Dealer Margins

[AKfish]

Before we all get too "touchy feely" for the trials and tribulations of running your own business and overly sympathetic for the low returns that equipment/tractor business owners experience...

Let's not forget - any business deal - is a TWO WAY STREET!

It requires 2 parties... everyone has to say - yes, this works for me.

The customer should know that his agreement with the business owner is fair and reasonable compared to the prevailing market.

The last time I checked -- my local dealer isn't very likely to throw me a few thousand dollars if my investments take a plunge; any more than I'm inclined to give up a few thousand on my next tractor deal -- just because he's a nice guy with a kid in college, etc.

AKfish

 

[jlsmith]

Ok here is what gets me, people buy a tractor for 20k and it cost the dealer 18k. people think the dealer just made 2k and put that in his pocket. WRONG that money goes toward light tech manuel employee payroll ect ect. For the dealers who have to haggel with customers and almost sell the product at cost will not be here tomarrow. The customer has to know that he is just not buying a tractor hes buying into that dealership and helping keep them around so he can be here tomarrow when the customer needs him the most. Im sorry but i will NOT haggel a price. If the customer comes in i give him the lowest price i can and if thats not good enough then im sorry. I have to look out for my family and employees also and im not doing that if im giving stuff away.Alot of people just dont know what it cost do run a dealership.

 

[Dutch445]

JL,
How many times do you find that those customer that do
end up with the cutthroat price are usually the ones that
never come back, for anything. So in reality, what did
we gain by selling him in the first place?
It is a relationship purchase, and I am impressed with our customers
that are chiming in here with a good understanding of
the costs/investment associated to provide the services
we do.
thank you all.

 

[jlsmith]

JL,
How many times do you find that those customer that do
end up with the cutthroat price are usually the ones that
never come back, for anything. So in reality, what did
we gain by selling him in the first place?
It is a relationship purchase, and I am impressed with our customers
that are chiming in here with a good understanding of
the costs/investment associated to provide the services
we do.
thank you all.

i agree with you 100%..I wasnt trying to step on any toes just putting a dealers side out there.:thumbsup:

 

[bigbull338]

well i for 1 will not turn my back on a dealer that gives me the cutthroat price.i stay with them as long as they treat me fairly.theres 2 dealers 15mi from me,but i wont buy big ticket items from them.because i dont like the way they treat me.my kub dealer is 50mi from me.

 

[jlsmith]

well i for 1 will not turn my back on a dealer that gives me the cutthroat price.i stay with them as long as they treat me fairly.theres 2 dealers 15mi from me,but i wont buy big ticket items from them.because i dont like the way they treat me.my kub dealer is 50mi from me.

And ur a customer a dealer likes to have. Sometimes i dont give the best price BUT I will give the best service i can offer.

 

[bigbull338]

theres was 1 dealer that i wanted to work with because he was closer.but when i told him the tractor i wanted an how i wanted it set up,an what i was going todo with it.an he told me that the tractor would not do what i wanted.an my dealer said it would.an he proved it the day they delivered the tractor.

 

[wallace]

If anyone would really like to find out what a dealers profit is.....I will sell you my working operation..You can have everything, a turn key operation.
I'll leave all the trucks, tarilers, inventory, parts, employees, and 17 acres.
As a matter in fact I will even throw in our self storage business.
I'll open the Bids up at 6 million.

What, no takers???

 

[wallace]

What do you feel is an acceptable margin a dealer should be able to achive? 5% 8% 10% 12% 15% 20%?????

So lets do this.....

GERB4 What do you feel is an acceptable margin we as a dealer should be able to achive? 5% 8% 10% 12% 15% 20%????
Or anyone else that would like to give an answer.

 

[qball98]

So lets do this.....

GERB4 What do you feel is an acceptable margin we as a dealer should be able to achive? 5% 8% 10% 12% 15% 20%????
Or anyone else that would like to give an answer.

