By on March 23, 2016

BMW-M235i

When an automaker posts its sales figures at the end of the month, how many vehicles actually left the dealer lot?

Not all of them, according to a top BMW executive, who admitted that his company and others “punch” up sales numbers to boost their standing, according to Automotive News.

Punching cars is “not an ideal practice,” but it’s a reality in the industry, BMW of North America CEO Ludwig Willisch said on March 22.

Speaking at the National Automobile Dealers Association-J.D. Power Automotive Forum in New York, Willisch said there was “a lot of pressure” to boost sales numbers. The practice involves an automaker purchasing its own vehicles to serve as dealer loaners, then quickly re-selling them as pre-owned after having seen very little use.

The issue of punching arose from last year’s close four-way battle for the top luxury automaker spot in the U.S., a battle BMW won — on paper, at least.

Recording 346,023 U.S. sales in 2015, BMW placed first in the race and Lexus third, but when actual vehicle registrations were tallied, Lexus came out on top.

Numbers gathered by IHS Automotive/Polk showed a gap of 10,764 vehicles between BMW’s sales and registration figures, the largest of the top three luxury automakers.

Like an army of Caspers, those ghostly Bimmers existed in an ethereal realm of non-existence, at least until a lucky buyer noticed a great deal on a same-model-year vehicle.

At the same New York meeting, Jaguar Land Rover North America CEO Joe Eberhardt said sales need to be spread throughout the month in order to combat the need to punch.

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99 Comments on “Ghosts are Real, and They’re Sitting on Dealer Lots...”


  • avatar
    28-Cars-Later

    Yeah, isn’t that fraud?

    • 0 avatar
      jjster6

      German companies don’t seem to get that!

    • 0 avatar
      dwford

      Fraud to who? If the dealer is titling the cars in their name, then selling them as used later, technically its a sale.

      I worked for a dealer that would just report cars sold to the manufacture and NOT title them in the dealer name. It was a mess to keep track of for inventory purposes, and we ended up having to reverse the sale on those cars when we finally sold them, so that we could correctly report the customer to the manufacturer. Total mess.

      • 0 avatar
        28-Cars-Later

        The article says:

        “The practice involves an automaker purchasing its own vehicles to serve as dealer loaners, then quickly re-selling them as pre-owned after having seen very little use.”

        …so what’s happening is the mfg is buying their own product (at what price I do not know) and then presumably taking the loss and reselling them as CPO. So if Cadillac wanted to claim a top sales position one month and had the coin, it could buy a load of ATSes, give? them to dealers as loaners, and then resell them as CPO but boost their own sales figures in the process. This practice done on a wider scale will affect financial reports and ultimately investors. Its kinda fraud.

        • 0 avatar

          Yes but given how much the cars lose in value being used and someone must eat this loss how does this work. Dealer sells car. Maybe gets some rebates. Someone eats the 10k for a lux marque. Thats a lotta cash on the hood

          • 0 avatar
            28-Cars-Later

            I’m honestly not sure how it would work, but in the first three years of a car’s existence it is very much on the clock with regard to depreciation. Unless they are buying the car from themself at cost and there is enough margin between cost and what it is expected to be worth at X time when it is sold (CPO or auction block) I would expect the OEM to take a loss in value.

      • 0 avatar
        jjster6

        US GAAP requires revenue to be recognized at the culmination of the earning process when risk and reward has transferred to an arm’s length party (paraphrasing, I can’t quote it verbatim).

        Sales to a non-arm’s length party should not be recognized as revenue. When sales are “punched up” to a material level it’s FRAUD.

        If that were not the case Company A could sell to Company B (which it owns) and report huge revenue but never really sell a thing to an external customer. Eventually that charade would collapse when no cash came in the door.

        Calling it a euphemism like “punching up sales” doesn’t make it right. Maybe it’s small enough to not be material, but it’s definitely not right.

        • 0 avatar
          Sigivald

          That’s “fraud” if the sale is reported as revenue under GAAP standards.

          “Monthly sales count announcements” are the context here, though – and they are not revenue reporting.

