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BMW resorts to high incentives to sell cars

XeroK00L submitted on 3/8/2007 Official Bell & Ross Timestamp: 9:17:22 PM

61 user comments | Category: Misc News | Source: | SOURCE: www.detnews.com

"BMW's discounting practice in the U.

S. leaves us speechless. Since May 2006, BMW has offered structurally higher incentives compared to its peers and there appears to be no light at the end of the tunnel," Frankfurt, Germany-based Dresdner Kleinwort said in a report.

"Incentives stand at an average of $4,125 per vehicle, which is about 60 percent higher compared to Mercedes ($2,573) and Audi ($2,607). Most of these discounts are related to BMW's active move into competitive lease deals," the report said.

"Even discounts on the new X5 (large SUV) are back at $4,490. The 7 Series is supported with $11,345 (Mercedes S class $3,711). Against this diluted pricing level, a 15 percent increase in February unit sales (in the U.S.) is meaningless in our view.

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LOLOLOLOLOLOLOLOLOLOLOLOLOL.

Yeah, it's just Canada alright. And still BMW cars are lower priced to begin with.
— huu76 (View Profile)

Posted on 3/8/2007 10:22:16 PM | reply to this comment | Votes: 3

Investors believe BMW "MUST" eventually seek out an alliance partner. Perhaps BMW-Always actually will become a reality. What they need is bigger propellors.

I hear Toyota has plenty of money kicking around.

Lastly. Save us Bangle!
— huu76 (View Profile)

Posted on 3/8/2007 10:35:33 PM | reply to this comment | Votes: 2

irrelevant to me as a driver. as long as BMWs are better handling and more fun to drive i'll choose them over any of the competitors. and if i can get what i want at a lower price EVEN BETTER!!.

— enthusiastx11 (View Profile)

Posted on 3/10/2007 2:49:31 AM | | Votes: 4

hilton makes more money than four seasons. so you'd rather stay at hilton?
gap makes more money than armani. so gap is better?
lexus makes more money per car than BMW. so you'd rather have a lexus?
— enthusiastx11 (View Profile)

Posted on 3/10/2007 2:51:43 AM | | Votes: 2

Wow. I love most BMWs, but eat it, AmazingBimmer!

Saying Audis are less-expensive... what nonsense.
— S4cabriofoxone (View Profile)

Posted on 3/8/2007 10:49:41 PM | reply to this comment | Votes: 3

bulldog- The A4 2.0t cab starts at 39k, your not getting it for under 40k
— jmrA480 (View Profile)

Posted on 3/11/2007 8:20:48 PM | | Votes: 1

I agree that "record sales" @ BMW is meaningless when BMW is actually buying it's customers. Looks as if there are financial troubles ahead for BMW.
— SixxFive (View Profile)

Posted on 3/8/2007 11:22:53 PM | reply to this comment | Votes: 1

u comment cant be justify thru that article.... o um did u take accounting before?
— hkaudi (View Profile)

Posted on 3/9/2007 4:36:46 AM | | Votes: 0

the writing was on the wall 3 years ago when it was obvious bmw was cheapening the interiors of it's vehicles. it seemed to me that they were penny pinching in anticipation of their margins shrinking.
i could see a bmw honda merger in the future.
— RS4inPA (View Profile)

Posted on 3/8/2007 11:29:44 PM | reply to this comment | Votes: 2

This article must be really painful for BMW fans.
— chewy (View Profile)

Posted on 3/8/2007 11:47:51 PM | reply to this comment | Votes: 1

see my comment above.
— enthusiastx11 (View Profile)

Posted on 3/10/2007 2:52:52 AM | | Votes: 0

And I thought the "ultimate driving experience" is enough to sell it's cars. LOL!
— flozel1 (View Profile)

Posted on 3/8/2007 11:58:29 PM | reply to this comment | Votes: 2

this is how the bmw news is posted? they made a record 4.124 billion dollar profit, (5.24 billion US) I read this news earlier on thursday 47 different articles on google, I knew autospies would put a negative spin on BMW news. Why hate? why not give them their respect they are not a mass market car maker like GM or VW, yet they make more money than both. Audi has been trying for over 17 years to be like BMW( source Businessweek) yet BMW more than doubled Audi's profit. I do not understand the autospies bias for mass market rebadged front wheel drive volkwagen products. people are jealous of BMW drivers, and BMW success, how do you put a negative spin on a record profit year, and the world wide leader in luxury automobiles.
— Larry (View Profile)