I will bite on this one. It is really a tough question to answer without knowing what the dealer needs to make in order to stay in business. If you look at it like this. Lets say a dealer has a 10% margin on everything he sells. This dealer sells Joe homeowner a $1000 mower he just made a whole $100 dollars. Now once he pays the salesman for the deal and showing Joe how to operate it, the mechanic for assembling the machine (some manufactures do pay the dealer for this and some don't), the secretary for doing the paperwork and taking the machine off the books and sending payment to the manufacturer, the full tank of gas Joe wanted with the machine, delivery of the machine to Joe's house because we all know Joe doesn't have a trailer, his overhead costs for keeping the store open (lights, water, gas bill, shop supplies and insurance). How much did he really make on that one deal? Almost forgot the hat Joe wanted just to have because we all know Joe does not wear hats. The point of all this rambling is there are allot of small costs that do add up when really sit down and look at what dealers really need to keep the doors open.

 

[wallace]

This was discussed over in the Mahindra forum and the one dealer hit the nail on the head with his post.

And as EFC has mentioned, a dealer that is in business to stay and pays it's employees fairly, gives benefits, has a proper level of parts, trained service reps, etc. will need to charge a little more to maintain that level of fairness to his employees and good service to his customer. I think most customers will pay just a little more for that. Tractors sales in California are down 70%, yet we gave our employees a modest raise this year and a small year end gift. Why? Because they are working their tails off, despite the economy and that is the fair thing to do. I can't do that and sell at 2% over cost, and if I can't treat my employees fairly, I might as well sell the place and retire. That is my little soapbox.

I've often wondered if a dealer could set up a two-tiered customer system. One would be VIP and would include free delivery, free pickup and delivery for services and warranty and maybe free scheduled services for the first 5 years. Next day air on parts, front of the line on service. Free loaner. Something like that, really over the top. The other we could call the parsimonious program. The price is rock bottom, but no free delivery, no warranty favors (where a dealer covers something out of his pocket-happens all the time), no free clips, pins, hats, toplinks, service calls, etc. No talking on the phone for two hours for free because you ran it out of fuel and can't figure out how to start it, or your radiator screen is filled with chaff or your battery cables are dirty. Read your manual. No sponsoring your child for his club, no wash job after a service, no full tank of diesel. Got a little weatherchecking on your tires, talk to Titan, it's not my problem...etc.

 

[AKfish]

Come on... the likely majority of folk's on this forum are financially responsible and have been moderately successful in their chosen profession's and lives.

Many recognize the scope of the financial liabilities involved with owning a business.

I don't know Wallace's "bottom-line" on a tractor sale - the point at which he says - NO.

I can only ask... if he tells me a figure that doesn't measure up to the other dealership's I've spoken with.. well, then it's my decision to say NO.

Everybody's gotta say YES! If not -- well, that's just business..

AKfish

 

[jlsmith]

I have to agree with wallace some what. What some folks dont know is that just becuz there are two identical tractors on the lot (or diff lots) doesnt mean they cost the same. ex dealer #1 has a 40 hp cut for 21k and dealer # 2 has the same model tractor on his lot for 23k. Same tractor but dealer #2 recieved his tractor 7 months after dealer #1 and thats how much they have went up in that short time. Dealer 3 has the same model tractor and can sell it for 18k what customer may not know is that dealer #3's tractor is 2yrs old and the Brand corp office has allowed x amount of dollars to be taken off the tractor based on ser# just to move the older tractor. So when some one is looking at buying a new tractor and he gets a better price from another dealer it may not be that the higher dealer was trying to make more $$ on the tractor but in fact that was as low as he could go due to price diff to the dealers.

 

[RickB]

What some folks dont know is that just becuz there are two identical tractors on the lot (or diff lots) doesnt mean they cost the same.

Very true, but nobody wants to hear that.
And a good reason why a discussion on margins is a waste of time; because few, if any buyers know what a dealer's true cost is, or their actual margin for that matter. 99% of dealers that "share" their margin on a deal are omitting the discount structure. That makes them look like martyrs for selling on a slim margin while pocketing the discounts which by volume or whatever, they are certainly entitled to.

All of which puts the buyer in the dubious position of knowing just enough to be thoroughly dangerous. Makes more sense to negotiate the best deal then either buy or walk away without worrying about the dealer's margin.

 

[aczlan]

A dealer should make enough to keep the doors open, pay their employees well enough to get good people, be able to take a vacation if they so desire and have someone available when I need something fixed on the L3830 before the rain shows up and soaks the hay that I have drying in the field.

Aaron Z