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2Addicts | BMW 2-Series forum BMW 2 Series (F22) Forum 2 Series Pricing, Ordering, European Delivery Can someone explain "dealer allocation" to me?

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      02-21-2014, 03:12 PM   #1
MegaMatt3
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Can someone explain "dealer allocation" to me?

I've seen enough references to "dealer allocation" to no longer be able to ignore the phrase without asking questions.

I assume, obviously, that dealers are allocated a certain number of units (per what time period?). But people are saying they anticipate better deals once units are "no longer coming out of dealer allocations". What do they mean by that? How does that translate to a lower price?

Thanks.
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      02-21-2014, 03:35 PM   #2
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I guess since they come out of their allocations, they are less likely to offer steeper discounts on them so they can make more $$$ on the limited number they have.
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      02-21-2014, 04:13 PM   #3
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Quote:
Originally Posted by mattssi View Post
I guess since they come out of their allocations, they are less likely to offer steeper discounts on them so they can make more $$$ on the limited number they have.
Ok, but don't all vehicles come out of dealer allocations? If I buy a BMW from a dealer, and it doesn't come out of their allocations, where is it coming from?
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      02-21-2014, 04:19 PM   #4
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BMW directly? My 135i was built and shipped and delivered to my house. I don't think it came out of dealer allocation.
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      02-21-2014, 04:20 PM   #5
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Quote:
Originally Posted by MegaMatt3 View Post
Ok, but don't all vehicles come out of dealer allocations? If I buy a BMW from a dealer, and it doesn't come out of their allocations, where is it coming from?
When ED orders stop coming out of dealer allocation, when you go to the dealership and make the ED order it won't come out of their allocation. I guess you could say itll come out of "BMW allocation" ha.

But when that happens, they won't need to worry about maximizing profit per allocated car for ED orders at least.
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      02-21-2014, 07:30 PM   #6
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Does PCD fall in the same boat as EU when it comes to dealer allocations?

Bonus question: do they still charge destination and handling if you get PCD?
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      02-21-2014, 08:07 PM   #7
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Ok so if I custom order a BMW by walking into a dealer, that never comes out of dealer allocations? Or is it more complicated than that? Why would a dealer sell me a car if there's no profit in it for them?
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      02-21-2014, 08:15 PM   #8
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Quote:
Originally Posted by Deso View Post
Does PCD fall in the same boat as EU when it comes to dealer allocations?

Bonus question: do they still charge destination and handling if you get PCD?

It has nothing to do with ED or PCD. A dealer is allocated a certain number of cars with better performing dealers getting higher allocations. When you special order a car, it either comes from a spot that the dealer already had allocated for them or one that is not out of any allocation.

When a dealer sells you a car that comes from their allocation they generally do not sell it for a tiny profit (think invoice plus 500) since they will be losing one of their guaranteed cars.

Occasionally the manufacturer will run specials and try move more units of certain models. When this happens dealers can special order as many as they want without it affecting any of their guaranteed slots. So, since they can sell as many as they want, some won't mind taking a small profit and going for volume.

A new model car almost always comes out of allocations because the manufacturer still has to see what the demand is and make sure they are able to supply a fair amount to all dealers.

And to answer your second question, it does not matter where you have your car delivered, you are always paying 925 handling and destination. Yes, even to get to the PCD, a car has to be taken off a boat, clear customs and then be trucked to the PCD.

Last edited by five3three; 02-21-2014 at 09:21 PM.
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      02-21-2014, 08:19 PM   #9
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Quote:
Originally Posted by MegaMatt3 View Post
Ok so if I custom order a BMW by walking into a dealer, that never comes out of dealer allocations? Or is it more complicated than that? Why would a dealer sell me a car if there's no profit in it for them?
The answer is it depends on if the manufacturer is allowing the dealer to order from outside of what they are allocated. M235i, still comes out of allocation. When demand dies a bit BMW will want to move more units so they will allow it to not come out of allocations. See my previous answer for more details.

A dealer will NEVER sell you a car with no profit. Even when they sell it to you for 500 above their costs there are still other incentives they get such as rebates and hold backs which guarantee more profit. And they will sell for that kind of number because some profit is better than no profit especially if it doesn't count against them.