Posted on 3/9/2007 12:48:03 AM | reply to this comment | Votes: -2

I agree. I didnt read much content in that article, just fluff. BMW needs an alliance with another motor company? Yeah, because that worked so well for Mercedes...
— Threepoint1415926 (View Profile)

Posted on 3/9/2007 1:14:38 AM | | Votes: -1

The truth? Yes, let's talk about the truth. The truth is that BMW is making a profit (see article) no matter what incentives they give US buyers. The truth is that sponsored incentives are different than the cash in trunk deals many auto makers provide for their dealers. The truth is, I find it repulsive that fan boys line up to give inutile comments because some guy named Dresdner Kleinwort says he wouldn't invest in the company. Hence, my comment about this article being fluff. Just as much fluff as the article about TVR buying Chrysler. It's just not even well founded speculation.
— Threepoint1415926 (View Profile)

Posted on 3/9/2007 4:13:50 AM | | Votes: 2

Wasn't most of the profit from non-sales related ventures? I think it had to do with the sales of Rolls Royce or something.
— Ironman273 (View Profile)

Posted on 3/9/2007 6:01:17 PM | | Votes: 1

Please tell me which cars share the same platform between Audi and VW. The A3/Golf and the Cayenne Toureg - that's it. If you look at the vehicles they are quite different. BMW is my third favorite company after Porsche and Audi. Don't be overly confident Larry (as BusinessWeek warned) - just take a look - ten years ago did people think GM would be getting passed by Toyota????? Was China and India's economies supposed to be booming how they are 25 years ago???? Never say never.
— truecarlover (View Profile)

Posted on 3/10/2007 8:18:23 PM | | Votes: 1

Truth is, BMW makes their cars much cheaper than Audi does. They save money all over the place when compared to Audi. They don't wrap the cars during transit, they use inferior materials almost everywhere (thinner sheetmetal, less aluminium, etc.) They don't even bother to paint certain areas of the cars that Audi does such as the underside of trunk lids and front hoods. Run your hand along the side edge of the front hood on a BMW and see how big of a gash it leaves on your fingers, an Audi will roll and tuck that edge so it's perfectly smooth to the touch, and don't even get me started on the interiors.

The mechanical and electrical areas are nearly the same with extensive use of Bosch and Sieman electricals and similar machine parts but they are clearly assembled at a much lower price point than Audi thus the higher profit margins. Combine that with a higher price point to begin with and you can see why $4000+ on average per car for incentives isn't really hurting them too much.

Sorry, that's just the way I see it.
— Neverfollow (View Profile)

Posted on 3/11/2007 6:45:59 PM | reply to this comment | Votes: 1

Still they are making money, and dont forget that there is a world outside the US. The US only takes 260.000 cars the rest goes to the rest of the world.

I think that BMW is a succes, a big one. They started out of almost nothing and are #1 premium maker today. All they make is cars and bikes, i dont know about engines for boat anymore, but AUDI is VW and does therefor not stand alone. Mercedes makes trucks busses vans like the viano and so one, BMW only makes cars and bikes and still they made it.

I dont care if they make more cars than MB or Audi i mean that would not change my life anyway. I just think they are great at what they do, and they do make money.
— MPowerDK (View Profile)

Posted on 3/9/2007 3:09:47 AM | reply to this comment | Votes: 4

"I dont care if they make more cars than MB or Audi i mean that would not change my life anyway. I just think they are great at what they do, and they do make money."

I agree 150%.

BMW is a great business. They do what they do quite well. And, astoundingly, without compromising (most) of their products in the process.

However, some of the posters on this site act like sales affect them directly, and they make a scene when "their" company posts great profits or sales or some other business record. Unless they actually own stock in the company, there is no reason for this (cough-cough-Lexus fans-cough).
— S4cabriofoxone (View Profile)

Posted on 3/10/2007 12:19:40 AM | | Votes: -1

There's nothing wrong with incentives. The problem is that when any other automaker not from Germany does it, it is twisted and used to say that that automaker is struggling. BMW is obviously not struggling...
— Will_ (View Profile)

Posted on 3/9/2007 9:19:29 AM | reply to this comment | Votes: 3

Well, BMW ISN'T STRUGGLING!

They're making great money!

