Pending new tractor purchase, How to negotiate?

[HenryFordPower]

In automobiles there is almost 22% profit or more. Tractors don't have the overhead of show room and advertising like cars but some manufactures do advertise. Tractor dealers don't sell as many in month as a car dealer would so he has to make that up in profit margin on each one sold. It also means he is always operating on the edge and may have to take something just to pay the bills that month. Shop on last day or two of the month, better even to deal on last days of the quarter. My bet is there's 18% profit in compact tractor and close to 22% in a utility tractor of retail values pushing 40-50K. I would offer a number that was 15% below the retail value and would walk away from any deal not approaching 10-12% below.

HS

Tractor dealers have every bit as much overhead if not more than an automobile dealer. They still have corporate standards to meet, floor plan interest, salaries, etc. Advertising is is always an input cost no matter what product a business sells. A full page ad in Fastline or Tractorhouse is very expensive, every bit of that of Autotrader for example.

As for profit margin, if there was 22% or anything close to it in compact utility tractors, everyone and their brother would be selling them. The industry average is honestly about 10%. I recognize that every deal is different but 18-22%?

Are you defining retail value as the list price of a unit? If so your statement makes sense. But I have never met a dealer that ever even starts at list price. That is a good way to drive a deal away fast. i thin the best way to approach a deal is to be informed, but not over zealous. Understand that in the end you are going to want fast superior service, make a fair deal.

 

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In automobiles there is almost 22% profit or more. Tractors don't have the overhead of show room and advertising like cars but some manufactures do advertise. Tractor dealers don't sell as many in month as a car dealer would so he has to make that up in profit margin on each one sold. It also means he is always operating on the edge and may have to take something just to pay the bills that month. Shop on last day or two of the month, better even to deal on last days of the quarter. My bet is there's 18% profit in compact tractor and close to 22% in a utility tractor of retail values pushing 40-50K. I would offer a number that was 15% below the retail value and would walk away from any deal not approaching 10-12% below.

HS

When I was selling Dodge products the percentage from invoice to sticker was 9-12%. On Neons it was about 7-8%. This was between 1987 and 2005 so I do not know if any changes were made to these percentages from then. Dealer kickback only covers floor plan if the car or truck sat there for a time but that was 3%.
Are your figures aiming at something else?
I once had a John Deere sales manager tell me there was a 20-25% difference from invoice to retail on tractors. What dealers sell for might be in the 5-10% range from invoice to remain competitive but there is the consideration that way less tractors are sold than cars and replacement does not happen anywhere near as often. Makes after purchase parts and supply sales critical.

 

[MyJoBota]

I really have to laugh at the guys that shop all the country to save some money on a new tractor purchase especially if they have a great dealership close by. I have a great dealer that we buy from because they are local, built a excellent reputation and facility, and only sell what they feel is a great product at a fair price. I know when I deal with them on new pruchase, warranty, service or parts I will get great service and pay a fair price. I had a guy say he bought from dealer x instead of our local dealer because he saved "big" money and the dealer loaded the rear tires for free with Rim Guard. Well I saw the same fellow the other day and I asked how he liked his Kubota. He started mumbling about having a flat rear tire and finding out his tires were never loaded and the dealer is no longer in business. You guessed it, it will cost him more money to have the tires loaded with Rim Guard than what he saved on buying from dealer X who is out business.

 

[HenryFordPower]

I really have to laugh at the guys that shop all the country to save some money on a new tractor purchase especially if they have a great dealership close by. I have a great dealer that we buy from because they are local, built a excellent reputation and facility, and only sell what they feel is a great product at a fair price. I know when I deal with them on new pruchase, warranty, service or parts I will get great service and pay a fair price. I had a guy say he bought from dealer x instead of our local dealer because he saved "big" money and the dealer loaded the rear tires for free with Rim Guard. Well I saw the same fellow the other day and I asked how he liked his Kubota. He started mumbling about having a flat rear tire and finding out his tires were never loaded and the dealer is no longer in business. You guessed it, it will cost him more money to have the tires loaded with Rim Guard than what he saved on buying from dealer X who is out business.