          So GAAP standards for revenue reporting can’t apply to them.

          It’s skeezy as hell, but I can’t say it’s fraud under the law or the GAAP standards as cited so far.

          • 0 avatar
            jjster6

            Good point. I haven’t read the BMW financial statements, which may not be on US GAAP, but they may disclose units sold in the footnotes or the MD&A. It may not be Fraud but it does stink.

    • 0 avatar
      dal20402

      (Not spoken as a lawyer, just as a private citizen, as I’ve done no legal research to support this post)

      I think that would depend on what happens with the cars after the sale to the dealer. If the dealer never uses them as demos, loaners, etc., and they just sit there on the lot until they’re resold as “pre-owned,” then the transaction seems an awful lot like a sham transaction that should be disregarded for reporting purposes. On the other hand, if the dealer really uses the cars as demos, loaners, etc., then I don’t think any court would find the transaction to be a scam, and the practice is a bit sleazy but probably passes legal muster.

    • 0 avatar
      sportyaccordy

      In my opinion only if they sell them as used it’s not. They are disclosing the car as used and taking a huge financial hit to make their quotas. If anything it’s a net win for the customer, if they are willing to buy “used”. There are no sleight of hands here.

      • 0 avatar
        S2k Chris

        “If anything it’s a net win for the customer”

        Exactly, if a company wants to give me a hefty discount because it relabeled its product used in order to hit some goofy bragging right for a TV ad, not sure where my downside is.

        From a financial perspective, yeah, they might inflate topline growth but their COGS will go up in concert and it will have a negligible EPS effect.

        This is more a “take the commercials about ‘best selling’ with a grain of salt” thing than a “OMG Fraud!” thing.

        • 0 avatar
          VoGo

          If investors are using sales figures to determine whether to buy BMW stock, and BMW is manipulating those numbers to look better, then this little shuffle may result in an expensive stockholder class action suit.

          Stupid practice. Even stupider for the N.A. CEO to admit to it.

          • 0 avatar
            dal20402

            Yep; this is about the investor, not the customer. The customer gets significantly discounted, mildly abused cars sold as used. The investor gets arguably false financial information.

          • 0 avatar
            S2k Chris

            If investors are using pure topline sales numbers to make investment decisions, they deserve whatever they get. Chasing volume at the expense of profit has never worked well for anyone except maybe Amazon, and probably not even them, really. I was at Motorola 2006-2011. Trust me on this.

      • 0 avatar

        The problem is if the people making decisions on how many cars they can sell at what price are getting fake data and don’t know it.
        I would assume dealers are taking less popular paint colors/option packages and using them for this.

    • 0 avatar
      FreedMike

      I agree with 28. It’s the same as a company lying about its revenues, and using those figures to entice investors. I worked for a company that did that. It did not end well.

      At a minimum investors would need to know what percentage of “sales” were made under these conditions.

    • 0 avatar
      b534202

      Fraud in the sense that 1 car is being sold twice?

  • avatar
    Firestorm 500

    Apparently cheating is normal for German manufacturers.

    • 0 avatar
      heavy handle

      I’m pretty sure most manufacturers do this. There was a news item last month about FCA doing it, but it’s SOP for the Detroit 3.

      I don’t think it’s a big deal. It allows dealers and manufacturers to sell some specific cars at a discounted price without upsetting the whole price structure, the way rebates and incentives do.

      • 0 avatar
        notwhoithink

        Agreed. As long as the vehicles are being properly reported as “used” when they are eventually sold on, and the title and associated histories reflect that then I see no issue. I’ve seen a number of very low mile, current-year, “used” cars for sale over the past year and always wondered what the source of said cars was.

      • 0 avatar
        FreedMike

        Right, but the problem is that the manufacturer reports these as “sales,” which is what investors use to gauge stock performance, when they aren’t. Now, if the specific number of cars this was done with was disclosed, then no problem – the investor can make an informed decision. But I don’t think that’s the case.

        • 0 avatar
          Sigivald

          If investors are buying car company stocks based on unit sales rather than profit/loss or revenue numbers, they *deserve to lose their money*.

