DavesTractor
Elite Member
There are many ways to look at the pricing issue. In a pure sense, the real price of an item is found when the item is stripped of "included" costs that are already factored into the price. An item with free delivery has delivery costs already factored into the price. It is not free in reality, but included. An item advertised at a certain price with 0% financing has the cost associated with that "free" financing built in. I can price all my tractors with free delivery and free 0%, and I sometimes do that with certain models. But what if a guy comes in with $100 bills instead of financing, and a truck and trailer to haul it home? I could calculate the cost of the 0% and for this discussion lets say it is $1500. And let's say the free delivery actually cost me on average $175. Is it wrong to give this cash customer the tractor for $1500 + $175 = $1675 discount for the items that were packed into the initial advertised price? That is one way to price things. Pack into the price those things that customers desire, then offer some discounts for the customer not needing those subsidized benefits.
Likewise, a dealer could advertise bare price for a cash (or standard non-subsidized finance rate) deal, FOB dealer lot. If a guy wants delivery, he pays $2/mile. If low rate financing is desired, the price goes up the same amount it costs me to provide 0% financing. I generally price a few models in this manner. The bargain hunter loves it, the 0% guy does not. We really do not like the thought that these free things aren't actually free.
Mahindra is upfront with the dealers on what the low rate financing actually costs, and allows the dealers to price in whatever manner they prefer. The problem is that people really, really want to think that 0% financing is free. It isn't. It is often a good deal if you pencil it out, even with the raised initial price, but it isn't actually free.
One other tactic is to offer the 0% and then offer no discount if you pay cash. Get out the spreadsheets and figure out how many people would take you up on the offer and spread those costs across all models. That works and makes the 0% buyer feel really good, but as a cash buyer myself for most items, I really do not like subsidizing free interest for others.
As a dealer, I like hearing what people think about pricing methods. Because no matter what a dealer or company figures out and thinks is fair, the perception of the customer is hugely important. At the end of the day, we need to sell tractors and be fair to both our cash and our finance buyers.
Likewise, a dealer could advertise bare price for a cash (or standard non-subsidized finance rate) deal, FOB dealer lot. If a guy wants delivery, he pays $2/mile. If low rate financing is desired, the price goes up the same amount it costs me to provide 0% financing. I generally price a few models in this manner. The bargain hunter loves it, the 0% guy does not. We really do not like the thought that these free things aren't actually free.
Mahindra is upfront with the dealers on what the low rate financing actually costs, and allows the dealers to price in whatever manner they prefer. The problem is that people really, really want to think that 0% financing is free. It isn't. It is often a good deal if you pencil it out, even with the raised initial price, but it isn't actually free.
One other tactic is to offer the 0% and then offer no discount if you pay cash. Get out the spreadsheets and figure out how many people would take you up on the offer and spread those costs across all models. That works and makes the 0% buyer feel really good, but as a cash buyer myself for most items, I really do not like subsidizing free interest for others.
As a dealer, I like hearing what people think about pricing methods. Because no matter what a dealer or company figures out and thinks is fair, the perception of the customer is hugely important. At the end of the day, we need to sell tractors and be fair to both our cash and our finance buyers.
