EDP economics and final thoughts
08-11-2018, 05:00 PM
#1
Member
Thread Starter
EDP economics and final thoughts
Took U.S. delivery of my 2018 C63s coupe last Wednesday, and here are some thoughts.
One can save a lot of money with EDP, albeit perhaps at a bit of an emotional trade off. To maximize the money savings and to minimize the emotional cost it is critically important to deal with a salesperson that knows both auto sales and the EDP program.
As I now understand things (perhaps not entirely correctly) there are three ways relevant here to buy a car:
____(1) Walk onto a dealer's lot and buy one from their on-hand stock. The pros are zero wait and the possibility to negotiate a discount based on factors like how long they have had the car without it selling. The cons are that you must take what you can get and there may be nothing motivating them to give you any discount. This is were "allocation" raises its ugly head. If dealers are selling all of their allocations they will not give a penny off of sticker and what cars they pre-order will be bloated with high profit margin options.
____For example, while picking up my car I noticed that my dealer has a 2018 E63s hatchback. The basic MSRP is $106K+ but its optioned out for $142K+! The thing has carbon fiber throughout, racing seats, and ceramic brakes -- yes, all on a glorified standard white station wagon. Will this dealer sell it for sticker, or will they have to discount it after it takes up floor space for 90 days? Their local demographic is successful women real estate agents and owners of gay nightclubs (not being judgemental about anything here), i.e., not gear heads who will realize that racing seats and ceramic brakes are really bad ideas for a daily driver.
____(2) Order a car with just the options you want. The pro is paying for only what you want (as long as you do not get hustled to pay a premium over MSRP). The cons are that you wait ~4 months to get your car and the dealer may only grudgingly take your order because the car will still come out of their allocation and they will not be able to "stuff" it with $35k of ridiculous options.
____(3) Order an EDP car. Like option (2), a pro here is that you get only what you want. Another pro is that you get the factory 5/7% discount off of MSRP, and that goes all or most of the way towards paying for a great European vacation. But the biggest pro may be the one that most of us and many unskilled sales people are ignorant about -- (as I understand things ...) EDP cars do not come out of dealer allocation! Thus, while a dealer may not offer a penny of dealer discount on a car under option (1) or (2), because that will likely be lost profit, they have an incentive to offer any dealer discount necessary to secure an EDP sale.
____For example, I first went to a local dealer and said I wanted an C63s coupe. Their sales person agreed to the factory 5% AMG discount under EDP, after I reminded him it exists and asked for it, but he would not give me a penny of dealer discount. Ignorant of how allocation works on EDP cars, he actually said "we are selling all the C43's and C63's we can get". So I left and went to another dealership with a person truly skilled at auto sales and especially with EDP. I stated what I wanted, asked a couple of intelligent questions about two options, and got detailed answers and intelligent suggestions in reply. In the course of this we both developed respect for each other. I was offered a substantial dealer discount without having to ask and I promptly accepted (based on my research here and elsewhere having convinced me that I probably could not get a better deal).
____Finally, EDP has some cons. My order was entered in the first week of January but my car did not reach me here until last week (first week of August). With per-ordered 2019's already on the street that can be very frustrating.
One can save a lot of money with EDP, albeit perhaps at a bit of an emotional trade off. To maximize the money savings and to minimize the emotional cost it is critically important to deal with a salesperson that knows both auto sales and the EDP program.
As I now understand things (perhaps not entirely correctly) there are three ways relevant here to buy a car:
____(1) Walk onto a dealer's lot and buy one from their on-hand stock. The pros are zero wait and the possibility to negotiate a discount based on factors like how long they have had the car without it selling. The cons are that you must take what you can get and there may be nothing motivating them to give you any discount. This is were "allocation" raises its ugly head. If dealers are selling all of their allocations they will not give a penny off of sticker and what cars they pre-order will be bloated with high profit margin options.
