DavesTractor
Elite Member
I've wondered why tractor dealers won't trade for equipment with liens on it and just pay off the loan like car dealers do. I guess tractors don't sell as fast as cars?
We take trade-ins with liens. We just pay off the lien. For example if the tractor trade value is $7500 and it has a $6000 lien, we cut a check to the lienholder for $6000 and the $1500 in equity is used as a down payment.
Dealers that avoid trades often have cash flow issues. When a customer drives off the lot with a new $30k tractor, the dealer has to pay off the floor plan, lets say that is $28k. He retains the profit to pay for overhead, wages, etc. But if a guy trades in a $15k tractor the dealer still needs to pay of the $28k cost...so his cash flow just shrank by the value of the trade less the profit made. Do that a dozen times in a month and it affects the old bank account. Most dealers are properly capitalized and it really isn't an issue. And there are some dealers that simply do not like selling used equipment, which amazes me. Profit margins on a used piece can be quite good, whereas profit margins on new equipment are quite slim.