2010 Mercedes E350

[jailer]

Thanks guys. That is what I am looking for. This is the type of discussion I enjoy and am much more interested in.

 

[TJPark01]

Now, I'm not talking about a S63 AMG. But the pedestrian Mercs and Bimmers are still demanding premium prices but making you pay xtra for leather, power seats, and things that are standard on cars costing half as much. A 528i or E350 prices out to be 15-20k more than a Tech V8, and the Hyundai would embarrass both cars on the track. I doubt any of the Germans care as they seem just as interested in being fashion statements as much as they are actually "ultimate" driving machines.

 

[Mark_888]

I think one factor missing in this discussion (unless I just did not see it) is that the Euro has been very strong the last decade, and dollar has been declining. This has put tremendous pricing pressure on European auto manufacturers who sell product in the USA. MB prices may have increased, and more stuff is now optional at extra cost, but in no way have these pricing actions kept up with the increase in Euro compared to the US dollar.

At the same time, the Korean Won has also been relatively weak, and provides Hyundai with pricing flexibility compared to their German competitors.

 

[TJPark01]

I think one factor missing in this discussion (unless I just did not see it) is that the Euro has been very strong the last decade, and dollar has been declining. This has put tremendous pricing pressure on European auto manufacturers who sell product in the USA. MB prices may have increased, and more stuff is now optional at extra cost, but in no way have these pricing actions kept up with the increase in Euro compared to the US dollar.

At the same time, the Korean Won has also been relatively weak, and provides Hyundai with pricing flexibility compared to their German competitors.

Excellent point. All international companies try and hedge their currency risk exposure, but it's not a perfect hedge. They also have exposure to so many basic materials price swings,fuel prices,advertising,labor unions. It's been known for a long time, that auto manufacturing, is a terrible business.

 

[DavidNJ]

BMW and Mercedes brands carry a prestige that enables them to charge the extra dollars. Additionally, BMW's have a drivetrain and usually suspension refinement that is better than their competitors.

There are quite a few 192" long sedans. Three Hyundais (Sonata, Azera, Genesis) are that size. So are 1 Cadillac, 1 Lincoln, 2 Infinitis, 2 Lexus, 2 Acuras, 1 Mercedes, ! Jaguar, 1 BMW, 1 Audi, and family sedans from Honda, Toyota, Mazda, Subaru, Ford, Chevy, Buick, Mercury, Nissan. The $35-42k price point also includes compact sedans from BMW, MB, Audi, and Lexus. Depending on the buyer's tastes, any of these could be competitors.

Note that the Cadillac CTS is sometimes compared to a 5 series (based on size and specification) and sometimes to a 3 series (based on price).

Also note that there is a big difference between purchase and lease, especially for BMW. BMW and to a lesser extent Audi and MB subvent their leases with artificially high residuals and artificially low money factors. BMW does it so widely that it effectively controls the market for quality 2-3 year old BMWs (if it is a certified pre-owned 2-3 year old BMW it probably has a problem).

As a result, a $50k sticker BMW 3 series ends up leasing for the same as a $40k Inifiniti or Hyundai.

Now the unknown is the true future value of the used Hyundai, which may be higher than expected as the brand image improves. However that wouldn't affect a lease.

Note: leases, especially on BMWs, are important when you add options. Options generally return pennies on the dollar. In the used market the difference in value between a $2500-3500 MSRP Technology Package equipped car and one without it may only vary by a few hundred dollars.

Most third-party leases and some manufacturer leases limit the number of options included in the lease (the residual is based on MSRP). However, BMW, which has lots options allows them all to be included. As a result, buying a new BMW is nearly always a bad deal. Leasing a new BMW is nearly always a good deal.

 

[Mark_888]

BMW and Mercedes brands carry a prestige that enables them to charge the extra dollars. Additionally, BMW's have a drivetrain and usually suspension refinement that is better than their competitors.

