b3d_sage

i'm just a newbie economics major focused on international macroeconomics, not a business major but... this makes sense. Obviously, the demand for more expensive cars is lower. This means the opportunity cost in holding higher priced inventory is going to be higher. To rebalance that, they would have to make a larger profit from the higher end cars. If the C's had such a large profi margin, many dealers would hardly even bother holding more expensive cars.

of course, i just finished ECO 1013 and 1023 so what do I know?

patrick_y

I'm a Business Management major, but I haven't even started studying for the stuff regarding my major yet. But I think that makes sense. I assume they make A LOT MORE per one of those cars than they do a C Class. C Class is the appetizer.

b3d_sage

the very first thing you will learn in studying any kind of economics- opportunity cost. it's what you have to give up in order to have something. For simplicity's sake I'm going to use made-up numbers here that I'm sure are waaaay off. If they make 10% on every car they sell and the price of an X-car is twice that of a Y-car they would only carry X-cars if the demand was equal to or greater than twice that of Y-cars. I'm going to say it's a pretty safe bet that in most parts of the US the demand for C230's is much higher than twice the demand for S550's. At the same % profit, the opportunity cost of having S550's in inventory would be higher than having the same amount of investment in C230's. So, until the demand for C230's is diminished to the point that the opportunity cost for S550 is equal to or greater than that of a C230, the dealership will have very little desire to keep an inventory of S550's. In order to MBNA to sell S550's, they would have to allow the dealerships higher profit so that the opportunity cost of having an S550 sitting on the lot is lowered.

of course, applying this to the real world isn't exactly as simple as plotting some lines on a graph and going "oh yeah baby, right there, that's the spot!" like it will be in your intro to microeconomics course.

Moviela

The percentage mark down on invoice is the almost the same across all lines of Mercedes-Benz cars. Dealers do not need to discount many higher priced models because the S550 is a bit like salt, people will buy the same amount, over a wide price range, as opposed to a C class where the number of units sold is more sensitive to price.

Dealers would love a 10% discount from MSRP and 6% holdback, but they don't get that. The truth for many dealers is that the cars pay the rent, but the shop makes the profit.

As to inventory costs, this is where it becomes very murky, because neither side (distributor and dealer) is publishing data. Sometimes the distributor has too many of a model in the pipeline, and will pay flooring for a limitied time, or give extra incentives for dealers to move that inventory. DaimlerChrysler is famous for making very expensive models hard to get, and allocates the desirable models to dealers based on performance. Makes them try harder to move C and E class iron in order to get SL and AMG models that sell quickly, and have no discount to the buyer.

If anyone can reduce automobile economics to a science, please dial GM and Ford, they are expecting yor call.

b3d_sage

good point, I hadn't thought of that. with such competition in the segment the C is in, it would be much more flexible in price. I was thinking the entire segment because I tend to me more of a macro-minded person.

methinks this may be the subject of a paper next year... thanks for the idea!

Outland

The C320 is closer to the C230 in performance, not the C350. The C350 really MOVES. Genuinely fast car. The C320 is nice...but there's only what, 10, 15 HP between the 06C230 and 05C320?

If you just a little more grunt, get the older C230 with the supercharged four...it gets off the line faster than the new V6 version, despite having less HP.

Gentlemanjim

Supercharged 4's are no longer imported in the US. It's C230 2.5 V6 Sport or the C280 3.0 V6 Luxury or the C350 3.5 V6 Sport or Luxury models. But I agree the C320 is only a modest upgrade in power over the C230. IF you take into consideration the Harmon Karden sound system and the full power seats. I would get the left over 2005 C320 if the price was the same as the 2006 C230. In my case $32,500 or less. I used to subscribe to the belief that "Too much power is never enough". I had 2 C5 Corvettes, an Audi S4 6 speed, BMW 330 Ci and last before the C230 a Z4. I enjoy the C230 more, so I guess Too much power isn't quite as necesary as it used to be for me. New belief "But more is always better"

Outland

Neither are C320's. The car/engine no longer exists.