____For example, while picking up my car I noticed that my dealer has a 2018 E63s hatchback. The basic MSRP is $106K+ but its optioned out for $142K+! The thing has carbon fiber throughout, racing seats, and ceramic brakes -- yes, all on a glorified standard white station wagon. Will this dealer sell it for sticker, or will they have to discount it after it takes up floor space for 90 days? Their local demographic is successful women real estate agents and owners of gay nightclubs (not being judgemental about anything here), i.e., not gear heads who will realize that racing seats and ceramic brakes are really bad ideas for a daily driver.
____(2) Order a car with just the options you want. The pro is paying for only what you want (as long as you do not get hustled to pay a premium over MSRP). The cons are that you wait ~4 months to get your car and the dealer may only grudgingly take your order because the car will still come out of their allocation and they will not be able to "stuff" it with $35k of ridiculous options.
____(3) Order an EDP car. Like option (2), a pro here is that you get only what you want. Another pro is that you get the factory 5/7% discount off of MSRP, and that goes all or most of the way towards paying for a great European vacation. But the biggest pro may be the one that most of us and many unskilled sales people are ignorant about -- (as I understand things ...) EDP cars do not come out of dealer allocation! Thus, while a dealer may not offer a penny of dealer discount on a car under option (1) or (2), because that will likely be lost profit, they have an incentive to offer any dealer discount necessary to secure an EDP sale.
____For example, I first went to a local dealer and said I wanted an C63s coupe. Their sales person agreed to the factory 5% AMG discount under EDP, after I reminded him it exists and asked for it, but he would not give me a penny of dealer discount. Ignorant of how allocation works on EDP cars, he actually said "we are selling all the C43's and C63's we can get". So I left and went to another dealership with a person truly skilled at auto sales and especially with EDP. I stated what I wanted, asked a couple of intelligent questions about two options, and got detailed answers and intelligent suggestions in reply. In the course of this we both developed respect for each other. I was offered a substantial dealer discount without having to ask and I promptly accepted (based on my research here and elsewhere having convinced me that I probably could not get a better deal).
____Finally, EDP has some cons. My order was entered in the first week of January but my car did not reach me here until last week (first week of August). With per-ordered 2019's already on the street that can be very frustrating.
08-11-2018, 09:28 PM
#2
Member
Took U.S. delivery of my 2018 C63s coupe last Wednesday, and here are some thoughts.
One can save a lot of money with EDP, albeit perhaps at a bit of an emotional trade off. To maximize the money savings and to minimize the emotional cost it is critically important to deal with a salesperson that knows both auto sales and the EDP program.
One can save a lot of money with EDP, albeit perhaps at a bit of an emotional trade off. To maximize the money savings and to minimize the emotional cost it is critically important to deal with a salesperson that knows both auto sales and the EDP program.
08-12-2018, 01:59 PM
#3
Member
Thread Starter
Good point Wagonrock.
Here is related subtle aspect to EDP. The selling dealer and the delivering dealer can be different (getting 75%/25% cuts of the overall sales commission, as I read in MBZ dealer training materials).
So, for instance, an EDP expert at a Southern California dealership ( e.g., the one many of us know and love ...) can make the sale and handle the whole EDP aspect of that but the car can ultimately be delivered to the customer at an Alaska dealership. The Alaska dealership sees this the same as they effectively see any domestic sale -- they receive the vehicle from the MBZ Vehicle Preparation Center (VPC); e.g., the one in Long Beach, California), they collect local sales tax, register the car, etc. If anything, since the customer has already driven the car in Europe and they know the operation of most of the controls already, the delivering dealer does not have to spend time teaching them what they already know.
Now that is an example of a win, win, win, win.
Here is related subtle aspect to EDP. The selling dealer and the delivering dealer can be different (getting 75%/25% cuts of the overall sales commission, as I read in MBZ dealer training materials).