Except that the ZF transmission on the Hyundai Genesis 4.6 V8 is suspiciously like those used on some BMW's, and the Aisin transmission on the 3.8 V6 is pretty good also (used on Lexus cars, among others). I do agree about the suspension refinement on the BMW, but I am not sure that is an issue of cost as much as it is some incompetent Hyundai employees in the California desert who made some bonehead decisions.

The fact is that Hyundai is buying market share with the Genesis in order to improve their overall brand image. Hyundai makes over 3 million vehicles per year worldwide, and they can afford to do that.

 

[Mark_888]

Also note that there is a big difference between purchase and lease, especially for BMW. BMW and to a lesser extent Audi and MB subvent their leases with artificially high residuals and artificially low money factors. BMW does it so widely that it effectively controls the market for quality 2-3 year old BMWs (if it is a certified pre-owned 2-3 year old BMW it probably has a problem).

I will admit almost complete ignorance on the subject of auto leasing, and because of that I guess I don't understand why "if it is a certified pre-owned 2-3 year old BMW it probably has a problem" just because BMW leases have artificially high residual values. Could you explain that?

 

[sandy]

Except that the ZF transmission on the Hyundai Genesis 4.6 V8 is suspiciously like those used on some BMW's, and the Aisin transmission on the 3.8 V6 is pretty good also (used on Lexus cars, among others). I do agree about the suspension refinement on the BMW, but I am not sure that is an issue of cost as much as it is some incompetent Hyundai employees in the California desert who made some bonehead decisions.

The fact is that Hyundai is buying market share with the Genesis in order to improve their overall brand image. Hyundai makes over 3 million vehicles per year worldwide, and they can afford to do that.

Mark, thanks for your many insightful and helpful contributions to this site but you diminish your credibility with nutty attacks on hyundai employees, car dealers etc. Were you bitten by a dealer as a boy?

 

[Mark_888]

Mark, thanks for your many insightful and helpful contributions to this site but you diminish your credibility with nutty attacks on hyundai employees, car dealers etc. Were you bitten by a dealer as a boy?

Everyone is entitled to their opinion, including yourself. But I don't think I stand alone in my opinions of car salesman, or the fact that most Hyundai employees are not used to dealing with upscale customers (but there are always exceptions and I apologize to those who fall into that category).

Most of my comments about the tactics of car salesman are expressed in amazement when other people complain about them, as if the unsavory things that they often do are not normal industry practice, when most of us know they are commonplace. And I don't think car salesman do those things because they are terrible people, they do them because history has shown they usually work, and enable them to put more money in their pocket.

If you read my posts carefully about car salesman, you will see that I am not at all obsessed about their tactics, and I just accept that is the way they are. In fact, I often find their tactics a source of amusement (so long as I know what is coming and I am prepared). I enjoy watching car salesman try their sleazy tactics, the same way I enjoyed watching the movie "The Grifters."

 

[DavidNJ]

I will admit almost complete ignorance on the subject of auto leasing, and because of that I guess I don't understand why "if it is a certified pre-owned 2-3 year old BMW it probably has a problem" just because BMW leases have artificially high residual values. Could you explain that?

I have never seen a BMW dealer lease other than through BMW Financial. BMW Financial offers lower money factors and higher residuals...much higher than should be appropriate. For example, our 1998 had a wholesale value $4k below the residual in 2001. The dealer could buy it and sell it to us for $2k less than the buyout. BMW includes complete maintenance for 50k miles.

Because of these values if you are keeping the car less than 4 years it much cheaper to have the BMW lease.

When the cars come off lease, if they haven't been damaged they go into the CPO program. It costs the dealers about $1200 to certify the car, and it then includes a warranty to 100k miles.

So:

1. The overwhelming majority of BMWs available used that are under 4 years old were leased by BMW Financial
2. Only undamaged ones can be CPO
3. They all had complete maintenance since it was free

The only ones that are wholesaled are the few that were purchased and not leased, those that were damaged, or those purchased by a third party leasing agency. This is a small percentage of the total, so the lack of availability keeps this market price up.

Meanwhile the dealers sell CPO with warranty at a premium. Everyone does CPO, but BMW has made it a science.