You are hitting the nail on the head here......

 

[houstonscott]

When I was selling Dodge products the percentage from invoice to sticker was 9-12%. On Neons it was about 7-8%. This was between 1987 and 2005 so I do not know if any changes were made to these percentages from then. Dealer kickback only covers floor plan if the car or truck sat there for a time but that was 3%.
Are your figures aiming at something else?
I once had a John Deere sales manager tell me there was a 20-25% difference from invoice to retail on tractors. What dealers sell for might be in the 5-10% range from invoice to remain competitive but there is the consideration that way less tractors are sold than cars and replacement does not happen anywhere near as often. Makes after purchase parts and supply sales critical.

Early in the 1980's when people and banks began to leak the true cost of a new car and people began to show up on lots with the true invoice cost to negotiate with car companies began to hide those true costs. The dealer invoice is not the true cost of the vehicle. There are kickbacks over the year for a whole slue of things, number of vehicles sold during the month, the quarter, the year, in that model. So showing the invoice is not even close to the invoice by the end of the year, that number is closely guarded, and well below the invoice number the dealer will show you. Nice try. Why not be up front. When you see a dealer (right now today) in Houston selling a truck for 12K off sticker, and 2-3K below invoice they are still making a profit, and trying to break some thresholds they need to bring home a kickback over hundreds of cars sold during the year.

HS

 

[MtnViewRanch]

MyJoBota & HenryFordPower, you guys are assuming that a good dealer is close by. What do you consider close by? 20 miles, 50, 100, 300 miles? What do you consider big money? The guy that thought he was getting filled rears was a joke, that alone is not enough to purchase from a distant dealer. But there are many guys that have posted here on TBN that A, they did not have a decent dealer of any brand close by and B, they saved anywhere from 3-9k over their local dealers by shopping a long distance.

I personally have purchased from what I consider long distance. Why, because A, there is no local dealer for what I wanted and B, I like the guy and his dealership from whom I bought from. He is 650 miles away.

If a person happens to be the type of person that relies on a dealer for maintenance and if there are other issues, then that person needs to have a good dealer and may have to "Pay" to have that dealer. But if the person is self reliant, a good local dealer would be nice, but not at all needed.

Just because you guys might have decent local dealers does not mean that everyone else does too. In fact from what I have read on TBN over the years, the great dealerships are almost non existent and good dealers are far and few between. Hopefully this is changing, I know that my local JD dealer has made a HUGE change for the better in how they treat their customers. They had been so bad 8 years ago that I skipped going in there for 3-4 years.

Just my :2cents:

 

[HenryFordPower]

MyJoBota & HenryFordPower, you guys are assuming that a good dealer is close by. What do you consider close by? 20 miles, 50, 100, 300 miles? What do you consider big money? The guy that thought he was getting filled rears was a joke, that alone is not enough to purchase from a distant dealer. But there are many guys that have posted here on TBN that A, they did not have a decent dealer of any brand close by and B, they saved anywhere from 3-9k over their local dealers by shopping a long distance.

I personally have purchased from what I consider long distance. Why, because A, there is no local dealer for what I wanted and B, I like the guy and his dealership from whom I bought from. He is 650 miles away.

If a person happens to be the type of person that relies on a dealer for maintenance and if there are other issues, then that person needs to have a good dealer and may have to "Pay" to have that dealer. But if the person is self reliant, a good local dealer would be nice, but not at all needed.

Just because you guys might have decent local dealers does not mean that everyone else does too. In fact from what I have read on TBN over the years, the great dealerships are almost non existent and good dealers are far and few between. Hopefully this is changing, I know that my local JD dealer has made a HUGE change for the better in how they treat their customers. They had been so bad 8 years ago that I skipped going in there for 3-4 years.