So, for instance, an EDP expert at a Southern California dealership ( e.g., the one many of us know and love ...) can make the sale and handle the whole EDP aspect of that but the car can ultimately be delivered to the customer at an Alaska dealership. The Alaska dealership sees this the same as they effectively see any domestic sale -- they receive the vehicle from the MBZ Vehicle Preparation Center (VPC); e.g., the one in Long Beach, California), they collect local sales tax, register the car, etc. If anything, since the customer has already driven the car in Europe and they know the operation of most of the controls already, the delivering dealer does not have to spend time teaching them what they already know.
Now that is an example of a win, win, win, win.
08-14-2018, 09:49 PM
#4
Member
Great write up and excellent points. I fully agree that it is best to work with a knowledgeable EDP dealer, but to add to your post, doing your homework can also work, as it did for me.
Having done EDP for a BMW several years ago, I understood the importance of knowing the advantages of EDP for the dealer is a key point to successfully negotiating a discount beyond the standard EDP 5/7%, a point you made quite well in your post. After spending several months researching the MB EDP program, trying to determine the EDP advantages for the dealer, it wasn't until I found the 2014 EDP Dealer Workbook that I felt ready to negotiate a deal. Armed with the info in this guide I put together an email that included a spread sheet detailing the car with options, along with list prices and expected discount price. I also detailed in the email the EDP dealer advantages and attached the relevant pages from the Guide. Using this strategy I was able to negotiate an additional 5% off over the standard 7%, working with a relatively new salesman that had never done EDP before (I do suspect he was provided guidance from a senior sales associate that knew the EDP). I believe one of the major reasons this negotiation strategy worked was because the email literally spelled out, with documentation, why it was to the dealer's advantage to accept my offer. All negotiations where done via email, I never met the sales associate until 30 days before delivery when I had to pay for the car, as documented in the Guide.
Another point you made was EDP cars can be sold by one dealer with delivery at another dealer. You mentioned a 7.5%/2.5% split of the deal's 10% commission, the guide states the split is actually negotiated between the selling and delivering dealer, but recommends an 8%/2% split. But 2.5% for the delivery dealer may be the current standard rate.
I just checked, the link to the 2014 EDP Dealer's Workbook seems to be broken (maybe MB figured out it was accessible on the Internet), so I have attached my copy of the guide to this post. There are some EDP changes since 2014, but much of the information is still accurate as far as I know.
Having done EDP for a BMW several years ago, I understood the importance of knowing the advantages of EDP for the dealer is a key point to successfully negotiating a discount beyond the standard EDP 5/7%, a point you made quite well in your post. After spending several months researching the MB EDP program, trying to determine the EDP advantages for the dealer, it wasn't until I found the 2014 EDP Dealer Workbook that I felt ready to negotiate a deal. Armed with the info in this guide I put together an email that included a spread sheet detailing the car with options, along with list prices and expected discount price. I also detailed in the email the EDP dealer advantages and attached the relevant pages from the Guide. Using this strategy I was able to negotiate an additional 5% off over the standard 7%, working with a relatively new salesman that had never done EDP before (I do suspect he was provided guidance from a senior sales associate that knew the EDP). I believe one of the major reasons this negotiation strategy worked was because the email literally spelled out, with documentation, why it was to the dealer's advantage to accept my offer. All negotiations where done via email, I never met the sales associate until 30 days before delivery when I had to pay for the car, as documented in the Guide.
Another point you made was EDP cars can be sold by one dealer with delivery at another dealer. You mentioned a 7.5%/2.5% split of the deal's 10% commission, the guide states the split is actually negotiated between the selling and delivering dealer, but recommends an 8%/2% split. But 2.5% for the delivery dealer may be the current standard rate.
I just checked, the link to the 2014 EDP Dealer's Workbook seems to be broken (maybe MB figured out it was accessible on the Internet), so I have attached my copy of the guide to this post. There are some EDP changes since 2014, but much of the information is still accurate as far as I know.
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