Dealer Margins
- Thread starter Gerb4
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CurlyDave
Elite Member
There are a lot of things called "margin" in the accounting world, which one do you want?
Or possibly do you mean % markup?
I don't think there is a magic number here. The dealer is going to charge what he wants to charge -- if you think it is too high, go somewhere else.
There are dealers who advertise on TBN who will ship you a tractor at a very reasonable markup. Reputable dealers.
When I bought, I paid a about 10% more for my JD than a comparable Kubota. Why? Easy, the JD dealer gave me a lot of pre-sale care and information, at the Kubota dealer I got to talk to a 20 something kid who was bored with his job and it showed.
Funny thing is 2 years later the Kubota dealer closed while 4 years later, the JD dealer is still open and still giving me good service.
I got good value for the extra money.
Or possibly do you mean % markup?
I don't think there is a magic number here. The dealer is going to charge what he wants to charge -- if you think it is too high, go somewhere else.
There are dealers who advertise on TBN who will ship you a tractor at a very reasonable markup. Reputable dealers.
When I bought, I paid a about 10% more for my JD than a comparable Kubota. Why? Easy, the JD dealer gave me a lot of pre-sale care and information, at the Kubota dealer I got to talk to a 20 something kid who was bored with his job and it showed.
Funny thing is 2 years later the Kubota dealer closed while 4 years later, the JD dealer is still open and still giving me good service.
I got good value for the extra money.
Baby Grand
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Whatever he can convince you to part with. Anything less would be socialism, or so I've been told.
Seriously though - I would think it would depend on supply vs demand. It's hard to find discounts on a good snow plow in the Winter, cause everyone is looking to buy. The size of the transaction probably plays a part, too. I can't imagine a dealer selling $5 stuff at 5% mark-up and being able to buy shoes for his kids. On the other hand, 5% on a 250 HP tractor might just cover a few living expenses and a Christmas present or two.
-Jim
Ductape
Elite Member
Enough for him to make a reasonable profit and keep his doors open.
beenthere
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RickB
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I am firmly convinced that your personal income is too high.
AKfish
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This is another one of those long-running; "always pops up" questions!
Like RickB says - it's like telling somebody they make too much money or don't pay enough taxes.. What's fair to the buyer and the guy trying to make a living selling?
The answer is only real apparent whenever the deal goes way outside of the margins.. and we all look at auction results, eBay, and the various Internet sites to determine what the "margins" are.
AKfish
bigbull338
Elite Member
a tractor dealerships margin on equipment an tractors is razor thin to some extent.i found that out when i was making a deal on my kubota.i was going to go with kubs financing on the 0 down 0 intrest 60 months.well kub turned me down no credit histry because i pay cash for everything i buy.so i called my banker,told her what i was doing she said write the check.well i have to pay intrest,so i called the dealer told him what id give knocking off $2000 wich is the intrest.an he had to call kubota an see if they would meet my price an they did.he said i was killing their profit margin.then i priced a new 10ft bushhog shredder.an i told that dealer low as he could go.an he told me he only makes $350 on each shredder.
revitupfaster
Silver Member
I was in the recreational power sports business for 30 years. Profit margins, Dealer markup, whatever you want to call it varies widely, depending on the item. Obviously on big ticket items, the margin/markup is a lot less than it would be on a your accessory/maintenance parts.
I watched our margin/markup on big ticket items (Snowmobiles / Boats & Outboard Engines) diminish over the years from around 18-20% in the early days, to being "Lucky" to end up with 5-8% at the end. Not only did the margins drop, the added costs that the Manufacturers charged us for things such as advertising materials, computer access, and inventory carrying charges continued to increase. Most will not believe it, but at the end, my major supplier was charging me $265 a month, just to have dealer access to their website, which was necessary for parts ordering, warranty registrations, etc etc......in other words, you had no choice. You were charged it on your parts account, and you paid it. Twice a year, we were automatically sent a collection of advertising material (Brochures and Showroom stuff) and automatically billed between $400 & $500 each time. Additional product Brochures over and above the original 25 which were included in the "Auto ship" kit, cost another $1.25 each. Just loved it when a "Showroom Browser's" kids collected one of everything while in the store, knowing they were all destined for the garbage when they got home.
Dealers today, are very hard pressed to be able to achieve a reasonable profit margin. Margins are for the most part driven by what the competition is doing. There always will be dealers that will sell the same for less. Many factors are involved in the pricing. How badly do you want to sell it, maybe the next interest payment on the item is due and the dealer needs the money, some dealers have lower operating costs possibly because they are better financed (have more capital behind them) whatever there are countless reasons why pricing varies. Believe me it is very frustrating being a dealer and trying to keep on top of what the market will pay in your area for a particular item. On top of all this, price shoppers will lie through their teeth, and tell you "Well I can get it at so and so's place for this price" when you know once they actually sit down and are prepared to buy, all the other added administration fees will sureley be added and the true price will probably be more than yours was, but by this time he's committed, and you won't see him again.