But you said you were interested in more power, and that a one year older model was fine...that said, a new 05C230 is just as likely to be sitting on a dealer as the 05C320. Probably a lot better price than the C320 as well.

There's nothing wrong with wanting more power. However, with today's gas prices, the supercharged 4 makes sense mileage wise, and its actually quicker than the new, V6 version as a bonus.

I wouldn't dwell on it too long...looks like you change cars pretty often.

Alan B

The C320 has enough power and handling prowess to get you to your destination safely and on time. Unless you have $ to burn, why spend it on a more expensive car? Good luck w/your choice!

anonymouse

1. Full power seats are an option on the C230 - many people opt for it
2. The radio is the same

yep yep

patrick_y

First I agrree with b3d_sage, it's all about opportunity cost. The dealership isn't going to tie their money in something that's not going to sell well. That's why you rarely see dozens and dozens of SLs at the dealership during wintertime, since they don't sell as well as the sedans.

Yes, I have heard that the dealership selling new and pre owned cars does not really make the dealership much of a profit. However, the profit part is hard to say, since usually the owner will take it out of the dealership as operating expenses (the owner's draw which is also pretaxed so the owner has minimal taxes afterwards).

I believe that the dealership doesn't make that much money on selling the normal cars, but I believe they make a truck load selling the AMG cars that don't get any discount.

I still think the dealer makes considerable income on selling the normal cars. For instance, I still remember how I acquired the C230. The "Invoice" is about $3-4k less the sticker price. I acquired the C230 in my garage under this "supposed invoice" price and my sales agent told me that the dealership was still making about $500 on the car and that he would be paid a "small" commission of around $200 for selling this car. This car was acquired in January of 2005 and was an 05 model year car, it's black and there was nothing wrong with it other than the fact that they had 3 exact same cars with the same options in the same colour.

So, whatever the dealer is selling the car to you at; 1, they're still making money; 2, they always try to sell you the car to increase their allocation of AMG cars where the real money is; 3, the dealership still has a lot of fixed costs though, so although they might make $500 on the car for selling it next to nothing, it barely pays the rent that car took up.

They definitely make the most money in the service area. No question about it.

patrick_y

Did anybody notice that the 06 C230 has 12 more hp than the 05 C230 but 11 less lb/ft of torque?

Add 12 HP
Subtract 11 Torque
Net gain: 1

The C320 is still miles ahead of both 05 and 06 C230s. However, the C350, I can only imagine (haven't driven that car yet) how many miles ahead it is of the C320.

mick1

hey guys, the w203 doesn't have the keyless entry option, right ? I looked for it at mbusa.com and I didn't find such option. I hope the w204 will have it.

patrick_y

Nope, doesn't have the keyless entry option. Still, that option isn't necessary for gentlemen. It's more applicable to ladies who prefer to keep their car keys in their purse.

Lastly, I don't imagine that you'd want to pay $1000 for that option either. I'm willing to pay $2000 for xenon headlights, but Xenon headlights cost only $790? I'm not willing to spend more for something I car less about. Especially, since my car is very rarely driven by someone else.

b3d_sage

...speaking of gentlement vs ladies, you have given me an idea. I wonder if it would be reasonably simple to build a system that would open and close (gently) the front passenger door via a remote. Would save me the hassle of having to walk all the way around the ****ing car every single time

mick1

I checked the price for that option on the BMW 3-series (E90) and bmw only charges $500. I would definitely get that option on my next car. I think it's cool to forget about unlocking/locking and using the key to start the engine

patrick_y

Yes, I've noticed that it's $500 on the 3 series and $1000 on the 5 series. Same key, same thing, don't know why one costs so much more.

Anyways, the one thing that I really don't like about the Mercedes one is that they put the starter button on the gear shift.

Thus, because of this, they do not offer this option on their cars in Europe with manual transmission, I've been told. I assume that BMW still offers it, even with the manual transmission.

