Low Resale Value? Let Dive into New Car Pricing and Sales Strategies

[Carbon82]

Took me quite some time to piece all the information together for this thread, which I have wanted to start a few months back. No right or wrong here, just some personal opinions on why I think the AD plays an important role in determining the resale value of the model sold by them. Feel free to share your thoughts (a forum is meant for members to engage in meaningful discussion, isn't it?)

Many ADs has been playing hard to maintain the sales price of new car sold by them, citing reasons such as protecting customer's interest (by not having an unusually wide price fluctuation from month to month), guarantee a good resale value in the used car market (used car price is tagged almost directly to new car pricing), better service if buying the car from them directly, etc.

But is that always the case? It is an open secret that when ADs are not able to meet their sales target, they will register the new car and sold it as used car through their used car division of even 3rd parties. I am using PML and Wearnes as an example below, to highlight the adverse effects of doing so.

PML (BMW)

With the new X3 priced from $302,888 (xDrive20i) / $308,888 (xDrive20i M-Sport) before over trade, the profit margin is between $68K to $71K, which is almost 150% of their respective OMV! Even after an generous O/T of say ~$30K, the net car price will still be around $270K to $280K.

Yet PML would rather sell brand new unit at a much lower price (estimated to be ~$250K+) every month to used car dealers, only for it to be listed as used car, than to price it down to similar level for genuine buyers (direct PML customer). This is the screen grab I have taken from sgcarmart.com and the list is not exhaustive.

You can even find pre-facelift X3, which was registered exactly a year ago, on the list (there are actually several units available, but the dealer don't want to give potential buyer the impression that they have to lelong the car in their inventory)! Based on the info I have, used car dealers got these units last year at just $200K thereabout, so they can continue to hold and wait (for uninformed buyer).

So what does it got to do with resale value? Well, we all know that in a few years time, when the owner want to sell their ride, used car dealers will probably offer PARF + remaining COE value + another few $$$K for the body, and given the record breaking COE premium currently, the owner is likely to burn >$150K in just <5 years (buy at $280K, sell at $105K - $120K max. at 5th year). That's when some will KPKB that BMW has low resale value, nope?

 

Wearnes (Volvo)

Let look at the total number of V60 Cross Country and V90 Cross Country registered in the first 5 month of this year, 13 units in total. Want to make a guess how many of this units are sold as brand new used car? 1, 2 or 3?

Well, I found 5 units listed on sgcarmart.com (I have reasons to believe there are more units available but not advertised - 'cos I saw at least another 1 - 2 units parked outside Wearnes Pre-Owned, probably management unit, which will eventually be sold as used car). That translate to ~40 to 50% of the new car sold as used. Reason for doing that? Having to meet sales quota without lowering the new car price. BTW, the profits for both model range from ~$67K to >$100K (before O/T), I will leave it to the readers to decide if that is reasonable for the brand.

In the case of Volvo, it is a double whammy for the owners (be it brand new from Wearnes or brand new used car / management unit), as not only they are experiencing paper lost as what I have described above, with many used car in the market with transfer count of more than 1, the resale value will be further suppressed. One just need to browse the used car list on sgcarmart.com for the earlier model, and some can be had for ~$14K annual depreciation (in the current climate of $100K COE, so I cannot imagine when the COE return to $50K, these used car will have <$9K depreciation??)

One particular unit of V60 Cross Country has been put up for sales for at least 2 months, with asking price of <$190K (for a 6 months old car) till the owner gave up and sell it to Eurokars Pre-Owned, so does that paint a picture that matches what I have written so far?

[Mkl22]

Clap clap. Good summary
all these have been happening for years. Notice that when it comes to Mercedes. There is very much less of these prata tricks being used. 
the reason is obvious. 

[Watwheels]

Maybe that's why car makers are stepping in and take over the sales of their cars? Hopefully used car too.

[Ody_2004]

Nevermind lah.. in life we need suckers at times.. just hope ownself don be one..

Heng i no money for such brand! whahahahahha..

[Comage]

So that's where all those < 3 mth old cars come from...

And I was wondering which idiot takes a loan for a car, only to sell it couple months later...

[Lethalstrike]

@Carbon82 Edited my earlier post. As they did advertised OCBC Event cars as first hand ownership.

These V60 Cross Country you pointed out may simply be ex service loaner cars or management cars. As to why so they keep registering V60 CC for these purpose, it may simply be they have too much stock and sales are also slower for niche bodystyle vehicles (wagon). 

Edited June 13, 2022 by Lethalstrike

[Soya]

@Carbon82 Interesting points.

Btw, what about BMW airshow cars? How does the sponsorship work?

 

[Benarsenal]

1 hour ago, Carbon82 said:

But is that always the case? It is an open secret that when ADs are not able to meet their sales target, they will register the new car and sold it as used car through their used car division of even 3rd parties.

This is quite common though, even in other countries. UK especially, whenever end of financial year if the dealers cannot meet target/clear stock they will pre-register their remaining stock and flood them on the market at places like car supermarkets (which is like giant used car dealer lot).

[Lethalstrike]

@Carbon82 In the ads you've screenshot, it's also particularly interesting to look at the mileage listed. All the "used" X3 Mild Hybrids have mileage of less than 100km, effectively a new car. The Volvos have more than a 1,000km. I'm more inclined to think PML has dumped the effectively new X3s into the used car market, while the Volvos could have been genuine ex service loaners/management cars, just an obvious observation.  