          (It looks to me like the dealer is the one taking the financial hit here, overall, which necessarily limits the impact of the phenomenon.

          But maybe I’m understanding the arcana of the incentives and kickbacks poorly.)

          • 0 avatar
            Pch101

            The OEM is paying for inventory that it allegedly sold to the dealer. It does so for the purposes of inflating its sales numbers, which will necessarily overstate revenues.

            This is a textbook example of channel stuffing, which is a violation of federal law.

        • 0 avatar
          fvfvsix

          @FreedMike

          In BMW’s case, you can’t invest. so it makes perfect sense that they are “leaders” in this type of reporting.

    • 0 avatar
      slavuta

      Germans are well organized and punctual. But when it comes to profit, thye aren’t different from rest of us

  • avatar
    05lgt

    The automakers are reporting false sales data to their investors, that’s pretty serious. The fig leaf that it’s the dealerships (the automakers customer) buying and the sale is still real may or may not be enough to keep SEC and other org’s off them. The upshot is analysts and “sophisticated investors” need to look at the registration numbers and ignore the sales number while making stock purchase decisions, the rest of us are OK to fleece.

    • 0 avatar
      S2k Chris

      Probably not true, automaker revenues are not based on sales from dealer–>public, they’re based on automaker–>dealer. There’s some shadiness as far as claiming to be “best selling” or yada yada, but it’s not outright fraud because that doesn’t really mean anything and isn’t an auditable statement as far as financial disclosures go.

      • 0 avatar
        ajla

        “There’s some shadiness as far as claiming to be ‘best selling’ or yada yada, but it’s not outright fraud”

        The SEC probably won’t care, but the FTC might.

        Depending on how the dealers record all this, the IRS might care as well.

    • 0 avatar
      Kendahl

      Not really. A sale is a sale is a sale. As long as the manufacturer gets its money, it doesn’t matter how the dealer comes out. In the end, the cars do leave the lot. A few customers get very good deals on an almost new vehicles. The only disadvantage is that their choices are limited to the dealer’s lame ducks.

      • 0 avatar
        Scoutdude

        In the long run this practice hurts the mfg as it causes a downward spiral of profit margin. What things like this do is pull demand forward. That means that next month, year or other accounting period they will need to falsify even more sales to make their target.

        Years ago the company I worked for had a practice of offering huge discounts at the end of the year to show those sales numbers to keep investors happy. However come January sales ground to a halt because all that demand had been pulled into Dec. Also the wholesalers often ended up with too much of a particular product in meeting the requirements for the biggest discounts. Since we sold items with a shelf life that meant that the company would take back that out of date product.

    • 0 avatar
      krhodes1

      How are they false sales? YOU are not the car makers customer, the dealers are. If they incentivize dealers to buy their cars before the dealer has a customer to resell the car to, who cares?

      Personally, I think the whole “must have bragging rights” thing is completely stupid, but what do I know? And this could let you get a better deal on a car.

      • 0 avatar
        sportyaccordy

        Exactly. It’s not like they are selling demos as new, or double dipping. The cars eventually get sold, albeit at a detrimental discount to the manufacturer. It’s stupid but car makers are not shy about being slaves to their egos. See: Phaeton

      • 0 avatar
        Pch101

        This is a classic example of channel stuffing, which is most certainly illegal.

        If a producer pushes product into its retail channel and then demands some sort of sham transaction to conceal the lack of retail demand, that is absolutely illegal.

    • 0 avatar
      05lgt

      OK if I reply to myself to get all of you? Cool.
      If the sale to the dealership is paid for by the manufacturer (it is) it’s faking the accounting. Maybe it’s intended to be an FTC issue with faked numbers for advertising purposes, but the SEC issue is the one that doesn’t play around when you lie to investors about sales. I used to work for Alcatel who went down with World Com etc. on this issue, so … I’ve felt the result.

      • 0 avatar
        krhodes1

        Sales to the dealership are already paid for with money loaned (often by the manufacture) to the dealer through the practice of floorplanning. I am failing to see a big difference here. The manufacturer still gets paid either way. It’s not like cars are perishable or get returned if they don’t sell in X days.

