Drive the Deal Alternatives

[S205-FTW]

I bought my car via DTD last year. I had a brief chat with the dealer about how the model works. From what I can gather, they are chasing volume sales bonuses from MB, rather than looking to make a large commission on each sale (they effectively pass most of their commission off as a dealer discount). Their margin in individual cases is very little - some way they absorb this is less customer service (no test drives, no bottle of champagne, flowers on collection, etc). The chap said he deals with around 50 punters (confirmed sales with paid deposits) at any one time and only makes £100 in commission himself per sale.

Personally, I would blame MB if they are incentivising large bonuses for dealer groups to sell x thousand cars every quarter. The dealer nearest me I originally got a quote from was several thousands of pounds off the DTD price. As much as I'd like to support a local business, I've got better things to do with £3k than pay a dealer who was actually father mediocre.

In terms of spec, my car was a factory order and well optioned. You could have whatever you want, PremiumPlus, Designo, whatever. S-Class, G-Class, AMG. So they weren't just going for poorly specced cars.

On the residuals side. I don't intend to keep any car I use so the residuals don't bother me. I just see it as a way of hiring a car with a monthly payment.

 

[gIzzE]

You would think that... but a new W205 2.0L Petrol Automatic is £30k RRP, or £26K though DTD. A late 2014 W204 is between £15 for a high-mileage low-spec one, to £20k for low-mileage high-spec, which makes no sense..

Unless for some reason buyers prefer the W204 to the new W205.... but otherwise why would anyone pay £20K for a 2 years old car of the previous model when a new one costs just £26k?

So it seems that for some reason the logic that says the low new prices push down second hand car prices does not always work.

Most 2 year old cars are like this though, get to years 3, 4 and 5 and they drop again.
Thing is most people see a 14 plate and think it is a year old. Plus it still has manufacturer warranty and will look new.


You can also buy a W205 C200 Sport with 25k miles on it for £18k now. That is £8000 off the discounted price and £13000 off list. A few on autotrader.

Sure you have lots of people 'asking' £20k for W204s, but will they sell?

 

[EVBUS]

I got mine through carwow. Went to the local dealer who gave me a tiny discount on a car that was in stock but not in the colour I wanted and with a few options missing.
Carwow offers ranged from 'no discount' to over £6k. I contacted one of the dealers and got a factory order car with just under £10k discount.
No idea how this works but there we are.

 

[stevehg]

1. I suspect it is driven in part by dealers forced to meet their quotas and then 'dumping' the spare capacity on the market through DTD.

In the olden days the dealers used to pre-register cars in order to meet their quotas, then sell them on at a discount because they were 'pre-registered' with delivery mileage, thus achieving the same effect.

If this is indeed the case, then MB UK can't really touch it... if dealers are not allowed to sell spare capacity via DTD or pre-register cars, they won't be able to meet their quotas, and the entire MB prachise model could be adversely affected.


2. Additionally... in part, selling cars through DTD is effectively selling online, and this reduces sales & marketing costs, even when taking into account DTD's commission.


3. And we should also keep in mind that the cars discounted on DTD are generally of basic trim level for the type, the options being mainly paint and transmission, but not the more unique options such as pano roof of Designo leather etc. So this is in effect the Economy section as opposed to Business class - i.e. the discount only works if the purchaser is after the cheapest option, but not for those who want more than the basics.



So the reduced price is probably a combination of all three.

But again, this is what I speculate, it would be interesting to hear from someone in the trade.

DTD works by using the fleet sales capability. When you buy via DTD, you deal with the business sales reps at the current MB dealer they are using at that time. You are just getting bulk buy rates, not any special deal or dumped cars.

You have the choice of buying from available stock or placing a factory order to your specification, and you can order whatever you like, just as in any normal retail order.

The fact is that even with Google, and numerous brokers at their disposal for years now, the majority of consumers still buy by walking into a dealer. Doesn't mean they don't get a discount, but the effect of online brokers is still minimal when you take the whole market into account.

cheers, Steve

 

[gIzzE]

....but the effect of online brokers is still minimal when you take the whole market into account.

Sorry, disagree.