Just my :2cents:

I totally agree with what you are saying. You should most certainly do business with the folks you feel most comfortable with and treat you the most fair. I think the point that I am trying to make is, that with negotiation practices, some guys need to understand that the object is not to get something for nothing, it is to get a fair price. A good dealer is not always the one that "throws things in on the deal" or has the lowest parts prices. It is the one that is open, honest, and the most knowledgeable with fair prices.

Most reasonable dealers are not shaking customers down for huge money. Huge money to me is anything over about 10-12% above cost. Cost being defined as the amount of money the dealer has in the unit after all incentives, freight, and setup. The dealers that are after big margins are usually the ones that drive the business away from themselves.

I write about patronizing "local dealers" because keeping any brand's dealer network strong depends on it. As with most other small businesses, they also stimulate our community economies. Folks often times complain that their closest store is too expensive, then they complain that they go out of their general areas to do business on a tractor because their local dealer is no longer there. And let's face it, not all customer's are self reliant. It is a double edged sword.

There are two sides to every story, and I appreciate your view points whether I choose to agree or disagree. I think we all just need to be straight forward and REASONABLE when doing business. If you wouldn't sell your own tractor at cost, why would you expect your dealer to?

 

[MtnViewRanch]

HenryFordPower, I am all for the local dealer as far as when they can be dealt with in a reasonable manor. :thumbsup: My point is that it seems it is more common than not to have unreasonable dealers and when they happen to be the only guy around, then they manage to stay in business some how. Me, I went elsewhere because I am able to get by without any of their services. Others can't and are forced to use them.

Hydraulic shops are a perfect local example. To purchase the exact same Chinese fitting, why is it that they are anywhere from 3 1/2-5 times the price that I can purchase the fitting elsewhere? How do they stay in business? They stay in business because there are enough professionals that need the product on short notice and are willing to pay the premium for that convenience.

Just how I see things from my corner of the country.

 

[HenryFordPower]

HenryFordPower, I am all for the local dealer as far as when they can be dealt with in a reasonable manor. :thumbsup: My point is that it seems it is more common than not to have unreasonable dealers and when they happen to be the only guy around, then they manage to stay in business some how. Me, I went elsewhere because I am able to get by without any of their services. Others can't and are forced to use them.

Hydraulic shops are a perfect local example. To purchase the exact same Chinese fitting, why is it that they are anywhere from 3 1/2-5 times the price that I can purchase the fitting elsewhere? How do they stay in business? They stay in business because there are enough professionals that need the product on short notice and are willing to pay the premium for that convenience.

Just how I see things from my corner of the country.

Ranch, I hear you all the way, and applaud you for being self reliant. Locations are unfortunately not all created equal, so you are forced to go farther away or deal with what you have. It is understandable. I am not at all against going where you need to to get what you desire. I just get a bit perturbed at guys that go 500 miles for $500, if you follow me. I like keeping the little man in business.

Prices are often times out of line, no matter the brand. It is frustrating, no doubt. We just have to stay well informed, as you certainly are.

Thanks for the thought provoking conversation.

 

[flusher]

HI:

Im about to upgrade to a Mahindra 5035. THis will be my first new tractor purchase. I have a quote from a dealer. It is basically at list price with a cash discount + the other factory discount.

My question is how much discount do others get? 5%? I have no Idea how much wiggle room the dealers have. Any help would be appreciated.

Thanks very much

Don't know about wiggle room. But one approach is to try to set up a package deal that includes the tractor plus a few extras (2 or 3 rear remotes, skid steer quick attach on the FEL, one or more implements). This may give the dealer greater incentive (and ability) to get you a better overall price.

When I bought my new 2008 Mahindra 5525 the package included triple rear remotes and a 6-ft Hawkline brush hog. My mistake was not getting the SSQA at that time (I got it about a year after the original purchase).

Good luck.