rbrylaw

Let's be real. The big orange man in the WH can huff and puff all he wants, but he is not getting tariffs on EU cars. He would single handedly destroy the automobile industry as we know it, put hundreds of thousands of people out of work and open the door to one of if not THE worst recessions in our history. Even his GOP lynch-men have publicly stated they plan to halt the stupid study about this. Should there be better trade relations on a world scale with the US? Absolutely. But putting huge tariffs on imports will only destroy the economy in rapid pace. It's not going to happen.

sackboydad

JTK44

Dear Visualguy:

Here is how taxes and tariffs work in New York when you lease:

You multiply the lease payment times the number of months. For example, $800 a month for 36 months is $28,800. NY State plus my Nassau County sales tax is 8.625%, That tax is due on the $28,800, $2484. The dealer then pays that tax. As the lessee you have two options: You can pay the tax at lease inception or have the tax rolled into the lease payment.

In New York it gets a bit "tricky" if you roll the lease payment into the lease: New York then considers the advancement by the dealer to New York of the tax $2484 to be a "loan" to you, and hence a "taxable" event. So, in effect you are paying a tax on a tax. So, you take the $2484, the tax on this amount at 8.625%, $214.25, total $2698.26 and add this into the lease. Then you multiple $2698.26 times the money factor (interest) and this total figure is then divided by the number of months and added into the lease payment.

As you can see the tax is not residualized.

In exactly the same manner the tariff, having been paid by MB to US Customs will be added into the lease payment.

Now it may be true that the present 2.5% tariff is built into the MSRP, but you can bet you last bottom dollar MB is not going to residualize a 25% ($16,000) tariff.

As you know the residual on a 36 month, 10,000 mile per year lease is 61%. That means on a $16,000 tariff, MB would be "eating" 61% or almost $10,000. IMO this is not going to happen.

visualguy

JTK44,

It's a problem for MB only if the increased tariff goes away before the car is returned. If the tariff stays, then used car prices will be higher as well, so no problem with the residual. If the tariff is eliminated, then suddenly the car will be worth less when you return it, and they will have to eat the difference.

My expectation is that we will see somewhat lower residual percentages when leasing after the tariffs are imposed to compensate for this risk. The tariff will be folded into the price and residualized just like today, but the residual percentage will be a bit lower than it is now.

JTK44

Anything is possible, but I believe that tariffs, like a tax will, not be residualized. A tariff is a form of tax - it is collected and is not a cost of manufacturing.

If residuals are lowered, then the monthly payment goes up. As nearly 70% of E and S class are leased, Tariffs and lower residuals will substantially increase the monthly payments.

To the 30% who buy, they will think twice if the MSRP will be increased 25% - knowing that if they wait in all likelihood the tariffs will be dropped.

If there are 25% tariffs the real winners are owners of late model cars as their value will go up:

visualguy

No doubt that both buyers and those who lease will be impacted significantly by such tariffs.

If you think that the tariffs will go away within 3 years, then leasing may make more sense than it normally does, especially if the residuals aren't reduced much compared to what they are now. The scenario you describe where the new tariff isn't part of the residualized price is not going to happen - too extreme and doesn't make sense unless the tariffs were going away for sure.

As to the tariffs going away, remember that the 25% tariff imposed by the US on light trucks has persisted since the 60s, and was just extended for another 20 years in the US trade agreement with South Korea. Such tariffs are very sticky once imposed because they change how the industry operates and develop a powerful constituency in the industry for keeping them once the industry adjusts to rely on them and on higher prices.

ECGC

Hi All, I heard from my dealer yesterday. Car was ordered on April 5 with HUD, 12.3 inch screen and all assistive electronics. I was told "Your new E450 is at the port awaiting the launch/release date by Mercedes Benz. 2019s are not due to be released prior to September 1". Well, at least the build was not delayed.

rbrylaw

Congrats on knowing your car is built and waiting for you. My dealer also confirmed 2019's won't be released till 4th quarter, which is September. For me, my order just went in yesterday, so my car couldn't possibly arrive in the states before September, anyway.

AZEZ

For those doom and gloomers, it appears President Trump's strategy is working and we will not have a trade war, rather we will get tariff concessions from the EU, commitment to purchase more US goods, and the auto market looks stable at this point. In fact, I would not be surprised if tariffs on EU cars go down a little bit over the next year though the official tentative agreement is to exempt the auto industry from current negotiations. Here is a snippet of today's announcement:

"After talks at the White House with E.U. officials, Trump announced in a joint Rose Garden appearance that the delegation agreed to increase imports of soybeans and liquefied natural gas. Both sides agreed to work toward the goal of "zero" tariffs and subsidies on non-auto industrial goods and to "resolve" recent tariffs that both sides have imposed."

rbrylaw

To say that I am not a fan of his, is an understatement, but I will be very relieved if no tariffs are imposed on my new build, which is yet to be built.

visualguy

They reached no agreement on autos, as you can see in the quote. However, it looks like the auto tariffs are on hold for now, which is definitely good news.

haibieb

Yesterday afternoon (July 26th), my salesperson informed me of another delay! Certification of engines is being attributed. No scheduled delivery date. I think is time to look for alternative vehicles. Maybe another CLS or GLE AMG 43.

sackboydad

haibieb

Its actually beyond that time as of now....

sackboydad

haibieb

The source is: MBUSA

sackboydad

rbrylaw

How is late July past late August early September? MB typically doesn't release the next model year cars until the beginning of the 4th quarter, which is September. It's not even August.

sackboydad

rbrylaw

oops......you're right. I hope people don't have to wait till October for their cars already sitting at VPC's until October. For me, my just recently ordered car won't likely arrive in the US till October anyway, so for me, it's not an issue. But I know it's VERY frustrating for those who's cars are built and just sitting there having to wait for someone to flip a switch and let them truck to the dealerships. And financially, I don't see any upside to MBUSA holding these cars?

ua549

My 2018 E300 sat at the VPC for several weeks until it was released in August 2017. I don't think that MB has held release dates until 4th quarter just for marketing reasons.

sackboydad

My E450 Cab has been in Baltimore since July 6.

I am completely amazed at how hard it is to give someone $85,000. Usually they want it :-)

JTK44

Just a thought: Maybe they hold to move current inventory of 2018 in stock at dealerships?

In any event the reason does not matter: You ordered the car, you have the price fixed and it as an asset you will probably hold for 3 years or more so delivery in September, October or beginning of November in the big picture really does not matter.

These are what I call "First World Problems!"

rbrylaw

We bought one of the very first 2016 GLC's that rolled into the country. It sat at the VPC for weeks before MBUSA finally released it into our dealership. No reason was ever given. It just sat there. Fortunately, the VPC for Tampa is Jacksonville, so it's a 4 hour drive away. Once released, it makes it here quickly, but I do remember how frustrating it was just waiting with no news, rhyme or reason.

I know. Right?!

ua549

Often certain models are held at the VPC due to a service campaign parts shortage.