On transmissions: BMW has not special science in transmissions, with their manuals being a little better than most. However, their engines are much smoother and more refined. That is a combination of engineering (can you say Iyy) and manufacturing.

Note: If a race engine builder rebuilds your Hyundai motor you will notice an instant improvement in smoothness.

BMW takes it further. When you use a high grade forged steel crank (4130, 300M, etc.) you don't need as much metal. Small block Chevy con rods have 2 or 2.1 inch journals. Racers use 1.88" Honda journals. BMW uses 1.78". Reducing rotational inertia is the same as taking weight off the car which is one reason BMWs have faster acceleration then their horsepower and weight numbers would imply.

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[Mark_888]

I have never seen a BMW dealer lease other than through BMW Financial. BMW Financial offers lower money factors and higher residuals...much higher than should be appropriate. For example, our 1998 had a wholesale value $4k below the residual in 2001. The dealer could buy it and sell it to us for $2k less than the buyout. BMW includes complete maintenance for 50k miles.

Because of these values if you are keeping the car less than 4 years it much cheaper to have the BMW lease.

When the cars come off lease, if they haven't been damaged they go into the CPO program. It costs the dealers about $1200 to certify the car, and it then includes a warranty to 100k miles.

So:

1. The overwhelming majority of BMWs available used that are under 4 years old were leased by BMW Financial
2. Only undamaged ones can be CPO
3. They all had complete maintenance since it was free

The only ones that are wholesaled are the few that were purchased and not leased, those that were damaged, or those purchased by a third party leasing agency. This is a small percentage of the total, so the lack of availability keeps this market price up.

Meanwhile the dealers sell CPO with warranty at a premium. Everyone does CPO, but BMW has made it a science.

Yes, I understand that BMW overestimates the residual (on purpose).

But I still don't understand your original statement that "if it is a certified pre-owned 2-3 year old BMW it probably has a problem", which seems to contradict what you said above in that "Only undamaged ones can be CPO". I know that I am missing something, but just curious as to what you meant (in case I ever want to buy a CPO BMW).

I was intrigued recently when my local MB dealer had quite a few 2 year old loaded E350's with about 25K miles for about $30K that were obvously coming off lease. I then found out that many other MB dealers had similar prices. I don't know if that is normal, or because the complete redesign of the 2010 model, or something else, but it seemed like a reasonable deal.

 

[TJPark01]

BMW includes complete maintenance for 50k miles.

No, only scheduled maintenance is included.

Because of these values if you are keeping the car less than 4 years it much cheaper to have the BMW lease.

You're not comparing apples to apples. When leasing, your payments may end, but then what do you do? You either have to lease again meaning you have more payments. Or you buy. When you buy at some point the payments stop. It's cheaper in this case if you ceased to own a car and walked away, which is never the case.

When the cars come off lease, if they haven't been damaged they go into the CPO program.

Cars that have been in accidents can still be CPO'd as long as the work had been done correctly. I looked at a 328i coupe. There are black plastic caps covering the bolts that hold the two front quarter panels in place. I popped them off, and they had all been turned. The only reason to turn those bolts is to remove them in order to paint the car, which means the car had been in a front end collision. Also there was overspray on the front A pillar. The body work was done well, no doubt, but the car was CPO'd and the carfax had no mention of any accident. But I work on cars and detail them, I know what to look for.

It costs the dealers about $1200 to certify the car, and it then includes a warranty to 100k miles.

BMW Certified Pre-Owned Warranty, you're covered for up to 6 years or 100,000 miles, whichever comes first. 100k warranty is not an extension of the bumper to bumper coverage. It's a separate limited warranty that covers mostly drivetrain components, and not a continuation of the original factory warranty.

Don't mean to be a pill, but I'm a Bimmer enthusiast who got confused and ended up owning a Hyundai, just wanted to clarify your statements, as they are very broad.