So there's no reason to say they are!
— S4cabriofoxone (View Profile)

Posted on 3/10/2007 12:20:18 AM | | Votes: -1

bulldogz ... BMW has had the everything included warranty since 2001. The history of BMW and Full maint. 1997 became available as scheduled Maint for 3 years or 36k miles ( oil services and Inspection I ). In 2001 BMW updated the program to go for 3 year or 36k miles with Full Maint ( brakes, wiper blades, oils services, Inspections, light bulds, air filters ) ... In 2003 they updated the Full Maint to 4 years or 50k miles ...

Before you comment make sure you know what you are talking about.
— BMW4me4ever (View Profile)

Posted on 3/9/2007 12:41:16 PM | reply to this comment | Votes: 2

The free maintenance is a great idea. Audi should have continued it. To me it says a company has faith in their cars to offer it. I wonder how much it actually costs BMW.?
— truecarlover (View Profile)

Posted on 3/10/2007 8:24:35 PM | reply to this comment | Votes: 1

This article fails to mention the 3-Series which accounts for half of all sales. I think that's a rather large omission. Doesn't the 5-Series have the best resale value of any car?
— lewissalem (View Profile)

Posted on 3/9/2007 9:49:30 AM | reply to this comment | Votes: 1

"It was bound to catch up when people realize BMWs cars don't perform anywhere near what they claim, so BMW buys them off to shut them up."

You are ridiculous.

Yes, that's EXACLTY what BMW is doing, RICEMASTER. They're just paying everybody to buy their cars, and yet for some reason, they still make money!

*SARCASM*, in case you didn't notice. I don't think you would have.

It's not the cars that under-perform, it's the drivers. 95% of BMW owners are posers, sadly enough.
— S4cabriofoxone (View Profile)

Posted on 3/10/2007 12:22:09 AM | reply to this comment | Votes: 1

this is ridiculous commentary. so people are being fooled that BMW handling better and are a hell of a lot more fun? if so, then please fool me some more. i'm loving it.

also, i find your logic of the media being "bought off" by BMW completely ignorant. but if you'd like to believe that here's some food for thought: lexus spends FOUR TIMES as much on advertising as BMW. so imagine how much worse they'd speak of lexus if they weren't being "bought off" by all those ad dollars.

— enthusiastx11 (View Profile)

Posted on 3/10/2007 3:02:06 AM | reply to this comment | Votes: 0

The 7 series is old thats the only resons the discount are that high compared with the new S-Class.
— BMW_DRVR (View Profile)

Posted on 3/9/2007 11:23:56 AM | reply to this comment | Votes: 1

I am confused by this article. Discounting practices. There are NO rebates or special financing on our cars. The ONLY thing they offer to sell cars are the lease programs. We dont discount our products $4k off MSRP. For one there is only a 7% profit margin on a BMW sold in the US. Take a 750LI that has a MSRP of $ 86,000. This means that there is only about $6k worth of profit to discuss with a client. BMW's average profit on a new car with the 1.5% hold back is $3200 per car. Would someone please help me out with the fact of these huge discounts .....
— BMW4me4ever (View Profile)

Posted on 3/9/2007 12:35:08 PM | reply to this comment | Votes: -1

To get the leases cheaper than the competition BMW has to subvent the back end of deal (residuals/interest rates). That's where the the money is being spent by BMW.

001
— Agent001 (View Profile)

Posted on 3/9/2007 12:37:56 PM | | Votes: 1

Agent ... that is true but they are not the only manufacturer that offers lease deals. Did you know that in the US, there is only about a 40% penetration of their sales due to leasing? Basically, not much of this article is true. I am surprised that you would post something like this. In the Midwest Ohio valley or Central Region ( BMW divides the US into 4 Regions ) their lease penetration in the midwest region is only 40%. Most of the info in regards to discounts doesnt make much sense. Talk about providing a skewed sense of realism. This is pathetic. I am pretty positive that in the Western Region of the US, they probably have a smaller amount of lease penetration due to the income levels.
— BMW4me4ever (View Profile)

Posted on 3/9/2007 12:46:25 PM | reply to this comment | Votes: -1

I live on the west coast and I've leased every one of my BMWs, as just about everyone I know. I bet leasing on the west coast is even more common than the Midwest... why tie up cash on a depreciating asset when you can lease it?
— joeyc (View Profile)

Posted on 3/9/2007 3:26:02 PM | | Votes: 2

joey ... Also, on the west coast you have a lot of dispensible income and such. I would bet that their lease penetration is about 30 to 40% ... That is why this article is ridiculous. I have 2 BMW's and lease both of them. I agree with you with the concept of leasing. Most of the clients that I take care of pay cash or finance. where I work is one of the most affluent regions in the midwest and they prefer to pay cash.
— BMW4me4ever (View Profile)

Posted on 3/9/2007 4:42:59 PM | | Votes: -1

So what about Lexus? Lexus subvents their lease program on the RX ( I know lexus is discounting their RX pretty heavy on the front end ), same as they do on the GS, and what they do on the IS> Audi .. they have some pretty good programs on the A4 sedan and conv ( i am in the business and have lost a few deals based on lease programs to these cars, The A8 and the A6 are discounted on the front end very heavily )> Infinti has akiller deal on the 2007 G35 ... Acura on the RL and MDX ...

