Dealer mark-up

[boat_guy]

There is something I am not understanding. I have heard from a few sources that the average mark-up on a tractor is about 10-15%, but then I hear that people are getting 10-20% off the MSRP of their tractor when they buy it!

What gives? The dealer must be making money some where, and also the manufacturer. They both have a lot of overhead. Are the dealers getting rebates from the manufacturer for some or all tractors?

This has had me wondering for a while.

Thanks for the feedback.

Boat_guy

 

[gamble77]

MSRP is not the same as dealer cost. Most dealers (that I know of) try to make at least 10-15%, if they don't they might not be there next time you go to see them. Don't get MSRP and dealer cost confused. Dealer cost is determined by a percentage OFF of MSRP (again, usually not always). Then once they get their price they will add whatever profit margin they want.

 

[MessickFarmEqu]

</font><font color="blue" class="small">( Most dealers (that I know of) try to make at least 10-15% )</font>

TRY being the key word there. In really a really competitive market with conditions being right there are times you pay more in sales tax than we can make on a tractor.

Yes, there are rebates. However they are pretty minimal. The manufacturers change those rebates on the fly to effect their market pricing quickly. Most places just figure that rebate right into the sale price and don't count it as some kinda bonus margin.

Figuring cost as a % of MSRP is not a great way to estimate anything. It ignores all the programs that effect the pricing and includes nothing for setup or freight. The best thing is to just get on the phone and call localy.

 

[beenthere]

I decide what I will pay, and don't worry about what the dealer is making. If he wants to deal with me, fine. I don't try to 'hold em up' and I either accept or reject their price. I may try to get some things thrown in on the deal and the dealer will have to decide if he can do that. I don't care what his mark-up is (don't think it is any of my business) but hope he makes enough to stay in business. The last thing I want to happen is for my dealer to not be around next year or even 10 years.

 

[SWB]

When I talked to two of my local dealers about this, they were very open about it (I think). They said that generally their cost is about 75% of MSRP and they generally add 10% (one dealer) or 10 1/2% (the other dealer) to that price. They do need to make a certain amount per tractor minimum so that on a smaller tractor purchase they will try to get 12% above cost if the total sale price is low. For a more expensive tractor they can afford to take less than 10% above their cost.
Therefore, 10% above cost on many tractors would be more than 15% off of MSRP. For example, a $20,000 tractor would cost $15,000 plus 10% or $16,500 which is 17.5% off of list. I don't know if all dealers operate like this or even if they were telling me the whole story, but most of the prices quoted on this site would support something like this being practiced by the majority of "reasonable" dealers.

 

[boat_guy]

Thanks everyone for the info.

Something sounds amiss here with SWB's reply. What happened to the other $3500 ($20,000-$16,500). That doesn't seem like much of a markup for a tractor! You would have to sell a lot of equipment to survive. In that example the dealer only made $1500 on a $20,000 tractor, that includes all his expenses plus assembly etc. I just can't see how you would stay in business on those margins?

I must be missing something!

 

[MessickFarmEqu]

This is what makes tractor pricing on our end difficult. Your still ignoring sales allowances, sales incenties, freight, setup, etc,etc. Usually the expenses and kickbacks come to a near wash - thats where your missing figures are.