No one, and I mean no one, trying to keep a small to medium dealership above water is rolling in dough. Customers today, with the availability of the internet and being able to research prices are able to grind dealers to the bare minimums. The only thing a dealer can offer in order to try and maintain a margin that will keep him in business is the level of service he provides and the honesty and integrity of his dealership. Strangely, I found that when it all comes down to it, for most buyers today it's not the honesty and integrity, or good service, it all comes down to the almighty buck, and who has the lowest price. They don't even consider the potential of after the fact issues, and who will go to bat for them on warranty issues, or go the extra mile when they need help. In the majority of cases, it's all about the $$$.
I'm sorry for the length of this post, but I dealt with the public for many years, and believe me it was an experience. Most people have no idea how small the actual margin is between "True" dealer cost, and the "Suggested Retail" price. Some actually think dealers have a 30-40% spread to work with, where in actual fact, it's probably more in the 15-20% range, if you're lucky. So by the time the obligatory discount is figured in, you figure out what the dealer is left with. Unfortunately, there are many after the fact Manufacturer and inventory carrying costs that are non-negotiable and assessed to dealers outside of the so called "cost" price, that erode the margin, before you even start. I could write a book on how many "behind the scene" costs are being slapped on the dealers by all the Major manufacturers of "Big Ticket" Product lines.
You can shop the world but if you are comparing the exact same thing, and I mean excatly the same, and buying without a trade, when all is said and done, I would bet, you would be hard pressed to find a 2-3% difference between any dealer. I personally think a dealer should be entitled to at least a 10% - 12% profit margin. Believe me, he needs it to keep his doors open, so he can look after you, when you need him. If he can't make a "reasonable" profit, on the sale, he won't be able to provide that high quality service department you will certainly want should the need arise. Good quality service people don't come cheap, I know, been there done that. My top service guys were taking more pay home a week than I was, and they didn't have any of the financial risk I was exposed to. It's also funny, that Dealer service people for the most part also seem to think the dealer is rolling in money, and it's a real challenge to hold onto your good ones, to keep that "High Quality" in the shop.
The cheapest price is not always your best deal by any means. I do my research before a purchase, like everybody else, but in todays market, I feel that too many of us fixate on getting the absolute "Best Price", then when that local dealer you bypassed goes out of business, you wonder why.
I once had a customer, that was prepared to drive almost 100 miles to save a couple of hundred dollars on a purchase of over $15,000. I wasn't prepared to drop the price anymore, because the margin was far too slim as it was. When I brought up the point about any warranty issues, his response was "Well, I'll bring it to you, the warranty says I can take it to any dealer for warranty work". Dealing with the public........what a joy.
Again, sorry for the length, but this topic was an ongoing issue for me, during all the years I had to deal with it, and I just felt like venting a bit. I sure am enjoying retirement from that rat race.
REV
REV
I watched our margin/markup on big ticket items (Snowmobiles / Boats & Outboard Engines) diminish over the years from around 18-20% in the early days, to being "Lucky" to end up with 5-8% at the end. Not only did the margins drop, the added costs that the Manufacturers charged us for things such as advertising materials, computer access, and inventory carrying charges continued to increase. Most will not believe it, but at the end, my major supplier was charging me $265 a month, just to have dealer access to their website, which was necessary for parts ordering, warranty registrations, etc etc......in other words, you had no choice. You were charged it on your parts account, and you paid it. Twice a year, we were automatically sent a collection of advertising material (Brochures and Showroom stuff) and automatically billed between $400 & $500 each time. Additional product Brochures over and above the original 25 which were included in the "Auto ship" kit, cost another $1.25 each. Just loved it when a "Showroom Browser's" kids collected one of everything while in the store, knowing they were all destined for the garbage when they got home.
Dealers today, are very hard pressed to be able to achieve a reasonable profit margin. Margins are for the most part driven by what the competition is doing. There always will be dealers that will sell the same for less. Many factors are involved in the pricing. How badly do you want to sell it, maybe the next interest payment on the item is due and the dealer needs the money, some dealers have lower operating costs possibly because they are better financed (have more capital behind them) whatever there are countless reasons why pricing varies. Believe me it is very frustrating being a dealer and trying to keep on top of what the market will pay in your area for a particular item. On top of all this, price shoppers will lie through their teeth, and tell you "Well I can get it at so and so's place for this price" when you know once they actually sit down and are prepared to buy, all the other added administration fees will sureley be added and the true price will probably be more than yours was, but by this time he's committed, and you won't see him again.