This is the most biased article yet. Very pathetic of Autospies to do so
— BMW4me4ever (View Profile)

Posted on 3/9/2007 12:53:26 PM | reply to this comment | Votes: 0

The only lease deal Lexus gas currently is on the GS. Also, Lexus uses real residuals vs. the crazy residuals other companies use. I'll admit the RX gets discounted on the front end, like you point out, but theres no factory incentives coming from the back.
— Ironman273 (View Profile)

Posted on 3/9/2007 6:03:21 PM | | Votes: 1

Actually ironman the residuals that BMW use are real. They are based on real market conditions. There are no factory incentives coming from the back end of a BMW either.

*** Autospies if you are going to allow people topost there own articles on here, then make sure they have the facts str8. BMW doesnt do back end incentives unless there is a model or body style change. They do lease programs but they are not residual influenced. They will when a particular product gets backed up a little put out a subveened rate in order to help move more product out, but that is ONLY for a Lease. BMW doenst do special financing. Ask someone if there is a great lease deal on the new 2007 X5, 3-series conv, 3-series coupe, 3-series sedan, 7-series, M5, M6, 6-series .... The only programs which are incentivized for a lease are on the X3, Z4 & remaining 2007 5-series. *** Get your facts str8 before posting nonsense ***
— BMW4me4ever (View Profile)

Posted on 3/9/2007 6:47:47 PM | reply to this comment | Votes: -1

You are wrong...there are aggressive lease programs on the new 335's but most dealers aren't passing on the savings yet to customers.

001

There are other cars that also have good lease rates and residuals as well right now
— Agent001 (View Profile)

Posted on 3/9/2007 8:11:30 PM | | Votes: 0

agent ... actually you are wrong ...I work for BMW and will be happy to discuss the rates and the profits that BMW is selling the cars. This Article is not factual and misrepresents Autospies. It only glorifies the ineptness and pathetic excuses of this site.

335 coupes if you are lucky to get one may be able to get a $500 average discount( most are still on a 2 month wait list ). The new 2007 Conv most dealers are on a wait list of 3 to 4 months. 328 coupes can be found at an average saivngs of $ 1,000 to $1,500 off MSRP ( they do offer a pretty good lease program on the coupes, but this is offset by lack of inventory and discounts ) .... 2007 335xi no lease support ... 2007 335i decent lease program ... In any of the cases their is no special financing or rebates on the cars listed above ....
— BMW4me4ever (View Profile)

Posted on 3/10/2007 10:21:17 AM | | Votes: 0

You are wrong...there are aggressive lease programs on the new 335's but most dealers aren't passing on the savings yet to customers."

Agent, by saying this you are disputing this whole article.

The article says the BMW's discounting practices in the US leaves us speechless. If you are saying that BMW has leasing programs but arent passing the savings on to the clients, then what are you saying exactly.

2007 X5 for example has a lease program on it, but in regards to its competitors like the Lexus, Acura, Mercedes, Audi we are not even competitive ... Those other company lease blow us away.

BMW has incentivise leases for the Z4 , 525i sedan, 530 sedan 530xi wagon, 328i sedan , 328 coupe ... The 5-series is due to the fact that the 2008 will be out in April. Those cars do not make up even half of the cars BMW sells in the US. The great thing is that BMW is very profitable and they sell more cars in the US and have a higher resale value than any of our competitors. Lexus sells more cars and trucks combined, but in regards to passenger cars BMW is #1 and no one is even close
— BMW4me4ever (View Profile)

Posted on 3/10/2007 10:27:42 AM | | Votes: 0

Check your residuals given to you by your "finance manager" against the RVLG. I think you will find that most of them are inflated when compared with that publication. The "ResidualValueLeaseGuide" is used by banks and credit unions to calculate a lease. If the residual value quoted by a manufacturer is higher than what is published in that guide, then it is an incentivised lease. If the interest rate (money factor), is lower than bank market rates, then it is an incentivised lease. Trunk money is the only other form of price manipulation there could be.
— Neverfollow (View Profile)

Posted on 3/15/2007 3:50:15 PM | | Votes: 1

The biggeset scam is Future Value Financing, which is basically a forced "lease then buy". Look it up, mostly everyone (including BMW and Acura) do it. I'm not sure if Lexus or MB do it, they didn't last time I looked.