Last edited by five3three; 02-21-2014 at 08:24 PM.
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      02-21-2014, 09:02 PM   #10
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Alright, so I think I'm beginning to get it. Now you say that dealers are only allocated a certain number of units, and they may or may not be allowed to sell above their allocation. Does that mean, hypothetically, one could walk into a dealer and be turned down because the dealer has reached their limit with allocations and isn't being permitted to go above? That seems next to impossible...

And to clarify, you said that if they're not selling out of their allocations, they're less likely to sell for a small profit since they'll be using up one of their spots. I'm not sure I'm following this part. If a dealer is selling outside of allocations, why is that using up a spot?
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      02-21-2014, 09:17 PM   #11
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      02-21-2014, 09:21 PM   #12
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Quote:
Originally Posted by MegaMatt3 View Post
Alright, so I think I'm beginning to get it. Now you say that dealers are only allocated a certain number of units, and they may or may not be allowed to sell above their allocation. Does that mean, hypothetically, one could walk into a dealer and be turned down because the dealer has reached their limit with allocations and isn't being permitted to go above? That seems next to impossible...

And to clarify, you said that if they're not selling out of their allocations, they're less likely to sell for a small profit since they'll be using up one of their spots. I'm not sure I'm following this part. If a dealer is selling outside of allocations, why is that using up a spot?
It is not impossible. It is very possible. That's why nobody will sell you a car like that at invoice or near invoice. For example, with the M235i, dealers are currently getting only a few a month max. That's why they wouldn't sell it at invoice since they wouldn't have more than those they can sell. I'm talking about special orders. They can do dealer trades and get them from other dealers all they want. But you wouldn't get that at the rock bottom pricing.

I'm confused with the last paragraph so let me try to clarify. If a car is not coming from their allocation, some dealers will sell for a small profit since it doesn't affect their guaranteed spots. If it is coming from their allocation, unless the car is not selling very well, you'll be hard pressed to find someone to sell at only a tiny profit.

Think of it this way. Let's say BMW has planned to produce 1000 M235i's in the first production run to see what the demand is. If one dealer sells 1000 of them in the first month because they are giving crazy deals, then everyone is in trouble because BMW can't meet the demand and other dealers are left with nothing.

Last edited by five3three; 02-21-2014 at 09:30 PM.
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      02-21-2014, 09:29 PM   #13
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Quote:
Originally Posted by MegaMatt3 View Post
Alright, so I think I'm beginning to get it. Now you say that dealers are only allocated a certain number of units, and they may or may not be allowed to sell above their allocation. Does that mean, hypothetically, one could walk into a dealer and be turned down because the dealer has reached their limit with allocations and isn't being permitted to go above? That seems next to impossible...

And to clarify, you said that if they're not selling out of their allocations, they're less likely to sell for a small profit since they'll be using up one of their spots. I'm not sure I'm following this part. If a dealer is selling outside of allocations, why is that using up a spot?

A dealer gets X allocations / month and they can't sell above their allocation.
Yes, for example dealers get only 1 or 2 M235 allocations per month at the moment so, most likely if you go to the dealer and want one, unless you have put a deposit already you will have to wait for the next untaken allocation.

Once they start selling out of allocations it won't be using one of their spots.. but right know BMW won't let dealers sell out of allocations cause there is too much demand
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      02-21-2014, 11:48 PM   #14
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If everything you guys are saying here is true, then I guess I shouldn't be surprised that the dealer I went to was probably marking up the MSRP on the lease "deal" they offered by over $1,000.
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      02-22-2014, 01:07 PM   #15
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Why is everyone assuming there is such high demand? The 1 series was a very slow seller in the US, they were only selling 500 a month or 6,000 a year for the 128, 135 and 135is. Compare that to a Mustang or Camaro at 75,000 each a year. By any standards 6,000 a year is not a big seller when the X1 sold over 25,000 in the US last year. 360 dealers and 1-2 allocation per month doesn't mean a big seller especially if you include the regular 228. Even assuming BMW could double sales of the 2 series that still puts it as a niche series. Remember its a coupe and most people do not buy coupes.
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      02-22-2014, 01:29 PM   #16
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sorry... I think it's not that there is such high demand but actually very low supply.... and the car is just coming out so some people are already waiting for it
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      02-22-2014, 04:45 PM   #17
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Ok, I think I'm up to speed now. To summarize:

Dealers are allocated a certain number of units per month to sell from their dealership. When they sell a car from their allocations, they're less likely to give you a good deal because they want to maximize profits from the cars they're allocated.

