[The Automotive Enthusiast]

Originally Posted by Sedan_Clan

The resident BMW detractor is at it again. People have been claiming they were going to leave BMW for over a decade. The sales continue to increase (...be it from returning customers or new customers), so the reality doesn't quite align with your narrative.

I'm just somebody who's lived it and has seen the impact something like this has. Local sales here have taken a hit, especially now that BMW is starting to slowly relax the BMW Advantages they once had. There were certain things that over the years, I've had loyal owners talk to me about and why they keep coming back. The cost difference between a Mercedes and a BMW really isn't all that much anymore and the only thing these days that separates the two is design.

BMW's playing it safe and boring, while Mercedes is knocking their designs out of the park. Sporty, yet elegant. The new 5 series, looks really good, but it doesn't really stir your soul. It doesn't really look like a lot of time was put into the design of the car. Especially if you owned an F10. I'm frustrated because the brand that I've loved for so long(since 1993) just isn't holding itself at the standard that was set years ago.

A BMW is a great car, but the factors that use to separate the brand from the others just aren't there anymore.

[NickyC]

Originally Posted by Mo@BMWofFairfax

I'm just somebody who's lived it and has seen the impact something like this has. Local sales here have taken a hit, especially now that BMW is starting to slowly relax the BMW Advantages they once had. There were certain things that over the years, I've had loyal owners talk to me about and why they keep coming back. The cost difference between a Mercedes and a BMW really isn't all that much anymore and the only thing these days that separates the two is design.

BMW's playing it safe and boring, while Mercedes is knocking their designs out of the park. Sporty, yet elegant. The new 5 series, looks really good, but it doesn't really stir your soul. It doesn't really look like a lot of time was put into the design of the car. Especially if you owned an F10. I'm frustrated because the brand that I've loved for so long(since 1993) just isn't holding itself at the standard that was set years ago.

A BMW is a great car, but the factors that use to separate the brand from the others just aren't there anymore.

Couldn't agree more. I have no desire to own any current BMW model, something unheard of to be said 10-15 years ago from me.

[rich8566]

Originally Posted by bradleyland

That depends upon whether you intend to take advantage of the MSD rate buy-down?

There are a lot of people freaking out in here, but we're talking about a relatively small amount of money. IMO, a lot of folks are hung up on the principle of the matter. Something is being taken away from them, and that pisses them off.

Any time you're buying a new car, you should understand the math involved in the financing method. If you understand how lease math works, then you can easily see what the exact amount saved by MSD would be. You can go to a dealer right now and run a deal with and without MSD.

MSD is attractive because it's basically a sure bet, and it pays something like a 10% APR when you calculate the savings on your principle "invested" (your total security deposits). You can't get 10% on any other "guaranteed" investment, so most people who are responsible with their money jump at this opportunity. I see where it makes financial sense, but in the overall scope of things, the principle invested is pretty damn small.

We own our home, and in August of this year, we'll have no more car payments. My retirement fund is on-target, and I have no debt (outside of the 1 remaining car loan).

I have never used MSD.

Why? Because my money is usually invested elsewhere, and while the rate of return is competitive with my other investments, the opportunity cost of moving the money around outweighs the marginal benefit (difference in return between the current investment vs MSD rate of return).

If you have the money lying around, then sure, take advantage of MSD, but I wouldn't go out and buy a car simply because this program is going away. I would be far more concerned about the changes in residual that are hitting the BMW line-up. Learn the math, the rest will follow.

The MSD deal is even better than what's portrayed here - it's a 9-10% TAX FREE return on your money. It's impossible to beat this deal anywhere!! (Not for nothing, this time around I bought my 17' M2 instead of leasing it).

[bradleyland]

Originally Posted by rich8566

The MSD deal is even better than what's portrayed here - it's a 9-10% TAX FREE return on your money. It's impossible to beat this deal anywhere!! (Not for nothing, this time around I bought my 17' M2 instead of leasing it).

On how much principle though? I mean, I get it that it's percentages, and earning a 10% return tax free sounds ZOMG AMAZING, but we're usually talking about somewhere in the area of $5k - $6k in deposits. The rate of return is great, but it's not like I can drop $50k in there so I can make some decent money.

