Dealer How much does the Dealer get on a New Tractor?

JohnBoy45 · Jul 19, 2003

Hi, I have a dealer that claims he only get 800.00 profit on a new B7500 HST Tractor is this true? Why would a person want to sell tractors and have all the overhead costs if they are only making a small profit compared to Car dealers?

Thanks, Terry

DavidJ · Jul 19, 2003

Remember, he said "profit" not what his portion of the sale price is. What he's telling you is that after he pays all the overhead; rent or mortgage, salaries, service, utilities, etc; he winds up with $800.00 profit. I'd say that's a pretty good fo a $9K unit.

stvman · Jul 19, 2003

Terry, Your dealer may be telling you the truth but that may be on one model. All dealers do loss leaders on models to get you in the door but this isn't even that. Call your dealer and see how long it will take for service. Whenever I go by the dealers in my area the mechanics are never standing around doing nothing (I suppose he isn't making money there either)

I was pricing L35 TLB,s two years ago my local dealer quoted me a price 6500.00 dollars higher than Carver Tractor. When I brought this to the dealers attention he became very agitated and dismissed me and told me to buy from Carver "Just dont expect me to service it".

All I wanted was a fair price. The tractor dealers in my area are so arrogant quoting above list in most cases which left me disgusted and giving up on buying new.

Henro · Jul 19, 2003

When I was tractor shopping last year, after reading a lot here, etc, etc, I concluded that the dealer could afford to sell me a Kubota for about 13 to 14 percent off the list price.

Figuring he needs to make at least as much as he gives me off, that would double to mean he would pay Kubota a maximum of 70% of list price for the tractor...mabye the dealer pays less than 70% list after all hidden incentives are added in...

This is entirely speculation, naturally, but I can't see how it could be much different and the dealer still be able to stay profitable. Maybe he only pays 65% list...wouldn't surprise me.

TractorTeen · Jul 19, 2003

As has been said, he is making money off more than just tractors. He is making money off of servicing, attachments. fluids, and accessories. Honestly, 800.00 isn't bad on one compact tractor. I know my dealer sold 4 tractors on one Saturday. He opened at 8am and closed 1pm. 3200.00 isn't bad for one days work.

Rocketman · Jul 19, 2003

Terry: In a previous life I owned and operated a Tractor Dealership. A few months back I posted the following in another thread...I hope it helps out.

"There seems to be a slight misunderstanding regarding the profit margins in tractor whole goods; so, I thought I'd share.

Although the manufacturers all have slightly different programs and there are many influencing factors (time of year, special program, dealer volume, etc); in round numbers, a dealer will pay 20-25% (off of MSRP) for unit purchases. This could be as low as 15% and as high as 30% -depending upon the influencing factors.
Now take your typical $16000.00 Kubota BX22 and apply a typical 20+5+5 (volume dealer) discount and you get a cost of $11552.00. Or a typical straight 20 discount for lower volume dealers and you get a cost of $12800.00. You read it right ...... with only "dealer volume factors" there could easily be a $1250.00 "profit difference". Add in time of the year, special programs, and incentives, and you could sway the price another 5% or so. The lesson here is a dealer is not a dealer, all dealers are not paying the same price, and size DOES matter.

For the purposes of this discussion, lets say you are dealing with the "high volume" dealer and he buys his BX22 for $11552.00 + freight of $150.00. The tractor will arrive crated and require setup which will probably take 3 hours to get from the crate to the showroom. Out of pocket expenses is now around $11850.00.

Mr. informed customer walks in and sees the $16900.00 MSRP and negotiates a 15% reduction and pays $14365.00. Not a bad deal - the high volume dealership pocketed $2500.00 on the transaction the lower volume dealer pocketd $1250.00 - right? Not so fast tonto. Commisions (2% of gross at $231.00), caps (premium wool style with logo $20.00) , a free service (1.5 hours or $75.00), and baseball tickets ($25.00). The real number delta now sits at $2209.00 (or $959.00 for the low volume dealer). Taxes, insurance, light bill, wages for the salesman and sweet-thang behind the desk, a 51% IRS burden on the remainder, and finally the owner gets what is left over - believe me it is a negative number for even the largest dealerships.

Now - how many BX22s do you have to sell per year to maintain a profitable sales program? I'll tell you that it takes over 125 units per year and there ain't too many dealerships out there that push that much iron.

The $$$ is in parts/service - not sales. So what is the best negotiating technique? Buy when the discounts are greatest and convince the dealership you are a repeat parts/service customer."

5030 · Jul 19, 2003

Rocketman:

I agree with you. The one thing that you didn't include as an overhead is the fact the the dealer has to pay tax on his floorplan.

I get a little discusted when I read threads on TBYNet concerning someone who shops for the best price, buys a tractor and then never deals with the selling dealer again. I've read numerous threads where an owner is looking for as an example, UDT fluid and wants to substitute the TSC brand over the Kubota product, or an owner thinks (and probably is) getting a better deal on filters or parts from an internet supplier. The intrinsic thing that most people forget is that the selling dealer is counting on you to deal with him. That is the most important aspect of the sale.

gordon · Jul 19, 2003

I can say that most all of what I get for the tractor is bought local. But I"m lucky, I've got a really good local Kubota dealer so that helps.

Good post Rocket man. When I was working in the R/V business the goal was for each department to support itself--sales, parts and service. I would believe that if each dept. wasn't then your robbing peter to pay paul and down the tubes you go! Yes there were months that one dept would help to support other depts but at years end all would show a good profit.

Gordon

stvman · Jul 19, 2003

My local dealer claims to be the largest volume dealer in the country. The dealership looks more like a country club than a tractor dealership. They by far have given me the worst quotes on new equiptment.

So much for passing on that volume discount!!

frank_f15 · Jul 20, 2003

can't tell u how much the dealer makes on each sale. just know that if he sells at to high a price, he ain't going to be in business very long, and if he sells to low, he ain;t going to be in business very long. dealers must make a profit. or what is the point of being in business? am not a dealer or a businessman, but know that it is only a good deal if both parties are happy.