 

[Freeder]

End of the day, just buy from a reputable  PI…

 

[kobayashiGT]

12 hours ago, Carbon82 said:

Took me quite some time to piece all the information together for this thread, which I have wanted to start a few months back. No right or wrong here, just some personal opinions on why I think the AD plays an important role in determining the resale value of the model sold by them. Feel free to share your thoughts (a forum is meant for members to engage in meaningful discussion, isn't it?)

Many ADs has been playing hard to maintain the sales price of new car sold by them, citing reasons such as protecting customer's interest (by not having an unusually wide price fluctuation from month to month), guarantee a good resale value in the used car market (used car price is tagged almost directly to new car pricing), better service if buying the car from them directly, etc.

But is that always the case? It is an open secret that when ADs are not able to meet their sales target, they will register the new car and sold it as used car through their used car division of even 3rd parties. I am using PML and Wearnes as an example below, to highlight the adverse effects of doing so.

PML (BMW)

With the new X3 priced from $302,888 (xDrive20i) / $308,888 (xDrive20i M-Sport) before over trade, the profit margin is between $68K to $71K, which is almost 150% of their respective OMV! Even after an generous O/T of say ~$30K, the net car price will still be around $270K to $280K.

Yet PML would rather sell brand new unit at a much lower price (estimated to be ~$250K+) every month to used car dealers, only for it to be listed as used car, than to price it down to similar level for genuine buyers (direct PML customer). This is the screen grab I have taken from sgcarmart.com and the list is not exhaustive.

You can even find pre-facelift X3, which was registered exactly a year ago, on the list (there are actually several units available, but the dealer don't want to give potential buyer the impression that they have to lelong the car in their inventory)! Based on the info I have, used car dealers got these units last year at just $200K thereabout, so they can continue to hold and wait (for uninformed buyer).

So what does it got to do with resale value? Well, we all know that in a few years time, when the owner want to sell their ride, used car dealers will probably offer PARF + remaining COE value + another few $$$K for the body, and given the record breaking COE premium currently, the owner is likely to burn >$150K in just <5 years (buy at $280K, sell at $105K - $120K max. at 5th year). That's when some will KPKB that BMW has low resale value, nope?

 

Wearnes (Volvo)

Let look at the total number of V60 Cross Country and V90 Cross Country registered in the first 5 month of this year, 13 units in total. Want to make a guess how many of this units are sold as brand new used car? 1, 2 or 3?

Well, I found 5 units listed on sgcarmart.com (I have reasons to believe there are more units available but not advertised - 'cos I saw at least another 1 - 2 units parked outside Wearnes Pre-Owned, probably management unit, which will eventually be sold as used car). That translate to ~40 to 50% of the new car sold as used. Reason for doing that? Having to meet sales quota without lowering the new car price. BTW, the profits for both model range from ~$67K to >$100K (before O/T), I will leave it to the readers to decide if that is reasonable for the brand.

In the case of Volvo, it is a double whammy for the owners (be it brand new from Wearnes or brand new used car / management unit), as not only they are experiencing paper lost as what I have described above, with many used car in the market with transfer count of more than 1, the resale value will be further suppressed. One just need to browse the used car list on sgcarmart.com for the earlier model, and some can be had for ~$14K annual depreciation (in the current climate of $100K COE, so I cannot imagine when the COE return to $50K, these used car will have <$9K depreciation??)

One particular unit of V60 Cross Country has been put up for sales for at least 2 months, with asking price of <$190K (for a 6 months old car) till the owner gave up and sell it to Eurokars Pre-Owned, so does that paint a picture that matches what I have written so far?

Don't picha the trade secret leh. hahaha. 😁

[Mustank]

Hey James they talking about you

[Fitvip]

12 hours ago, Soya said:

@Carbon82 Interesting points.

Btw, what about BMW airshow cars? How does the sponsorship work?

 

As far as I know, these event cars are not registered. After the event, they are refurbished to the original condition and sold to those who have booked the cars at discounted price and they are registered as the first owners.

[Soya]

27 minutes ago, Fitvip said:

As far as I know, these event cars are not registered. After the event, they are refurbished to the original condition and sold to those who have booked the cars at discounted price and they are registered as the first owners.

Yeah I know that part. What I meant was who subsidises the discount (BMW Asia, PML?) n how much? How PML expect to sell their regular models at full showroom markup$$ when buyers know they can do this hack w 0 transfer, full factory warranty & service incl? 

[mersaylee]

5 minutes ago, Soya said:

Yeah I know that part. What I meant was who subsidises the discount (BMW Asia, PML?) n how much? How PML expect to sell their regular models at full showroom markup$$ when buyers know they can do this hack w 0 transfer, full factory warranty & service incl? 

Becos event car may get driven by any one hired to drive it and also use by any one with STI or formerly known as STD...😁

[Soya]

1 minute ago, mersaylee said:

Becos event car may get driven by any one hired to drive it and also use by any one with STI or formerly known as STD...😁

Lol.....STD could oso mean Super Tokkong Discount 

 

[Gz0707]

@Carbon82 excellent post and deep diving bro.  had seen some of these under 100km cars on used market, even with Jap cars like Camry - I had assumed that maybe they were quickly registered to expiring COEs , but ur deeper analysis is v interesting and observant. not sure how long the dealer intends to hang on to the pre facelift X3.  its alreay getting old for 2021 car ...

[Arogab]

@Carbon82, mind my stupidity. If I buy the car from Seng Hup, the mileage is 21k. I am going to be second owner??

I think there are still some drawback on this kind on deal....