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If you haven't been reading our Car Salesman Confidential series, I recommend it. It's a fascinating look behind the scenes at a dealership and shows how slim the profit margin can be on a new car. The service department, though, is where there's money to be made. I discovered this firsthand when the 328 recently suffered a flat tire while out on a video shoot. The video producer who was driving it had it shipped down to South Bay BMW in Torrance, California, via BMW Roadside Assistance, because the fix-a-flat in the trunk wasn't going to cut it. That's where the trouble started. The car was "lost" for approximately five hours at the dealer -- the tow truck driver had apparently dropped it in a corner somewhere the dealer didn't think to look. Once found, the dealer determined it didn't have an OEM Pirelli Cinturato tire in stock and would have to order one, which meant it wouldn't be fixed on the same day. Never mind that the 3 Series is far and away BMW's best-selling model. A follow-up call to the dealer a day later revealed the car had been "lost" again, but this time for only an hour.
Two days later, the dealer announced it had successfully installed a new
tire. The charge for this service? $500.93. A quick Internet search on
my phone showed the retail price for that tire at a place like TireRack.com
was just $289. Being a very large dealer, it's unlikely the service
department was paying retail price rather than wholesale, but a look at
the invoice showed the same tire with a list price of $428.40, a $139.40
markup over bricks-and-mortar retail. After fees and labor were added,
it came to $437 before tax.
I argued this point with the service consultant,
who at first insisted that the service manager set the prices and he
had no control over it. When I refused to pay that price, he disappeared
for 10 minutes, then returned with a bill for $342.82. The fees for
balancing, a valve stem, old tire disposal and a state fee were all
still present, but now the tire list price showed $340, and he'd knocked
the price down even further to $306 (a supposed loss, based on the
numbers presented) and waived the $25 labor charge. (The sales tax went
down to $27.32.) Sensing that
the deal wasn't likely to get any better, I took it.
While the dealer had been waiting for the tire to come in, we decided to
go ahead and replace the other three as well. After learning what the
dealer was charging, we had the shipment from Tire Rack diverted to our
office rather than the dealer. We then took them to our local shop,
Pacific Pitt Stop in El Segundo, California, and had all three mounted,
balanced, and installed for just $60. Total cost for three tires
purchased, shipped, and installed: $927 ($309 per tire), a savings of
$573.90 had we bought them from and had them installed by the dealer.
I don't begrudge making a profit, and we can
argue all day about how much is "fair." Even assuming the dealer paid
retail price for that tire, though, a nearly 50-percent markup seems
pretty steep. The dealer's willingness to knock nearly $160 off the bill
could suggest that the margin is even greater, or it could simply mean
that the dealer wanted to turn the situation around and make the
customer happy, even if it cost him a few bucks in profit. While I
appreciate that the dealer dropped the price significantly without too
much of a fight, I'll be taking the 328 elsewhere the next time it needs
something as simple as a new tire.
If you haven't been reading our Car Salesman Confidential series, I recommend it. It's a fascinating look behind the scenes at a dealership and shows how slim the profit margin can be on a new car. The service department, though, is where there's money to be made. I discovered this firsthand when the 328 recently suffered a flat tire while out on a video shoot. The video producer who was driving it had it shipped down to South Bay BMW in Torrance, California, via BMW Roadside Assistance, because the fix-a-flat in the trunk wasn't going to cut it. That's where the trouble started. The car was "lost" for approximately five hours at the dealer -- the tow truck driver had apparently dropped it in a corner somewhere the dealer didn't think to look. Once found, the dealer determined it didn't have an OEM Pirelli Cinturato tire in stock and would have to order one, which meant it wouldn't be fixed on the same day. Never mind that the 3 Series is far and away BMW's best-selling model. A follow-up call to the dealer a day later revealed the car had been "lost" again, but this time for only an hour.
Two days later, the dealer announced it had successfully installed a new
tire. The charge for this service? $500.93. A quick Internet search on
my phone showed the retail price for that tire at a place like TireRack.com
was just $289. Being a very large dealer, it's unlikely the service
department was paying retail price rather than wholesale, but a look at
the invoice showed the same tire with a list price of $428.40, a $139.40
markup over bricks-and-mortar retail. After fees and labor were added,
it came to $437 before tax.
I argued this point with the service consultant,
who at first insisted that the service manager set the prices and he
had no control over it. When I refused to pay that price, he disappeared
for 10 minutes, then returned with a bill for $342.82. The fees for
balancing, a valve stem, old tire disposal and a state fee were all
still present, but now the tire list price showed $340, and he'd knocked
the price down even further to $306 (a supposed loss, based on the
numbers presented) and waived the $25 labor charge. (The sales tax went
down to $27.32.) Sensing that the deal wasn't likely to get any better, I took it.
Finally got the 3 Series on a good road again and remembered why I liked it so much when it first launched.
While the dealer had been waiting for the tire to come in, we decided to
go ahead and replace the other three as well. After learning what the
dealer was charging, we had the shipment from Tire Rack diverted to our
office rather than the dealer. We then took them to our local shop,
Pacific Pitt Stop in El Segundo, California, and had all three mounted,
balanced, and installed for just $60. Total cost for three tires
purchased, shipped, and installed: $927 ($309 per tire), a savings of
$573.90 had we bought them from and had them installed by the dealer.
I don't begrudge making a profit, and we can
argue all day about how much is "fair." Even assuming the dealer paid
retail price for that tire, though, a nearly 50-percent markup seems
pretty steep. The dealer's willingness to knock nearly $160 off the bill
could suggest that the margin is even greater, or it could simply mean
that the dealer wanted to turn the situation around and make the
customer happy, even if it cost him a few bucks in profit. While I
appreciate that the dealer dropped the price significantly without too
much of a fight, I'll be taking the 328 elsewhere the next time it needs
something as simple as a new tire.
| Our Car | |
| Service life | 11 mo/20,539 mi |
| Average fuel economy | 26.0 mpg |
| CO2 emissions | 0.75 lb/mi |
| Energy consumption | 130 kW-hr/100 mi |
| Unresolved problems | None |
| Maintenance cost | $0 (oil change) |
| Normal-wear cost | $0 |
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