Spin it all you want, it shows that sizzle w/o steak eventually catches up to you (esp when the steak looks like garbage).
— huu76 (View Profile)

Posted on 3/9/2007 7:30:39 PM | reply to this comment | Votes: 0

i'm so over you. you're profoundly negative. and, frankly, a schmuck.
— enthusiastx11 (View Profile)

Posted on 3/10/2007 3:06:52 AM | | Votes: -2

Thank you :)
— huu76 (View Profile)

Posted on 3/10/2007 10:58:42 AM | reply to this comment | Votes: 3

BMW4ever,
lol, this article is so biased. Funny, you don't seem to have poblems with smear article targeting Toyota and U.S. companies.

loser.
— huu76 (View Profile)

Posted on 3/10/2007 10:59:51 AM | reply to this comment | Votes: 2

Geez, one negative article about BMW and the Beemer fans are up-in-arms! Relax, it's mostly one investor's opinion, although the Morgan Stanley downgrading might be cause for concern.

Every car magazine and Web site on earth gushes over BMW. And you can't handle one negative article? Try being an Audi fan!! LOL
— anS4inOC (View Profile)

Posted on 3/10/2007 11:19:21 PM | | Votes: 1

at least BMW doest have any pointless models that dont sell like the umm R Class .. which you can lease for Less than a 335i...
— AMGC55 (View Profile)

Posted on 3/11/2007 2:28:30 AM | reply to this comment | Votes: 1

Umm, they are getting an "R-class" vehicle very soon.
— Neverfollow (View Profile)

Posted on 3/13/2007 11:18:41 AM | | Votes: 1

so wheres the special lease rates on the RR Phantoms??
— AMGC55 (View Profile)

Posted on 3/11/2007 2:29:25 AM | reply to this comment | Votes: 1

BMW's pricing/leasing strategies are nothing short of ingenious. Their lease residuals are among the highest, which enables them to lease for less. Then they throw 4 years / 50k free maintenance on top of that, which ensures a steady supply of well maintained bimmers coming off leases, which dealers can sell at a premium. So bimmers hold their value, which goes back to higher residuals and lower lease rates.

i've leased several bimmers and the story has always been the same. i can always get into them for less than a comparable benz/lexus/audi, and the residuals are so high i've bought every bimmer i've leased and resold them immediately for a nice $2-4k of profit, which makes the total cost of ownership so ridiculously low that it's a no brainer!
— dgoodson (View Profile)

Posted on 3/11/2007 4:38:15 PM | reply to this comment | Votes: 0

Forgot to add, of course non of this would all be possible if bimmers weren't high in demand when new, and high in demand when used. even if you don't like bimmers, there's no denying that there are many many many people who do, and the residuals and used car market prove it.
— dgoodson (View Profile)

Posted on 3/11/2007 4:42:21 PM | reply to this comment | Votes: 0

There's just a lot of ppl who can't afford a Lexus, so they have to settle for a cheaper BMW.

Some ppl don't care about the car, just as long as the propellor is prominent on the hood. I think they're called enthusiasts.
— huu76 (View Profile)

Posted on 3/13/2007 8:47:20 PM | reply to this comment | Votes: 1

huu76, you have obviously never driven a bimmer. people may buy a lexus because it's more reliable, or an audi because of a prettier interior or understated luxury, or a benz because of its history or snob appeal, but people who value driving above all else drive bimmers. there's simply nothing else and that offers a better balance of handling, driving dynamics, sporting luxury and least amount of compromises. after a long day's work, i just look forward to the drive home through some twisties cuz my bimmer never fails to leave a grin on face when i'm done. That pleasure alone is worth the premium.

an no, i'm hardly an enthusiast. i'm just a guy who happens to test drive everything when shopping for a car and has always ended up with a bmw because nothing else compared. with all the other makes, i felt there were too many compromises...
— dgoodson (View Profile)

Posted on 3/16/2007 2:15:16 AM | | Votes: 1

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BMW resorts to high incentives to sell cars

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