No one, and I mean no one, trying to keep a small to medium dealership above water is rolling in dough. Customers today, with the availability of the internet and being able to research prices are able to grind dealers to the bare minimums. The only thing a dealer can offer in order to try and maintain a margin that will keep him in business is the level of service he provides and the honesty and integrity of his dealership. Strangely, I found that when it all comes down to it, for most buyers today it's not the honesty and integrity, or good service, it all comes down to the almighty buck, and who has the lowest price. They don't even consider the potential of after the fact issues, and who will go to bat for them on warranty issues, or go the extra mile when they need help. In the majority of cases, it's all about the $$$.
I'm sorry for the length of this post, but I dealt with the public for many years, and believe me it was an experience. Most people have no idea how small the actual margin is between "True" dealer cost, and the "Suggested Retail" price. Some actually think dealers have a 30-40% spread to work with, where in actual fact, it's probably more in the 15-20% range, if you're lucky. So by the time the obligatory discount is figured in, you figure out what the dealer is left with. Unfortunately, there are many after the fact Manufacturer and inventory carrying costs that are non-negotiable and assessed to dealers outside of the so called "cost" price, that erode the margin, before you even start. I could write a book on how many "behind the scene" costs are being slapped on the dealers by all the Major manufacturers of "Big Ticket" Product lines.
You can shop the world but if you are comparing the exact same thing, and I mean excatly the same, and buying without a trade, when all is said and done, I would bet, you would be hard pressed to find a 2-3% difference between any dealer. I personally think a dealer should be entitled to at least a 10% - 12% profit margin. Believe me, he needs it to keep his doors open, so he can look after you, when you need him. If he can't make a "reasonable" profit, on the sale, he won't be able to provide that high quality service department you will certainly want should the need arise. Good quality service people don't come cheap, I know, been there done that. My top service guys were taking more pay home a week than I was, and they didn't have any of the financial risk I was exposed to. It's also funny, that Dealer service people for the most part also seem to think the dealer is rolling in money, and it's a real challenge to hold onto your good ones, to keep that "High Quality" in the shop.
The cheapest price is not always your best deal by any means. I do my research before a purchase, like everybody else, but in todays market, I feel that too many of us fixate on getting the absolute "Best Price", then when that local dealer you bypassed goes out of business, you wonder why.
I once had a customer, that was prepared to drive almost 100 miles to save a couple of hundred dollars on a purchase of over $15,000. I wasn't prepared to drop the price anymore, because the margin was far too slim as it was. When I brought up the point about any warranty issues, his response was "Well, I'll bring it to you, the warranty says I can take it to any dealer for warranty work". Dealing with the public........what a joy.
Again, sorry for the length, but this topic was an ongoing issue for me, during all the years I had to deal with it, and I just felt like venting a bit. I sure am enjoying retirement from that rat race.
REV
REV
Last edited:
beenthere
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revitupfaster:
That was good
Personnaly, I don't care what the dealer makes. I decide on what I am willing to pay for the item/tractor/attachment. If the dealer puts it all in his pocket or not, isn't my business. It's his.
I expect the dealer to be fair, and stay in business so I can go back in the future - be it for repairs, warranty, parts, service, or to buy/trade up. The dealer with his staff needs money (customers' money maybe ? ) to feed their families and keep the lights on. Simple as that, IMO.
I don't know why the OP asks the question. He/she didn't say.
That was good
Personnaly, I don't care what the dealer makes. I decide on what I am willing to pay for the item/tractor/attachment. If the dealer puts it all in his pocket or not, isn't my business. It's his.
I expect the dealer to be fair, and stay in business so I can go back in the future - be it for repairs, warranty, parts, service, or to buy/trade up. The dealer with his staff needs money (customers' money maybe ? ) to feed their families and keep the lights on. Simple as that, IMO.
I don't know why the OP asks the question. He/she didn't say.
jenkinsph
Super Star Member
revitupfaster,
I sometimes think everyone should be forced to run their own business for a decade to understand what it is like. I have changed the way I percieve my business too, I have changed from trying to grow as much as possible to culling out the non profitable customers and getting more entrenched with the good profitable customers. That is fewer customers but very good customers, for these good customers I will feed the cat and wash the windows. For the low paying and or unfriendly customers I can't get to them.
As far as the margins a business should make enough to make the business worth maintaining and keeping. No one needs to make a high investment in a dealership without a decent return. When the volume in units sold/yr declines it make it worse because most overhead remains the same.
Wednesday I drove past the place where I bought several trailers and after 15 years they are out of business.