        The “sale” to the manufacturer is when the dealer buys the car. That is when revenue is recognized. What happens from that point is mostly the dealer’s dilemma, but we have this weird tradition of only counting “sales” for bragging purposes when the car is sold for the second time, from dealer to end user.

        To use a non-car analogy, lets say I run a computer store. I buy computers from Dell, and I resell them. I buy 10 computers from Dell. When does Dell recognize the revenue – hint – it isn’t when *I* sell them to my customer. I may even have a line of credit with Dell to buy those computers. Doesn’t matter – that is a separate set of accounting entrees, the sale is when *I* buy the computers, even if I don’t pay for them for a long time. Dell can decide that they want to buy a bunch of market share by discounting the computers by 20% to get me to buy more for stock. Perfectly fine, they can even lend me the money to do it. They can even GIVE me some computers for free, as long as the expense of doing so is properly accounted for.

        But with cars we have this weird thing that sometimes the number of sales is only counted when the cars are titled, which leads to this stupidity. The revenue and expenses are long since accounted for at that point.

        If the dealer never has to pay for the car at all, and the manufacturer doesn’t account for that expense, THEN I could see this as cooking the books. But I doubt very much that BMW is giving away anything for free.

        • 0 avatar
          Pch101

          You don’t understand channel stuffing.

        • 0 avatar
          05lgt

          Try this:
          http://www.sec.gov/news/press/2004-105.htm
          It’s the SEC’s own site, so … maybe you’ll believe them? Channel stuffing, misleading investors, significant harm and a stiff civil sanction all appear.

          • 0 avatar
            Pch101

            I don’t think that you understand: BMW can’t possibly be stuffing the channel because it produces the Ultimate Driving Machine!

          • 0 avatar
            Pch101

            All jokes aside, this article about liquor producer Diageo explains channel stuffing in fairly simple language:

            http://www.businessinsider.com/sec-investigates-diageo-how-channel-stuffing-works-2015-7

            The difference between the automotive industry and most other businesses is that there are no “sales returns” provisions that allow dealers to return excess inventory to the OEMs. So other measures are taken to hide the unwanted inventory.

  • avatar
    ericb91

    This just goes to show whose interests are really being looked out for with regards to the automotive retail business. Being the #1 selling luxury manufacturer isn’t what sells cars; brand loyalty and having the best product are. It’s a shame that manufacturers put this pressure on the dealer to make sales like this, but I guess it all comes down to market share.

  • avatar
    DeadWeight

    All dealerships do this as their volume incentives (monthly, quarterly or annual sales quota targets enabling them to earn anywhere from $330 to as much as $1,600 per sale after that floor from the manufacturer) depends on doing literally whatever it takes to get that cold, hard manufacturer cash (dealerships will sell vehicles for as little as a week to the owner’s family members or employees of dealerships or their family members).

    It’s essentially corrupt, and BMW dealers as % of reported sales are more corrupt than some others (as the figures prove – 300 BMW Dealerships in U.S. divided by 10,000 “ghost vehicles” = 33 ghost vehicles per dealership), but I’d bet certain General Motors dealerships (particularly Chevy ones) have easily 80 to 120 ghost vehicles floating around their lots in any given month.

    As long as the manufacturers keep greasing the dealerships up with volume incentive cash, this will continue. Standard operating procedure given how manufacturers have now moved to a incentivization system that splits dealers into two tiers, with the aim of trying to kill the smaller and middle sized dealers.

    • 0 avatar
      87 Morgan

      Oddly, it has been my experience that GM is really NOT one to participate in this practice.

      BMW and Lexus get away with all of this with their get a loaner car with every service.

      You don’t normally get a loaner car from the Chevy store when you go in for service. You get a shuttle ride, or a chance to hand out in the waiting lounge and drink really bad coffee.

      GM for the most part uses the oldie but a goodie to move cars and trucks….10k on the hood.

