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Author Topic: [-] History and Future: repricing of A/C on order seems wrong  (Read 192 times)

Offline weasel

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[-] History and Future: repricing of A/C on order seems wrong
« on: January 04, 2020, 11:52:44 AM »
I have several planes on order and wanted to modify their config and, as I have cash on the bank, pay in full. The price uplift seems to be rather hefty, so I tried to just change the payment ratio, without modifying the specs/base etc. and I see the following:

Initial order was 60% pre-payment, resulting in 2.5% discount on list price. When I change to 100% pre-payment (delivery is 19 months out), the price increases by 8'607'670! 

Code: [Select]
Boeing 777-200ER (12-May-1997)

   Price to be paid now: 63 203 010 USD
   New price on delivery: 0 USD     (-54 595 340 USD)

Total sum to be paid/refunded: 63 203 010 USD

In theory a change from 60% to 100% pre-payment should result in a rabate (plus change fee): Difference between precentage off list price (2.5% vs 6%) on open amount, considering the time when the purchase order was placed and date of full pre-payment.

For example:

- 200'000'000 list price, order placed 1st June 2015 with 60% pre-payment, resulting in 2.5% rebate = 117'000'000 on order, 78'000'000 on delivery, which is 1st June 2017 (24 months from order to delivery)
- change by 1st June 2016 to 100% pre-payment: 3.5% (rebate difference) on open amount 78'000'000, taking into account the remaining time to delivery (12 months): 1'365'000 rebate (I assume the system to be in favour of the manufacturer, so rebate is based on open amount and not list price)
- plus change fee, approx. 50'000 (I  get around this amount, if I only change the base the plane will be delevered to)

I would assume this formula to calculate the rebate

Code: [Select]

remaining months to delivery * ( price to pay on delivery * (discount with new pre-payment ratio - discount on order ) % ) / months order placed until delivery

12 * (78'000'000*(6-2.5)%)/24 = 1'365'000 rebate or remaining amount to be paid

   Prior on delivery: 78 000 000 USD
   Price to be paid now:  76 685 000 USD [includes change fee, estimated 50'000)
   New price on delivery: 0 USD     (-78 000 000 USD)


So the closer we get to the delivery date, the lower will the rabate be. I remeber having seen this in prior/other game worlds, but for some reason in "History and Future", I need to pay subsentially more when I want to pay the manufacturer earlier than planned. Considering the credit interest rate is not negative, rather weird :)
« Last Edit: January 04, 2020, 01:29:44 PM by Sami »

Offline groundbum2

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Re: History and Future: repricing of A/C on order seems wrong
« Reply #1 on: January 04, 2020, 12:00:30 PM »
I think if you change the order then it gets processed at the current list price, which generally is much higher a few years after initial launch. Plus you won't get the launch discount or if you ordered 40+ large order discount.

G

Offline sanabas

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Re: History and Future: repricing of A/C on order seems wrong
« Reply #2 on: January 04, 2020, 12:48:27 PM »
Code: [Select]
Boeing 777-200ER (12-May-1997)

   Price to be paid now: 63 203 010 USD
   New price on delivery: 0 USD     (-54 595 340 USD)

Total sum to be paid/refunded: 63 203 010 USD

If 55 million was 40% of the plane's price on ordering, and you had 2.5% discount, that means the initial list price was ~140 mill, and you've already paid ~82 million when ordering. Current list price of a 777ER is 216-240 mill. So you're not being asked to pay the new list price, and the total price is now $145 mill

I think you're simply losing the initial discounts, plus a small fee for the change, and not sure about the other $4-5 million. Maybe inflation adjustment? $140 million in 1991 = $145 in 1995? Or maybe blanket bigger fee for changing the payment structure, if you changed to 20% deposit you're asking the factory to hand over $35+ million, so they should get a bit extra for that on delivery.

Factory has no real reason to up your discount from 2.5% to 6%, they've already got your order.

Quote
I think if you change the order then it gets processed at the current list price, which generally is much higher a few years after initial launch.

The change to current list price only happens if you change the specs of the plane, e.g. MTOW, engine, from 772 to 772ER, etc. Probably also if you change from buy to lease or vice-versa.

Offline Sami

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Re: History and Future: repricing of A/C on order seems wrong
« Reply #3 on: January 04, 2020, 01:28:06 PM »
The system knows the original order price and discounts you got, but the recalculation of the new price after the editing depends partly also on the current list price and the system does it's best to take into account the original discounts and prices paid, but as a rule of thumb editing the order afterwards will always cost you compared to "choosing correct specs" right from the start.

And the change in financing does NOT only cost the 50k fee but always will be at least a couple of % of the total sum (this is intentional, and is done for example to avoid a situation where juggling the payment amounts back and forth could lead to a situation where you actually gain money..).

Offline weasel

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Re: History and Future: repricing of A/C on order seems wrong
« Reply #4 on: January 04, 2020, 01:33:50 PM »
Quote
I think you're simply losing the initial discounts, plus a small fee for the change, and not sure about the other $4-5 million. Maybe inflation adjustment? $140 million in 1991 = $145 in 1995? Or maybe blanket bigger fee for changing the payment structure, if you changed to 20% deposit you're asking the factory to hand over $35+ million, so they should get a bit extra for that on delivery.

Factory has no real reason to up your discount from 2.5% to 6%, they've already got your order.

I agree, a change in payment after order should never result in huge savings, so one is always better off to pay 100% at time of order. Yet, given there are not negative interest rates on cash balances, the factory should have a motivation in getting the money today (it can be invested, spent on research, goods, paying salaries) rather than in 19 months time, so it should - except from a change fee, which, if the delivery is due within a few months could be higher than potential savings - not result in an uplift of 8'607'670.

Most businesses are interested in getting paid upfront rather than time of delivery and, in in cases of partial payments even incentivize early payment by giving a few percent extra on the remaining balance rather than to wait 90 days.



 

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