Low gas prices and more disposable income are expected to…
BY Dave Lee, General Sales Manager | Voss Village BMW
Editor’s note: This guest blog post is extra special to me because it is written by my former boss, a gentleman who guided me when I worked for him in the Import Sales department at Performance Automall in Chapel Hill, N.C. I owe a lot of my automotive success to Dave as he was always an encouragement to me and my pursuit for a career in this industry. Enjoy!
No doubt the headline caught your eye and many of you are wondering how I can make such a bold statement.
To begin with, the calendar date is obvious. It’s the last day of the month and the last day of the year. While most manufacturers will keep their sales month open until January 2, 2013, many dealers will close their books for 2012 at midnight on December 31. They will be trying to use all incentives to lure you in at the last moment with the lowest possible prices to meet their sales goals. Yes, dealers do have quotas to meet with their manufacturers.
There are a lot of factors that help determine how automotive manufacturers and dealers market and sell their vehicles. And right now, all those factors are aligning to create a perfect storm of savings for savvy shoppers and buyers.
The manufacturers also have goals to meet. Let’s remember, BMW, Mercedes, Audi and the like all report to their European superiors, and the Japanese brands are are fielding calls from Tokyo almost daily. There is a dog fight at the top of the luxury brands between Mercedes, BMW and Lexus for supremacy in the U.S. They are throwing consumer incentives at nearly every vehicle and every consumer. Loyalty offerings, conquest offerings, dealer cash to be used as the dealer sees fit, and even special incentives, depending on who you insure your car with, are available across the board.
As an example, a nicely-equipped BMW 750Lxi with a MSRP (sticker price) of $99,995 and an invoice cost to the dealer of $92,190 has the following:
- Option credit of $3,005 to $3,300 depending on production date
- Holiday Credit of $3,500 if financed or leased with BMW Financial Services
- Loyalty offering of $750
- Additional rebate of $1,000 if you are insured by or are a member of USAA
- Dealer discount of $5,805 (assuming a $2000 deal on this unit)
That’s a total savings of $14,355 – almost 15 percent off MSRP.
I should also note that USAA members have two options: 1) to use their membership to combine the Holiday Credit and USAA insured member rebate or 2) to secure alternate financing or pay cash to receive a $6,000 incentive. Basically, if you’re a USAA member and can pay cash you score an extra $1,500.
Smaller cars and the global marketplace
Of course, not everyone can afford a BMW 7 Series, regardless of the specials. But fear not, because the savings are big on the smaller cars, too.
There are other forces at work as well, temporarily keeping prices down. In Europe, things are tough right now. The economy is sluggish and luxury brands are not selling. In order for car makers to keep their production facilities running and their people gainfully employed, those manufacturers are diverting production to other markets – namely the United States and China.
But the Chinese have not turned out to be the car-crazy consumers that the manufacturers thought. They seem to be more interested in American cars than the European imports. Additionally, the Chinese economy is not as robust as predicted, so even more production is being sent to the U.S.
With all these extra vehicles coming ashore, dealers are pressured to sell them, and that is putting downward pressure on prices, especially in large markets with multiple dealers.
Consider this: in a marketplace where the negotiated price produces an average profit on a new vehicle of about $1,500, if a dealer takes another $1,000 off, he has cut his profit margin by 67 percent. From a consumer perspective, an additional $1,000 off a $50,000 car may not seem like much. But for the dealers, they are risking their livelihoods by cutting margins to such low levels. But it’s a risk they are willing to take to earn your business – as long as you buy before December 31 at midnight.
Dave Lee is the General Sales Manager at Voss Village BMW
with 17 years of Automotive Sales Experience.
He lives, works and drives in Dayton, Ohio.