New Tractor Sales Are Declining

[rScotty]

Doesn't the manufacturer sells to the dealer and its up to dealer to set or negotiate a selling price above true invoice for a profit? In my case the dealer did not know how I was going to pay for the truck until I got to the finance person which was after the deal was made.

Good points. I negotiate the same way. The assumption is always cash - but honestly I don't know myself how I am plannng to pay until the deal finaly gets done and it comes time to finalize. If I haven't decided, there is no way the dealer can know in advance.

It is popular online today for everyone to think like a financial wizard. I quickly discovered in my own small dealership & repair business was that not every transaction had a profit attached. Some things are advertising and goodwill.
The object is to grow the business, not to make profit on every transaction.

Every business owner has his own style. Some run on debt, & some on investment. Whatever interest any busness owner decides to charge - or doesn't - is part of that style. I is often impossible to know a dealer's finances from the outside.

rScotty

 

[Hay Dude]

There probably are narrow number of situations where a dealer wants to move something and the customer gets close to invoice and 0% financing, but for the vast # of typical buyers, 0% interest means paying more invoice. OR you pay higher interest and get a lower price.


Next people will be saying the paid invoice, got 0% for 5 years and got retail trade in money for their trade-in.

Come on fellas, these aren’t multi-billion dollar corporations because they are philanthropists to their customers.

 

[rScotty]

Normally, there will be a flooring plan between the dealer and manufacturer. There will be free flooring until a certain time and then the dealer will start paying interest on unsold units. Models that are known to be hard to sell may come with a much longer free flooring plan. If a dealer doesn't pay the interest, a manufacturer can repo the stock. Few dealers choose to pay off the units instead of paying interest.

If by "normal" you mean "more commonly done" then the answer is "maybe". Some dealers do it that way and others don't. I have known dealers who did what you describe, but not many. Basically that way they are working for the bank or some other lien holder, so what's the point?

The dealer I learned from was more independent. He simply bought the units outright from the wholesale distributor and resold them....since I learned from him, so did I. Many businesses do so.
rScotty

 

[Hay Dude]

Good points. I negotiate the same way. The assumption is always cash - but honestly I don't know myself how I am plannng to pay until the deal finaly gets done and it comes time to finalize. If I haven't decided, there is no way the dealer can know in advance.

It is popular online today for everyone to think like a financial wizard. I quickly discovered in my own small dealership & repair business was that not every transaction had a profit attached. Some things are advertising and goodwill.
The object is to grow the business, not to make profit on every transaction.

Every business owner has his own style. Some run on debt, & some on investment. Whatever interest any busness owner decides to charge - or doesn't - is part of that style. I is often impossible to know a dealer's finances from the outside.

rScotty

The dealer always assumes the buyer has that tactic up their sleeve.
These people aren’t stupid.

 

[Hay Dude]

If by "normal" you mean "more commonly done" then the answer is "maybe". Some dealers do it that way and others don't. I have known dealers who did what you describe, but not many. Basically that way they are working for the bank or some other lien holder, so what's the point?

The dealer I learned from was more independent. He simply bought the units outright from the wholesale distributor and resold them....since I learned from him, so did I. Many businesses do so.
rScotty

That was many years ago, when penning a check was more the norm. I’m buying/selling 5+ times a year. Most buyers are financing now.
The prices of new equipment have long out stripped the purchasing power of most (not all) buyers.

20+ years ago, when the value of the dollar was much higher and purchase prices were lower, more people paid with a check. Today, the script has flipped. I bet many, many more if not most finance tractor and equipment purchases.

In fact, I’d be leasing is now the upcoming way to replace typical financing.

 

[jyoutz]

These manufacturers aren’t stupid enough to give you the lowest price and finance you for free for 5 years. Anyone who thinks so is fooling themselves.
I credit the manufacturers for playing games with people like that. It makes them feel smart, like they took advantage of the manufacturer.

Regardless, you take the loan or pay cash. But there is no significant cost reduction for cash.

 

[Yander]

I don't feel like I tricked anyone using a 0% deal. I did it because I was okay losing 1500 or whatever it is on a cash deal, to use 25k on a house remodel that brings income.
For me, it was the smart thing to do. House has made me much more than the 1500 I "lost" on that tractor deal.

edit: each persons situations differ, so whats smart for some is dumb for others. I understand both sides of this argument and depending on the view, agree with both.

And your situation is a good example of why they offer the two options and sometimes more options.

They are trying to get a tractor sold and make money doing it.

You are trying to put your money in the place it works most for you.

So people coming on acting like 0% has them a better deal are no different than people acting like cash has them a better deal.

You had to take cash from somewhere making you money unless
maybe it was in a coffee can in your backyard doing nothing for you.

 

[Hay Dude]

Regardless, you take the loan or pay cash. But there is no significant cost reduction for cash.

And likewise, there is no 0% interest AND significant reduction in price.

 

[Yander]

But the interest rate discussion brings up some good points. With interest rates rising like they are, any company offering financing has to consider that in their package they can offer you.

If they didn't they wouldn't be in business very long and you wouldn't want to buy a tractor from there anyways.

So you might see slightly better deals on cash purchases then you would have even 8 months ago. Because someone has to deal with that higher interest rate and it isn't going to be them.

 

[ruffdog]

If by "normal" you mean "more commonly done" then the answer is "maybe". Some dealers do it that way and others don't. I have known dealers who did what you describe, but not many. Basically that way they are working for the bank or some other lien holder, so what's the point?

The dealer I learned from was more independent. He simply bought the units outright from the wholesale distributor and resold them....since I learned from him, so did I. Many businesses do so.
rScotty

I agree. In my experience, small dealers that don't move much product tend to purchase outright while the large dealers moving tons of units will use a flooring plan.