 

[DavidNJ]

It was scheduled then changed to comprehensive. It was interesting how the brake life magically increased 10k miles (to just over 50k) when that was done. Did they change it back? We switched to MB when the 2004 5-series came out. MB dropped scheduled maintenance for 2005...we estimated that having an NPV of about $1000.

Cars can be sold as new with repairs up to $4k or 10% of MSRP. Repaints of bumpers and fenders are common. If a major repair was done and it is CPO, the dealer may have violated their contract.

Cars are like beer, you don't buy them you rent them. You always have a cost of capital and depreciation cost. There is also a risk of loss of value from an accident. A Porsche with a repair can be worth $20k less than one than was never hit.

The lease makes the lessor responsible for the risk of resale value at the end of the lease. However, it forces you to borrow the residual and 1/2 the depreciated about in the lease at an interest rate above your cost of capital. In the case of BMW and to a degree other manufacturers it allows you to include options (which have little resale value) in the lease at the high residual. It removes the risk of loss of value from an accident. And excess miles are usually at 15¢ or 20¢ each, compared to 35¢ or more on a resale. In some states the lessee only pays sales tax on the lease payment, not on the full MSRP.

The penalty is having to trade in at a specific time, which may not be best for getting the new car you want.

In the low priced end of the car market it allows the cars to be sold for a lower monthly out of pocket expense since the lessee never pays the residual principal.

In the high end of the market it brings the customer back and provides the CPO cars. In BMWs case, they lease such a high percentage the odds that a car not CPO has a problem are high. Not 100% but much higher than a used MB or Lexus of the same vintage.

 

[TJPark01]

It was scheduled then changed to comprehensive. It was interesting how the brake life magically increased 10k miles (to just over 50k) when that was done. Did they change it back? We switched to MB when the 2004 5-series came out. MB dropped scheduled maintenance for 2005...we estimated that having an NPV of about $1000.

Cars can be sold as new with repairs up to $4k or 10% of MSRP. Repaints of bumpers and fenders are common. If a major repair was done and it is CPO, the dealer may have violated their contract.

Cars are like beer, you don't buy them you rent them. You always have a cost of capital and depreciation cost. There is also a risk of loss of value from an accident. A Porsche with a repair can be worth $20k less than one than was never hit.

The lease makes the lessor responsible for the risk of resale value at the end of the lease. However, it forces you to borrow the residual and 1/2 the depreciated about in the lease at an interest rate above your cost of capital. In the case of BMW and to a degree other manufacturers it allows you to include options (which have little resale value) in the lease at the high residual. It removes the risk of loss of value from an accident. And excess miles are usually at 15¢ or 20¢ each, compared to 35¢ or more on a resale. In some states the lessee only pays sales tax on the lease payment, not on the full MSRP.

The penalty is having to trade in at a specific time, which may not be best for getting the new car you want.

In the low priced end of the car market it allows the cars to be sold for a lower monthly out of pocket expense since the lessee never pays the residual principal.

In the high end of the market it brings the customer back and provides the CPO cars. In BMWs case, they lease such a high percentage the odds that a car not CPO has a problem are high. Not 100% but much higher than a used MB or Lexus of the same vintage.

That asterisk is very important. Here's what's not covered in the picture, sorry for the crappy iphone pic.
Also, to answer your question, no they didn't change it back, in fact they have magically extended all the recommended service. A oil change can last 15k miles in between, and no dipstick in most of them.

 

[DavidNJ]

Only the first three on the list would occur within the warranty period. The first, rotation, wouldn't affect models with different size front and rear asymmetric tires. It our northern climate, it is also covered by the change the snow tires and back.

The key is not the $1000 in cost, it is that BMW will own the service on these cars. When they come back off the lease, BMW knows what the service history is and that it has been done.

The point really is the cost of owning a car is the net present value of the cost of owning it. That includes depreciation, taxes, cost of money invested or borrowed, insurance, fuel, tires, maintenance.

When those costs are calculated, the cost of owning a leased $50k BMW is comparable to a $40k Infiniti. Not sure how the Genesis stacks up. How big are the discounts? It doesn't seem like the Hyundai lease is anything special.