The guy who walks into the dealer is affected by online brokers big time, but only when he comes to trade the car in.

Pay £40k for it new, then trade in and be told "But you can buy this new for £30k therefore a used car needs to be £20k, and means we ca only pay you £17k." means they are affected.

 

[Scooby_Doo]

I've just ordered my new car with a main dealer. Prior to approaching the dealer I went via DTD and Carwow for the new one and then Webuyanycar & Wewantanycar to sell the old one.
The deals offered were very good and after comparing them all I then went to the dealer to see what they could offer.
At the end of the day it's the cost to change cars that's important and in my case it was the dealer who offered me the best deal, not much in it but I'm happy to place my order with a local dealer.
Biggest problem with buying from DTD is that you have to sell your car privately which can be a nightmare and take ages.

 

[JBD]

MB UK dealers as I understand are no longer allowed to discount or price match unless there is a dealer contribution campaign going on.

That's not true at all, they can do what they want. That's the issue.

MBUK have the power to ban dealers from DTD etc, but they know it's increasing sales overall

 

[aquiss]

Well I added my details to both carwow and DTD and awaiting offers. Coast2Coast came back instantly with a discount, which seems inline with the dealer contribution.

 

[st13phil]

I absolutely agree that heavy discounting on new cars destroys residuals but DTD and their ilk are only giving the private buyer access to similar discounts that fleet buyers have enjoyed for years. The problem is that pricing in the UK new car market has been massively distorted for decades by the relative volume of Company Cars that are supplied at huge discounts. The honest solution would be to reduce the list price and stop the deep discounting, but that would pitch UK cars at a lower price than other countries in Europe who don't have the distortions our market does.

BMW is actually the worst of the German big three as they've been buying market share with big discounts for years, with the attendant rubbish residuals that entails. Mercedes-Benz have joined the party because, like all motor manufacturers, they can make very good money out of selling finance. By increasing volumes they guarantee they recover their manufacturing costs and manage to make a bit more out of each car too.

 

[gIzzE]

A few years ago in the States they were trying to take in house funding away from the manufacturer, so the dealer had to use a third party funding, fair trading policies and all that nonsense.
It was Ford who said "But the vehicles we sell are simply a tool to help us sell the product.....finance. Take that away and there is no company."

It was left as it was.

 

[st13phil]

"But the vehicles we sell are simply a tool to help us sell the product.....finance. Take that away and there is no company."

Absolutely true.

A friend of mine did some high-level IT consultancy for GM in Detroit a few years back. A Senior VP told him by way of an introduction to the company that "People think we're an auto maker. We're not. We're a pensions and healthcare provider who makes money by selling finance. We also happen to make cars.".

BTW, it's the pensions and healthcare aspects of their businesses that ensure the US Federal Government will never allow the American Big Three to fail: the burden it would put on government finances would be unacceptable.

 

[tuonopepper]

I used carwow and I guess it's a case of market economics really, of course I accept the Carowow, DTD approach etc benefits the bigger dealer groups who potentially secure bigger discounts due to the volume of units they shift.

That aid I will always give my local dealer a chance to quote and be competitive, as someone else mentioned there are different factors to consider and I look at he overall cost to change/cost per month moving forward.

As a consumer of the product I'm all for the biggest discount I can get, If I can get a Business Class flight for the same price of economy why wouldn't. That said the PCP model works for me so residual value is of no significance. I can see how this model of discounting etc really annoys cash buyers or those looking for good residuals.

 

[PXW]

Bought my new e class through DTD. Had wandered in to my local main dealer for a chat previously and he had given me an indicative price (without p/x as I was always planning to sell the BMW privately). Perfectly pleasant chap but miles away from the DTD price (about £4k adrift).

I called him back to give him an opportunity to match - left a message telling him when I needed to close off the deal but he didn't return my call for a couple of days, by which time it was too late. When he did eventually call, he complained a bit about unfair competition, how he has to provide test drives etc. I just pointed out that I hadn't taken any test drive with him, and hadn't taken any more of his time than was necessary to get an indicative price. He then said he could have got within less than a thousand or so of the DTD price and would I cancel DTD if he did. To which the answer was of course no - I would have lost my deposit, if nothing else, and he had already had first dibs on a bid for my business. And (rightly or wrongly) I am always reluctant to give my business to someone who was apparently quite prepared to lighten my wallet by thousands more than he needed to...!