BMW may or may not allow individual dealers to sell above their allotted units per month. If they're not allowing a dealer to sell outside of allocations, and the dealer has sold their allotted cars for the month, a buyer will have to wait until the dealer gets more units in that they can sell. If they are allowing the dealer to sell outside of allocations, and the dealer has sold their allotted cars for the month, the buyer can simply purchase a vehicle through the dealership that doesn't come from their allocations. This is when the buyer is most likely to get a good deal.

But a question (if I have that all right): If BMW is allowing a dealer to sell outside of allocations, doesn't the dealer stand to profit just as much by selling outside of allocations? Why are they more likely to mark it down then?
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      02-22-2014, 08:41 PM   #18
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Thing is that dealers don't sell outside of allocations at the dealer.... in most cases the ED orders are the one coming out of allocation ... I haven't seen dealers sell cars out of allocation at the dealership but I think somebody mention that sometimes BMW lets dealers do that when they want to really move some cars....

So no only is that there is demand cause the car just came out but also all the ED order cars that usually come outside of allocation, now come from the dealer allocation so there are even less supply...

So if a dealer 6 allocations a month and they sell 3 non-ED and 3 ED they will try to make the most and not give you much discount....

Now if they get 6 allocations and they sell 3 non-ED and 3 ED and the 3 ED don't come out of their allocation... then they have 3 more to sell so they might be willing to discount those more as they will have to sell 3 more cars
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      02-22-2014, 10:27 PM   #19
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Quote:
Originally Posted by MegaMatt3 View Post
But a question (if I have that all right): If BMW is allowing a dealer to sell outside of allocations, doesn't the dealer stand to profit just as much by selling outside of allocations? Why are they more likely to mark it down then?
Not every dealer is willing to bargain like that. It depends on the individual salesman and dealer. Some like to go for volume and the word will get out quick and they will sell more of those or they can mark it up the same way and sell much fewer units. It just depends on what strategy the dealer likes.

Very few dealers will personally offer you something like that off the bat. Usually you have to initiate such a move and make an offer and if the dealer sees that you aren't going to buy unless they work with you on that level, in addition to knowing that they can order as many of them as they want (if it's not coming out of their allocation) then some profit is better than no profit.

I'll take 500 bucks any day of the week over 0 if I know this person will walk out and I stand nothing to lose by doing so. Now, if it was coming out of my limited supply, then I would say no and wait for the right customer who will pay what I want.

As an example, 4 series are not currently coming out of dealer allocations (true story). Therefore, you could easily order one of them from some dealers and get an awesome deal. It does not have to be a Euro Delivery. It can be just a normal special order.
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      02-24-2014, 01:27 AM   #20
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Plus, factor in that dealers can trade cars/allocations too. Dealer X only has 1 235 and two buyers. Rather than send buyer #2 to Dealer Y, X may swap (of sorts) a 435 for the 235 and keep buyer 2 at his dealership (plus likely for the next time #2 buys a car).

But if they are only allocated 3 235's a month, and all the other local dealers are only allocated 2 235's a month, there are not that many out there for people to choose from. If the demand is high (often when a new model comes out), then each dealer is going to hold things tight and want the most our of each car. If you're a cheap bastard and trying to lowball, they can wait another 2-3 weeks and sell the car to the guy willing to pay top dollar. They can only sell 3 235's a month, so they want top dollar for each (knowing they'll likely get it this early in the model).

If the model has been around a bit, it's more likely a guy can do an ED, and that car will not come out of the dealers allocation. So, if he's allocated 4 Z4's a month, I can go in and order my ED Z4, offer $500 over ED invoice, and he's apt to take it. My ED car doesn't not subtract from his 4 allocations. So, he can still get top dollar for those by the guy who isn't willing to wait 4+ months for a car.
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