    • 0 avatar
      krhodes1

      My local BMW dealer, which is one of the smallest BMW dealers in the country, has AT LEAST a dozen service loaners at any given time. I have never seen one with more than 1500 miles on it, and they are all out every day. Every one of them belongs to the dealer. So for the luxury marques, it is a way to provide a valuable service to their owners, subsidized by the automaker. Who gets some extra “sales” to brag about. Win-win. Nowhere in either this article or the linked one is there any suggestion that somehow the manufacturer is paying for these cars in full. They are simply providing incentives for the dealer to buy some cars for their own temporary use.

      Now what a Chevy dealer who would laugh at the idea of a service loaner is doing with a bunch of cars titled to themselves I have not a clue.

      • 0 avatar
        fvfvsix

        My neighbor down the street is part of a car dealer family, and they usually have 2 or 3 brand new dealer-plated vehicles every other month or so. They don’t own any stores that sell luxury makes, so I’d imagine that they’re rotating through a few “demo” cars to sell as used every month or so.

  • avatar
    bikegoesbaa

    I often see companies do dumb things to “make the numbers” at quarter or year-end. Typically things that compromise quality and/or cost them more money in the long run.

    Good to know that automotive OEMs aren’t immune to this behavior.

  • avatar
    NickS

    Are we pretending that going to a dealer or auto maker to get any information is somehow associated with transparency, full disclosure, or straight accounting?

    Unless vehicle sales fall into a regulated system and tracked, there is no reason to trust any of these numbers.

    Track vehicle sales as title changes at DMV and exclude any VINs that change hands within twice the sales reporting cycle. March sales should include only VINs that had one title change in March, and none in April. Quarter sales figures should include VINs that only had one title change this quarter, and none the following quarter. You are bound to under count true sales, but not overcount by swapping cars back and forth. Even then I am sure there would be ways to game the system.

    And as far as I know people who work in the auto-trade industry are not required to disclose their affiliation at the time of sale (and neither are their close relatives). Those transactions need to be excluded from sales figures that are used in a different market, that of non-affiliated consumers. There is a very big incentive for misreporting sales figures here. Publicly traded companies do not get to self-report how many of their shares were sold. The exchange does that according to some rules. And stock traders have limits on what they can trade on for personal gain and what they advise or sell to their clients. (Of course they created non-stock instruments to profit from their own clients, but that’s the whole nother matter).

    • 0 avatar
      sportyaccordy

      Financial instruments like stocks are beholden to very different reporting/disclosure standards than consumer goods. As far as I know there are no laws against these kinds of games. I know this is a huge problem in the digital camera world. Camera makers stuff the hell out of channels, essentially holding retailers hostage until they go out of business, and then undermining those retailers with more channel stuffing through “grey market” sales. Eventually the gig is up though- there are 3-4 year old brand new cameras still out there, and reported volume is in decline. Instead of stuffing channels they should have spent that money on making products that appealed to a broader more sustainable market….

      • 0 avatar
        NickS

        Sporty, that was my whole point. Unless there is a specific requirement within the industry to objectively account for vehicle sales there cannot be a way to reliably get that information without also double- and triple-counting ghosts.

        There is no incentive for the industry to establish an accounting system for true sales. There is a lot more incentive to overinflate sales figures via all these tick sales.

  • avatar
    SunnyvaleCA

    Does “punching” start the warranty period? I bought my last car as a “brand new” car but the warranty had started to run… and run and run. Still $18k discount and all was good!

    • 0 avatar
      jkross22

      If the car is sold on March 23, that is the in-service date of the car and the warranty period starts.

      • 0 avatar
        SunnyvaleCA

        OK. Sorry to be so dense … but does “punching” mean it is “sold”? I believe each transfer of ownership in California pays the _full_ sales tax, which is usually in excess of 9%, so an additional sale would be financially catastrophic.

        • 0 avatar
          87 Morgan

          Yes, if the car is ‘punched’ the factory warranty clock starts.

          Dealers can buy and sell cars from each other and not pay sales tax.