Having said that, I agree that the online discounters are currently a disruptive force - the market model just seems to penalise those who don't check prices online. I fully expect the discount I achieved to flow through to to any secondhand value down the line - but that's very tough on someone who "negotiated" perhaps a 5% discount at the local main dealer.

 

[gIzzE]

I tried to buy a nearly new GLE (suv not coupe) recently through a main dealer. But that made even less sense than buying new from a broker.

I don't understand why the interest rates on used cars is so expensive at the moment?
With loans at an all time low, around 3.5%, why are used cars now at the 12% rate?

I enquired about the GLE SUV, a few months old at £41k.
With £4k down they wanted £808 a month with £10k at month 48.

I explained that I get 3.5% from Lombard. He kept saying "but we guarantee that car is worth £10k at the end."
I kept explaining that at 3.5% from Lombard I will have paid it off in full at £820 a month by month 48.
He just couldn't understand what I was saying, he kept saying "But we guarantee it is worth £10k at the end of the agreement."
I even emailed back saying "No, you are asking me for another £10,000 to keep the car, you are not guaranteeing me anything as that car will be worth £15-20k all day long."
His reply was along the lines of "Oh, I had never really thought of it like that before."

Needless to say that was the end of communications.

 

[markjay]

...BTW, it's the pensions and healthcare aspects of their businesses that ensure the US Federal Government will never allow the American Big Three to fail: the burden it would put on government finances would be unacceptable.

Yes, but it is also what got them into trouble in the first place.

At some point at turn of the century GM and Delphi had 40,000(!) employees worldwide beyond their needs, all on full pay and many with hefty healthcare insurance, that could not be made redundant due to various deals agreed with the local unions. They managed to drag this on until the 2008 crash (Delphi was under the protection of Chapter 11 from around 2005 till 2009), when the entire auto industry finally collapsed and needed a Federal bailout.

 

[aquiss]

Well that's a little frustrating

So one of my offers has come back from Carwow and its via my local dealership. The offer they have quoted via carwow is some 2.5k cheaper than they were quoting when talking face to face only the other day. More annoying, the point of contact is the same car sales person I was talking to when I went in.

 

[gIzzE]

Well that's a little frustrating

So one of my offers has come back from Carwow and its via my local dealership. The offer they have quoted via carwow is some 2.5k cheaper than they were quoting when talking face to face only the other day. More annoying, the point of contact is the same car sales person I was talking to when I went in.

Hahaha, brilliant.

 

[st13phil]

Yes, but it is also what got them into trouble in the first place.

Oh, I don't dispute that. I would say, however, that every western "mass employer" of yore has been or is in a similar position - unless they've folded completely and left their former employees high and dry, of course.

Regardless of any local agreements that "prevented" the shedding of excess labour, it was absolutely in the interests of the Federal Government that those employees were not made redundant as the Fed would either have had to pick up the welfare bill or the political fall-out. In other words, while it's fashionable in some circles to blame what might be called restrictive labour agreements, there were other interested parties who would have ended up in the brown sticky stuff if they hadn't been there - which explains much of the lack of appetite to challenge them.

In the end of course, the Fed ended up picking up much of the tab through the bailout, but that was more politically acceptable.

 

[st13phil]

I don't understand why the interest rates on used cars is so expensive at the moment?
With loans at an all time low, around 3.5%, why are used cars now at the 12% rate?

When I bought my E63 the salesman asked if I wanted to finance it. I asked what the best deal was that he could offer and was told 10.6% APR. How I laughed!

My assumption is that it is to make new cars (and their associated finance package) look more attractive to the uninformed without having to offer headline-grabbing discounts?

 

[st13phil]

Well that's a little frustrating

So one of my offers has come back from Carwow and its via my local dealership.

Ha ha

Don't forget to wear a hat and false beard when you go back in to discuss the deal with the salesman...