My point was really about keeping it in perspective. The MSD thing was nice, but it's not the deal breaker that everyone is making it out to be. If it was, then why did you buy your M2 instead of leasing it? I suspect it had something to do with the positively dismal residual values. Which really underscores my point: the MSD rate reduction was a nice perk, but that's all it was. It's not as important as the other factors that go in to a lease payment.

[doug_999]

Originally Posted by bradleyland

Based on BMW financials, they make a profit of $5k per car, so they're far from NET negative profit. When it comes to customer acquisition costs, Mo is absolutely right. Your least expensive customer acquisition is always repeat business.

You are assuming they make $5K on every car. That's not the way it works. You could make $12,500 on one car and lose $2,500 on the next car and your average profit is $5K per car. Take out the loss and you are making $12,500 per car.

[Kung Fu English]

Originally Posted by bradleyland

On how much principle though? I mean, I get it that it's percentages, and earning a 10% return tax free sounds ZOMG AMAZING, but we're usually talking about somewhere in the area of $5k - $6k in deposits. The rate of return is great, but it's not like I can drop $50k in there so I can make some decent money.

My point was really about keeping it in perspective. The MSD thing was nice, but it's not the deal breaker that everyone is making it out to be. If it was, then why did you buy your M2 instead of leasing it? I suspect it had something to do with the positively dismal residual values. Which really underscores my point: the MSD rate reduction was a nice perk, but that's all it was. It's not as important as the other factors that go in to a lease payment.

I got 2k off my interest fees by putting 5600 into MSDs on my 69k cap cost.

That's over 33% ROI.

That's pretty great.

Of course I can't drop 50k in there to get 33% return, but you take what you can get when you can get it.

[rich8566]

Originally Posted by bradleyland

On how much principle though? I mean, I get it that it's percentages, and earning a 10% return tax free sounds ZOMG AMAZING, but we're usually talking about somewhere in the area of $5k - $6k in deposits. The rate of return is great, but it's not like I can drop $50k in there so I can make some decent money.

My point was really about keeping it in perspective. The MSD thing was nice, but it's not the deal breaker that everyone is making it out to be. If it was, then why did you buy your M2 instead of leasing it? I suspect it had something to do with the positively dismal residual values. Which really underscores my point: the MSD rate reduction was a nice perk, but that's all it was. It's not as important as the other factors that go in to a lease payment.

I was just stating a fact - I don't disagree with anything you said. The other simple fact is that the msd savings typically equated to saving a month of lease payments annually. Nothing wrong with that, but as someone stated above, deals change all the time. It is what it is so to speak. And yes, I bought the M2 because the lease deal was horrific.

[bd307]

Yes we got that you bought an m2.

[DailySleeper]

Originally Posted by bd307

Yes we got that you bought an m2.

I think it must be his sig lol

[The Automotive Enthusiast]

This is what I was talking about. Bob Lutz kind of gets it.

[bradleyland]

I kind of can't stand Bob Lutz (he's a classic big mouth), but he's often right... Which makes it worse

I don't agree with him 100% though. BMW still make exciting cars, IMO. As you get older, you sometimes long for the past. It's one part nostalgia, and one part wanting what you're used to. The cars are still exciting to drive; they're just different than they were in the past.

[Fugly M3]

This has probably already been mentioned, but another thing the BMW bean counters probably realized is that there are folks out there that slapped down a bunch of money as an MSD on a lease years ago and have been rolling it over from lease to lease to lease...the return on that money (BMW's cost) is probably not insignificant!

[bradleyland]

Originally Posted by doug_999

You are assuming they make $5K on every car. That's not the way it works. You could make $12,500 on one car and lose $2,500 on the next car and your average profit is $5K per car. Take out the loss and you are making $12,500 per car.

I'm not making that assumption at all. You're making the leap that customers who use MSD are net-loss customers. That is an assumption.

The numbers don't lie: BMW turns an average profit. Many businesses have net-negative profit SKUs (loss-leaders) or sales (customer acquisition programs), but what matters is growth and overall profitability. In that regard BMW is doing ok.

On this forum, the loss of the MSD program seems like a big deal. In the market? Most people don't even know about it.

All the hand-wringing over profitable vs non-profitable customers is just silly. BMW are turning a profit, and a pretty damn good one, as far as the industry goes.