          I knew of several independent used car stores who bought several units for inventory in December from GM stores using the 16% off deal. Granted, they bought at invoice or below less the 16% and put the newly ‘used’ cars on their lot.

        • 0 avatar
          krhodes1

          Yes and no. Dealers buy the cars, but they don’t have to register the cars – they have “dealer plates”. Presumably the dealer lobby has carved out a nice exemption here.

          It certainly works that way in Maine – if you are a car dealer you can have X number of dealer plates which you can slap on any car in inventory to drive, with some limitations. No sales or excise tax owed. Loaner cars get loaner plates, which work the same way, with some limitations. Even though the car is titled to the dealership, it still is not individually registered, the plate is registered.

          Really it is not much different than any company that buys things for resale – if I (as a computer consultant with a sales tax certificate) buy computers from Dell for resale I don’t owe sales tax on them, my end customer does. Only the fact that cars have this official record of ownership (the title) complicates matters.

          • 0 avatar
            Scoutdude

            New cars are not titled. The have a MSO or Manufactures Statement of Origin. It will identify the car for when the retail sale is made and it is first titled/entered into the state’s data base.

            Sales between people who deal in a certain product are not subject to the retail sales tax.

            When a dealer takes a used car in trade or buys it at an auction it does not title them either in most states. In our state they even have lines on the back of the form for the “1st reassignment by dealer” 2nd reassignment ect.

          • 0 avatar
            krhodes1

            Agreed. But in my state (and I assume most all the rest), even when a dealer does title a car, they don’t pay sales tax on it (assuming they are holding the car for resale and not giving it to their kid). Those low-mileage CPO cars HAVE been titled. But nobody has paid a penny of tax on them yet. But of course they are not “new cars” at that point either, even if they only have delivery mileage on them.

            At least for BMW, at that point the warranty clock is running. But they are nearly always sold as CPO, so in many, but not all, respects they have a better warranty overall than a “new” one. You do lose somewhat on the maintenance warranty, unless they throw in the extension to that as well.

  • avatar
    Land Ark

    A quick search on Cars.com provides the following Certified used cars:

    2015 Nissan Quest – 4 miles
    2015 Ford Fiesta SE – 5 miles
    2016 Honda Accord EX coupe – 7 miles
    2016 Hyundai Elantra GT – 8 miles
    2015 Porsche Panamera 4 – 12 miles
    2016 Chrysler 200 Limited – 12 miles
    2015 Mazda5 – 22 miles
    2015 Scion tC – 31 miles
    2015 Volvo S60 – 65 miles

    I picked one car from each maker. There are many others in between. It does not appear this practice is uncommon within the industry.

    Look at this Carfax for the Fiesta:
    http://www.carfax.com/VehicleHistory/p/Report.cfx?partner=CDM_U&vin=3FADP4BJ7FM223660

    It lists 5 miles on it prior to being sold and is listed as certified with 5 miles on it. It was on the lot for less than a month before it was “sold.”

    The Elantra doesn’t even list a sale before going CPO. And it is listed for sale for $1000 more than the MSRP reported to Carfax.

    • 0 avatar
      SCE to AUX

      Great data.

      So the consumer gets a new car, with a new car warranty, for a great price. The mfr claims a sale by cutting their own throat on margin.

      I wonder why should anyone care?

      • 0 avatar
        Land Ark

        As an investor I would want to know to what extent this was happening. But other than that… I dunno. It doesn’t seem like a sustainable model so I would figure it would take care of itself.

        But as I mentioned, it doesn’t appear you are always getting such a great deal since the Elantra is priced higher than MSRP and priced higher than the most expensive new one I could find in the same distance.

        • 0 avatar
          FreedMike

          Well, they’re ASKING more than sticker. Whether they’re getting more than sticker is another matter.

        • 0 avatar
          mike978

          As an investor I would expect them to go off the revenue and profit data. Which no-one is suggesting BMW falsifies as that is criminal. Investors don`t go off units sold, since each sale is variable – fleet, retail, incentive given etc all vary.

