Deal on a demo which is not really a demo (lease, insurance)

[uhuru]

I wanted to share this experience in case it is helpful to anyone else on this forum. Although this transaction involved a new BMW 328i, I think the strategy used here may well apply to other makes.

So here is the story: my son wanted to lease a new 2016 BMW 328i and we were trying to get the best possible deal on the car since the dealerships are currently getting rid of their 2016 inventory. One dealership offered us exceptional pricing on the car compared to other offers. I checked all of the terms including what the odometer reading on the car was before we went to the dealership to finalize the paperwork. We wanted a lease that was priced right with the only cash out would be the first month's lease payment. All other costs - bank fee, title, processing costs, etc - was to be rolled into the capitalized cost. There was no downpayment to reduce the capitalized cost.

When we got there the only surprise was when we were told that although the car had just 15 miles on the odometer, it would be shown on the paperwork as a demo in order to get the favorable pricing. Apparently the dealership had missed their sales target in terms of units sold in July and so what they were doing was to game the system. They showed paperwork that had been presumably backdated that the car was a demo since August 1 and because it was recorded that way, it was possible for them to reduce the price and BMW would adjust the cost to the dealership for the vehicle.

We accepted the deal since the pricing on the lease was excellent and we did not care that the car was a "demo". The lease was for 3 years and the car would then be turned in.

I don't know if other dealerships game the system this way but I certainly have not experienced this previously or even read about it. About the only unique thing about this particular vehicle was it was the only one with the exterior/interior color combination with the options my son wanted.

Anyway, I thought I would share this information with others in case it helps anyone else in negotiating a deal on a car.

[clawsondude]

I work as a sales forecasting analyst in the auto industry, currently for one of the OEMs. I can tell you that all OEMs game the system in one way or another. BMW probably uses this tactic more than any other though, particularly this year when their sales volumes are low compared to Mercedes-Benz (always try to outdo each other). You see BMW do this to an even greater degree in December if they are within spitting distance of being the top luxury automaker. It isn't really the dealership missing the target, it is BMW overall. What they do is offer the dealer a cash incentive to buy the vehicle as a demo so that the dealer comes out ahead when they resell it.

[Blue biker]

I used to work for a GM dealer in the 80's, cars put into demo service warranties month wise started the day it was put into demo service. The dealer also got a couple of credits on the dealer price and the options on the car. Even if you had the same model, color combo, etc in inventory you always tried to sell the "demo" first. The dealer got the credit for the car being in demo service and also got rid of the demo. The next buyer looking for that color/option combo might consider the demo a "used" car, although they are not considered "used" until titled. (We'd limit our demos to 3K miles) Some people want to put the first 100 miles on a car themselves. I had a woman who turned down a deal for a dealer swap I'd found because I would have put the first 100 miles on the car.

Since it's the 11th of Aug, and they said it went into demo service on the 1st. It just sounds like a good story for them to tell you to close a deal. Dealers are always trying to get rid of inventory, although when I worked in the industry cars weren't considered "leftovers" until the new model introductions. Sometimes new model year cars and present model years would be on the same truck. Once they became leftovers dealers got other price incentives to sell "leftovers".

[uhuru]

Originally Posted by Blue biker

Since it's the 11th of Aug, and they said it went into demo service on the 1st. It just sounds like a good story for them to tell you to close a deal.

The deal was done on August 8th, so it had technically been a demo for 8 days.

From our standpoint, we got a car that was priced almost $50 per month less than the next best offer we had from any other dealer so whatever the motivation of the dealer who did the deal with us, we were happy with what we got. I know my son had to sign a "release" that he was, in fact, getting a "demo" - but I would lease a car with 15 miles on the odometer no matter what they called it if the price was right!

Leasing a car is fraught with potential for a consumer to be cheated especially on the money factor which most consumers have no idea how that equates to an interest rate. BMW was offering a money factor of .00137. A well known national chain was quoting prices at 40 basis points higher and insisting that they could not lower that number. So the only real flexibility was on the price of the car since the residual was also fixed. I guess some buyers might have been drawn to a lower apparent cost even though they were paying a higher interest rate that the dealer was pocketing.

[Tourian]

Originally Posted by uhuru

Leasing a car is fraught with potential for a consumer to be cheated especially on the money factor which most consumers have no idea how that equates to an interest rate. BMW was offering a money factor of .00137. A well known national chain was quoting prices at 40 basis points higher and insisting that they could not lower that number. So the only real flexibility was on the price of the car since the residual was also fixed. I guess some buyers might have been drawn to a lower apparent cost even though they were paying a higher interest rate that the dealer was pocketing.

On a lease I negotiate a payment. I don't care how they arrive at it. If dealer A wants to hold some higher lease factor and cut the cost of the car, it doesn't matter to me. That's not being cheated, that's just that dealer protecting the back end money and putting the shaft to the sales people that probably don't get paid commission on finance reserve.

[LeagleEagleDFW]

Originally Posted by Tourian

On a lease I negotiate a payment. I don't care how they arrive at it. If dealer A wants to hold some higher lease factor and cut the cost of the car, it doesn't matter to me. That's not being cheated, that's just that dealer protecting the back end money and putting the shaft to the sales people that probably don't get paid commission on finance reserve.

Exactly. A lease is all about monthly payment, and how much cash down (hint - none).

[GTOlover]

Not sure if it is a good idea for parent to be leasing their kids a brand new BMW due to the fact that they may be better off with a nice used vehicle that can get some dings and dents without having any restrictions on mileage and condition.

Trust me as teen having to pay for my own vehicles we beat the heck out of them and drove them stupidly and got alot of little ding, dents and scratches and many into some minor accidents before we matured and gained hands on driving experience and learned the hard way.

[Tourian]

Originally Posted by GTOlover

Not sure if it is a good idea for parent to be leasing their kids a brand new BMW due to the fact that they may be better off with a nice used vehicle that can get some dings and dents without having any restrictions on mileage and condition.

Trust me as teen having to pay for my own vehicles we beat the heck out of them and drove them stupidly and got alot of little ding, dents and scratches and many into some minor accidents before we matured and gained hands on driving experience and learned the hard way.

Well, they can buy lease protect, or some other type of add on insurance that will cover excess wear and tear...or they can roll the dice that the kid doesn't bang it up...or they can just write a check at the end. I would probably do it like you do and put my kid in a beater for a first car, but I don't care/expect or worry about how others do it or get by...and I'm not saying that you do, I'm just saying there's so many "right" ways to do it for different people and their needs/expectations/circumstances.

[LeagleEagleDFW]

I don't believe the OP said this is for a teenager. Could be a college graduation gift or just an older kid who deserves it.

[sirtiger]

OP didn't say nor does it matter. That wasn't the topic of this thread. Haters will hate & continue to chime in not knowing much