[Sedan_Clan]

Originally Posted by E46M54325Ci

I actually did leave the brand...alas, I am back!

I left too......once! I fell for the Infiniti G35 marketing hype back in 2003/2004, and traded my '03 M3 for an '04 G35. Worse decision ever. That car lasted maybe 5 months. I ordered an '05 M3 ZCP promptly afterward.

[The Automotive Enthusiast]

Originally Posted by bradleyland

I kind of can't stand Bob Lutz (he's a classic big mouth), but he's often right... Which makes it worse

I don't agree with him 100% though. BMW still make exciting cars, IMO. As you get older, you sometimes long for the past. It's one part nostalgia, and one part wanting what you're used to. The cars are still exciting to drive; they're just different than they were in the past.

Name me one, please. We're talking overall experience. BMW refuses to introduce a proper halo car. Mercedes is bringing cars like the AMG GT-R to market and very soon, a Hypercar. Audi has the R8, and BMW has.....



the i8. Shoot me now.

[bradleyland]

Originally Posted by Mo@BMWofFairfax

Name me one, please. We're talking overall experience. BMW refuses to introduce a proper halo car. Mercedes is bringing cars like the AMG GT-R to market and very soon, a Hypercar. Audi has the R8, and BMW has.....



the i8. Shoot me now.

What excites one person may not excite another. IMO, Lutz is speaking in hyperbole in order to make a point.

[The Automotive Enthusiast]

Originally Posted by bradleyland

What excites one person may not excite another. IMO, Lutz is speaking in hyperbole in order to make a point.

A point that hits the nail on the head.

[doug_999]

Originally Posted by bradleyland

I'm not making that assumption at all. You're making the leap that customers who use MSD are net-loss customers. That is an assumption.

The numbers don't lie: BMW turns an average profit. Many businesses have net-negative profit SKUs (loss-leaders) or sales (customer acquisition programs), but what matters is growth and overall profitability. In that regard BMW is doing ok.

On this forum, the loss of the MSD program seems like a big deal. In the market? Most people don't even know about it.

All the hand-wringing over profitable vs non-profitable customers is just silly. BMW are turning a profit, and a pretty damn good one, as far as the industry goes.

No, it is a fact, they make less money when the customer does the MSD. That's not an assumption.

And while lots of people don't know about it (agree with you there), it doesn't matter if only one person knows about it, why take a hit when you don't have to?

Finally, if they can make more money by eliminating a program that few people use or know about, then why not do it? Keeping a customer in the brand, who knows about a cool gimmick, does not make financial sense.

[bradleyland]

Originally Posted by doug_999

No, it is a fact, they make less money when the customer does the MSD. That's not an assumption.

Sure. No disagreement there.

Only, that's not what you said.

Originally Posted by doug_999

You are assuming they make $5K on every car. That's not the way it works. You could make $12,500 on one car and lose $2,500 on the next car and your average profit is $5K per car. Take out the loss and you are making $12,500 per car.

[doug_999]

Originally Posted by bradleyland

Sure. No disagreement there.

Only, that's not what you said.

Funny, you wrote this

Originally Posted by bradleyland

Based on BMW financials, they make a profit of $5k per car, so they're far from NET negative profit. When it comes to customer acquisition costs, Mo is absolutely right. Your least expensive customer acquisition is always repeat business.

and that's you "stating" they make $5K per car, which is wrong. I was simply trying to point out that it is an average profit per car and that can be made up of a loss and a profit and still "average" out to $5K per car.

[bradleyland]

Originally Posted by doug_999

and that's you "stating" they make $5K per car, which is wrong. I was simply trying to point out that it is an average profit per car and that can be made up of a loss and a profit and still "average" out to $5K per car.

They do make $5k per car, just like your car gets 24 MPG (miles per gallon). Any time you see "per", an average is implied. That's basic statistics, bud. If I said, "They make $5k on every sale," that would be flat out wrong.

But nice attempt at saving face.

[doug_999]

Originally Posted by bradleyland

... Any time you see "per", an average is implied.

Now that's just funny. I'm sorry - you got me however, I thought, crap, I never knew that - turns out it is not true. But hey, if it helps you sleep at night, go with it.