          • 0 avatar
            Land Ark

            If I were looking to invest, I would want to know they are essentially buying back cars from dealers. I would use this information to determine if I think that has a larger impact on future earnings. I am not suggesting they are committing fraud. I’m looking out for myself.

          • 0 avatar
            Scoutdude

            Sorry but since the dot com boom there are a ton of investors who only look at the sales figures and whether they are growing, flat or decreasing. Today’s average investor is not the rational investor of 20 years ago.

    • 0 avatar
      28-Cars-Later

      Most of those models were unpopular ones which could use a sales boost, as well…

  • avatar
    Von

    So having 38 variations of the 3 series wasn’t enough to bring up sales numbers to where they need to be?

  • avatar
    wmba

    Print off this article, hand it to your BMW salesman in the first week of the new month, and ask to see the hardly used vehicles. Tell them you expect a great price, and if not, why not.

    • 0 avatar
      fvfvsix

      Just look at the CPO finder on BMW’s website. You’ll see tons of current model year 3-series with extremely low miles. There are roughly 40 for sale right now with fewer than 3000 miles. Lowest mileage is 7mi.

      • 0 avatar
        Jimal

        Some dealers offer employees super sweet, ultra short and ultra low mileage leases to punch new cars and feed their CPO inventories at the same time. My understanding is that our local BMW dealer does this.

  • avatar
    thornmark

    Companies that don’t want to be seen as discounting use this artifice.

    Not just cars. Looks at Dyson vacuums and fans – go to Woot! etc and you see so very many “refurbished” units for sale at much lower prices. Think about it, they have that many returns?

    • 0 avatar
      JMII

      Ahhhh yes good catch. I was wondering why instead of just offering a cash rebate they were playing this game. But this sums it up nicely. If the car is CPO you get a good discount vs having to admit you bought the “cheapest” BMW on the lot. While everyone wants a sweet deal nobody wants their new, fancy, luxury item described as a bargain choice. While the consumer wins this clearly a shady tactic of a corporation fixing the books.

    • 0 avatar
      sirwired

      I’ll bet Dyson does have that many returns, especially of your fans. Returns by people that get home from the store and realize they just spent several hundred $$$ on a freakin’ oscillating fan.

  • avatar
    sunridge place

    This article needs a correction. The below statement is not correct.

    ‘The practice involves an automaker purchasing its own vehicles to serve as dealer loaners, then quickly re-selling them as pre-owned after having seen very little use.’

    OEMs are not purchasing these vehicles at all. Dealerships have already purchased them and are using an OEM incentive program to report them sold and using them for their own use. Most of these do see time as a loaner vehicle. There are many reasons why a large pool of current MY vehicles in a service loaner fleet are a good idea.

    Do the people here think loaner/demo cars are delivered by storks?

    • 0 avatar
      DenverMike

      No, it’s right. Why should dealers take the loss, when it’s BMW corp that’s looking to cook up ‘fake’ sales?

      BMW corp wins by avoiding the embarrassment of big rebates/incentive going straight to end buyers, and resale value taking a dive.

      The dealer’s “incentive” is free use of loaner cars, and more importantly, end buyers don’t ever get the idea rebates/incentives are sometimes happening, instead have to be lucky enough to stumble on to a great deal on a very low mileage, and otherwise brand-new “loaner”

      • 0 avatar
        sunridge place

        Cool. You believe in the stork theory for loaner cars. FREE LOANER CARS!!!

        You know nothing about the retail car business and you know even less than nothing about how loaner cars work at luxury brands.

        • 0 avatar
          Pch101

          You probably ought to read the article.

          “Dealers have cited strong suggestions from some automakers to self-register cars as loaners, a practice known as ‘punching.’ The cars are later sold as used with little mileage on them.”

          You see, loaner cars get driven. These don’t.

          They aren’t actually loaners. They only claim that they are so that the transactions don’t appear to be what they actually are, i.e. sham sales. There are legitimate loaner car purchases, but these aren’t among them.

          • 0 avatar
            Acd

            They still have to comply with the rules of the loaner car program, one of which is the car can’t be retailed until after they’ve been in loaner service for 90 days otherwise they forfeit the incentive that caused them put the car into loaner service in the first place.