Additionally, it's very detrimental to put the starter button on the gear shift of an automatic transmission because some people will press "start" and less than a second later, shift into reverse to get the car out of the garage. The car really does need about 10 seconds minimum warm-up time (slightly more if the engine is cold) before being engaged in a gear.

patrick_y

I think the whole point is to have the man do it himself. If the car could do it, it takes the meaning out of it a bit.

b3d_sage

unless the man went through all of the troubble to install a system to do it for her. he's still putting effort (and money!) into it.

mick1

haha. This reminds me of that clip of Tom Cruise trying his best to open the passenger door of the Bugatti Veyron for his fiancee at the MI3 premiere

rrpnow

LMAO... i just googled that video... funny crap


http://video.google.com/videoplay?do...cruise+bugatti

patrick_y

That is so obvious that was redone on some kind of cheap movie software. Obviously, look at the photographers, where they are after the first time he tries to open the door, and where the photographers are again after the "second" attempt. Then look at the top part of the picture, someone wearing black shoes and trousers are walking past, then again.

Tom Cruise's passenger simply did not know how to undo the lock to the door. That's it. Besides, the Bugatti's passenger door lock switch is also hard to find. And the hole for the foor handle on the interior is also especially difficult for a lady with delicate fingers (with nails) to operate.

mick1

hehe. see the benefit of the keyless entry thingie ? Had Cruise got that option on his Bugatti, that door would just open. There would be no need for Katie to unlock the door for him.

anonymouse

I dunno know about being miles ahead - drive them back to back and you might be surprised, especially a 6 speed vs an A/T (which most of the 320s in my area are). I have yet to have a 320 pull on me (including my friend who has an 04 non sport)

ceindusa

Just a little insight on this subject... When a dealership offers a vehicle at invoice there is still plenty of profit in the vehicle. Most people assume that when a dealer prints out their invoice on that car that is mocked up or padded, that may be true at some of the sly or cut-throat dealers out there, but for the most part it is not. If they are going to sell it at invoice, a lot of time they will hold back the rebates. When they give the rebates to the customer the still have Marketing Support (usually towards the end of a model year). This can be from $250 - $20,000 depending on that vehicles expected depreciation and gap between invoice and MSRP. For example the MB CL, S & SL class has $15,000 marketing support for 2005 models. The SL600 has a base MSRP of $130,900 & an invoice of $121,737. So for the dealer to move a high end, 1 year old model like this (who's book value is only $115,300)... They are going to have to give one helluva price break on it. What I'm saying here is someone could walk into a MB dealership with a '05 SL600 on the floor and buy it for a little under $107,000 +TTL. So while they are still making money on the new models of the cars, the manufacturer is the one taking the hit.

The dealer has to pay insurance, detailing, gas, commission (which is usually 20-25% of front-end gross) etc… for every vehicle on their lot so, they have to realize a certain profit each month based on units sold. Outside of MSRP markup, addendum markup, and support from manufacturer, dealers make a helluva lot of money in finance (back-end profit). Finance guys are nothing more than salesman. Their biggest money maker is the “extended warranties” and “service plans”. There is usually about a 40% markup in those (even more on new cars than pre-owned). Most dealers will even markup your interest rate by 1-2% (I don’t know if they are still allowed to do this). There is also that wonderful $399 doc fee (it varies) that is nothing more than an extra $400 into the dealerships pocket. The salesman will usually give you a pitch on it like “Oh that’s to cover the costs of paying the employees to file and process the deal” (at least that’s what I used). If you think about it, that $400 added to the 200 deals a month the dealership is doing, that is an extra $960,000 they have made. If you don’t want to stop there, they also have all those nice factory extras to rip you on. Bottom line is, dealers will 99.99% of the time never loose money on a new vehicle. The only one that takes a hit is the manufacturer, and the hit is usually on the higher-end (overpriced) models. The part where the salesman gets screwed is he only get commission based on the front-end gross of the vehicle, so if the car is blown out and there is only a $500 front-end profit, they will only get a “mini” or “flat” (usually $100-$250 depending on the dealership). I hope this isn’t to off subject (not trying to hi-jack the thread), just wanted to give a little knowledge from my own experience.