that day comes and you need to ask for help from your local dealer, and all of a sudden he is not there anymore, but bought up by some huge car mall, that doesnt care about your problems from the past, then you will see why it is important. Its sort of like the mom and pop harware store that went out of business because of wal mart. It is just a nicer experience dealing with people that know you and care, rather than the rockbottom price and when you are over the curb you are forgotten. I personally would always pay alittle more for a person to be there in the future than be on my own. But thats just me. By the way what do you do? hope to hear from you soon. Julius
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