I sometimes think everyone should be forced to run their own business for a decade to understand what it is like. I have changed the way I percieve my business too, I have changed from trying to grow as much as possible to culling out the non profitable customers and getting more entrenched with the good profitable customers. That is fewer customers but very good customers, for these good customers I will feed the cat and wash the windows. For the low paying and or unfriendly customers I can't get to them.
As far as the margins a business should make enough to make the business worth maintaining and keeping. No one needs to make a high investment in a dealership without a decent return. When the volume in units sold/yr declines it make it worse because most overhead remains the same.
Wednesday I drove past the place where I bought several trailers and after 15 years they are out of business.
Stormtruck2
Bronze Member
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I guess I'm an odd duck ( I've been called other things). When I do go to the dealer it is for something I can't do or make myself. I rarely negotiate on a price. I frequent the same business' faithfully. Once I find a business that treats me well, I feel a duty to treat them well also. When I need to buy something from the dealer, I ask them for their best price. If my local dealer gives me a price I can handle, I accept the deal. If not, I ask them if that is really their best price. If they offer a better price, I realize they aren't taking me serious. The JD dealership I deal with knows that when I ask for their best price they get one shot. Having dealt with them for a long time now, they know how I work. Last year I bought a used 1,070 hours 4600 HST MWFD with a 72" MMM, FEL, cab and a 928E snow blower for $17,500 out the door. I felt that was a fair price. Since then I have had three service calls, great service, and I have faithfully paid the bill within 48 hours of receiving it. They have frequently reduced the bill, without my asking, and have given me great service. I have bought all my parts and supplies from them. I am happy to pay them the service fee to fix what I can't/ don't have time to/want to. I pay them for their knowledge/expertise/proper tools to do the job, and time savings for me. As a fan of Ayn Rand, I do not begrudge paying what they want for want they have, if I want/need it. I don't work for free, unless I want too, I don't expect others to work for me for free. My dealer has a really nice new building, good inventory, and well qualified techs. When I see that new building, I don't feel they are charging me too much, instead I feel " Great, they are making money and will be there to serve me very well, well into the future." Their success makes me feel secure about the future of my equipment and its needs.
Leejohn
Elite Member
revitupfaster you are so right!! I had a large marine service and storage business in northern Ill. I didn't sell boats, just a few motors (Merc & Johnson) so that I could get parts, tooling, schooling & ect, ect. Man that ect, ect, right there cost alot of $$$$. I had to get 25% retail just to keep the doors open. And at that, there was no pay of me. Also this all had to be done in 7mo.
Your post was interesting and all the sleepless nights all came back. But it was a good and fun business. Would I do it again? You know I think I would if I was young and had never been in business. After I done it, I don't want anything to do with retail service business. I still do some I/O work for the shop here in town because they don't do any I/O work so I do it for them.
Your post was interesting and all the sleepless nights all came back. But it was a good and fun business. Would I do it again? You know I think I would if I was young and had never been in business. After I done it, I don't want anything to do with retail service business. I still do some I/O work for the shop here in town because they don't do any I/O work so I do it for them.
two_bit_score
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How about a 100%? There are some cases where that would be reasonable. Your question is too short on specifics to make much sense.
two_bit_score
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revitupfaster
Silver Member
As negative as my OP sounded, there were a lot of good times mixed in. We did have a lot of really great loyal customers over the years, that supported us year after year, and I can still refer to them as "Friends" today.
Knowing what I know now, I don't think I would do it again, at least not a similar type of venture, where you need to carry a couple of million in inventory. That's the hard part, floating that ball and chain.
The saying in the Marine / Power Sports industry, and I would think a lot of others is..."If you want to make a million dollars, start with 2 million, and get out early.
Thanks for reading guys, I feel better already.
REV
Engine_Tech
Bronze Member
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I've seen it vary according to product. On riding mowers, you probably shoot for 15% or more, but as the price increases that percentage may change. I think once you get into compact tractors and such, it's more of a "how much should I make" deal. When I sold compacts, we'd figure in all the freight, set-up, and such then stick $1,500 on it. I don't think that's unreasonable.
I agree with all the other dealer posts on here - there really isn't as much wiggle room as people think it is. It's nothing like the automobile market, which is where most folks learn to haggle.
I agree with all the other dealer posts on here - there really isn't as much wiggle room as people think it is. It's nothing like the automobile market, which is where most folks learn to haggle.
bigbull338
Elite Member
im going to haggle an squeeze the price no matter what the margin is.
A
Alden Plowen
Guest
As my old Economics Professor used to say--
"The value of any item is the price a willing seller and a willing buyer agree to at a certain time."
Or
"A thing is worth what it can do for you, not what you choose to pay for it."
"The value of any item is the price a willing seller and a willing buyer agree to at a certain time."
Or
"A thing is worth what it can do for you, not what you choose to pay for it."
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