          • 0 avatar
            Pch101

            They can stick them on a back lot and let them gather dust for a period of time. They weren’t able to move the unit, anyway, which is why this happened in the first place.

          • 0 avatar
            sunridge place

            My post was to try to correct the statement that OEMs are supposedly repurchasing these vehicles.

            That was an incorrect statement.

            BMW dealership in Austin where I live has over 100 loaners for service. How should those units be delivered?

            Not saying there aren’t isolated incidents but it’s a blip.

          • 0 avatar
            Pch101

            It’s a sham sale, nonetheless. The entire point of the article is to address that this tactic is used to overstate deliveries. That practice is referred to as channel stuffing.

          • 0 avatar
            Acd

            They are selling them to themselves and putting them in the loaner car program; it is the tool which allows this whole thing to happen. The cars are technically loaner cars even if they sit against the back wall and are never driven until they can be sold.

          • 0 avatar
            Pch101

            And as I keep noting, that’s an example of channel stuffing.

    • 0 avatar
      sunridge place

      Again, OEMs are not buying these vehicles back. That was my point. So, all these units just sit there? You know this how? Should an OEM disclose the $$ involved on every retail/fleet sale, lease, loaner etc to make everyone happy?

      • 0 avatar
        Pch101

        If you understood channel stuffing, then you’d know what the answer is: Avoid stuffing the channel in the first place.

        Read the article that I linked above, for it should help you to understand the issue.

        • 0 avatar
          sunridge place

          Your link on alcohol sales? That is supposed to teach me something about the retail auto business??

          Ok. Have a good night.

          • 0 avatar
            Pch101

            I hate to break it to you, but the SEC doesn’t make exceptions for automotive manufacturers. Channel stuffing is illegal.

            As I suspected, you’re incapable of learning anything.

          • 0 avatar
            krhodes1

            PCH, endlessly calling this channel stuffing does not actually make it channel stuffing. You know this, right? I realize it is your S.O.P around here, but really man, get a grip.

          • 0 avatar
            Pch101

            You’ve already established above that you don’t understand channel stuffing.

            I’ve provided an article above that explains the concept in general terms. This is what Automotive News claims specifically about BMW:

            “Dealers have cited strong suggestions from some automakers to self-register cars as loaners, a practice known as ‘punching.’ The cars are later sold as used with little mileage on them.”

            That is consistent with the definition of channel stuffing.

            A manufacturer pushing too much inventory into a retail channel, then attempting to conceal the inability to retail it, is exactly what channel stuffing is. If you can’t grasp that, then the problem is with you. As usual, you’re allowing your fanboy tendencies to get in the way.

  • avatar
    SoCalMikester

    Doesnt the warranty clock start counting down the first time its “sold”? And obviously when the 2nd owner sells, its now a 2 owner car, instead of “original adult owner, never smoked in, blahblahblah”

  • avatar
    bpsorrel

    This practice of dealers registering cars and then selling as pre-owned has been happening in the UK for many years. Over here, we call it “pre-reg” and virtually all makes and dealers do it.
    Back in 2005 my father bought a pre-reg Ford that was just 2 months old and with 100 miles on the clock. He saved £4000 off list price. Last year I bought a pre-reg Lexus at 1 month old and with less than 50 miles. I saved £7000! (interestingly the Lexus dealer described the car as an “ex-demo” )

    I don’t see the problem with it, other than it artificially swelling the manufacturers sales figures.

  • avatar
    aajax

    I worked for a pharmaceutical/personal products company that was fined big time by the federal government for pretty much the same sort of shenanigans. Perhaps the difference lay in what was reported to whom.

  • avatar
    BrunoT

    The local BMW here (one of the biggest I’ve read) had a modest selection in stock when I last purchased one. Years later, they now have a bunch of them tucked into a parking lot down the road behind a building, and another lot is being constructed. My guess is all inventories are going to rise fast in the coming months.

  • avatar
    Lee

    Heck, if this didn’t exist, Infiniti wouldn’t have sold any G25’s at all.


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