Best Negotiation Technique

r0GuE · May 23, 2003

( No, I can't imagine that. Retail stores commonly mark up items 100% or more yet you just walk in and pay the price on the item. The markup on cars, trucks, tractors and implements is far less yet no one seems to want to buy them the way they'd buy something at Wal-Mart or Home Depot there. )
Wal Mart has 30 - 40 people on staff at any one time keeping every concievable item in every conceivable color in a large air conditioned building with ample parking convieniently located. They have thousands of people buying in bulk to bring you the best and cheapest of everything.

Tractor guy keeps 1 or 2 of perhaps 5 or 7 different models. The dollar value of the markup is in the thousands per unit. He keeps an average of 1 - 3 people in the shop.

Totally different model.
I can get a husky chainsaw at Lowes now. The cost is 75% of what i paid for mine from a dealer. I'd bet it works just as good as mine.

I'm not against the dealers making aliving. I'm sure some are great and earn every penny. But I don't think the accusatory "bad person" attitude toward hard bargain shoppers is justified. If I want the absolute lowest price I have to pay for my Kubota, then that is what I'll get. And I might add, it is what I did get. Since then, I (being a ... what was the term... Sissy Hands Engineer /forums/images/graemlins/wink.gif , yeah that's it) have thrown 3 more BX unit sales that I have intitialtred through some coworkers. There's always a down side to turning away bussiness, there is seldom a good side. Yopu may notmake as much on this particular unit, but I promise the nice people at Kubota will give you another one to try yoiur luck with! /forums/images/graemlins/grin.gif

DavesTractor · May 23, 2003

Rocketman and DavesTractor are following the "high margin/low volume" sales model. 

Ranchman, big assumption on your part, and wrong. I'm not sure why you would make this remark, but sometimes I've written things and later wondered why, so I'll cut you some slack. Our prices are generally 16-18% off MSRP on tractors and often greater than that on implements, and we sell a lot of tractors based on a low to reasonable margin and high volume. We are a small business, but sell just about one tractor per business day. We try to keep about 40 units and 100-200 implements in stock and rarely will anything set on our lot for more than 60 days. I sell tractors, not collect them. I see other dealers with last years models, or even two year old machines, and they are hanging on to full list. That just isn't good business.

bmac, I think I understand your position, and I like it. We do try to post our prices, and have the prices marked on the bucket of our tractors. Just due to the volume we do for a small business, we sometimes will not get a tractor marked or have a price on an implement, and it does cause a delay as someone will have to go to the price list to figure the sales price. As the same model tractor can have different options, this can take a few minutes. As a dealer, I appreciate the comments made in this thread. Some of you are fellow dealers, but most are owner/buyers and informed ones at that. I appreciate the points you have made!

BillyP · May 23, 2003

Go in Wal-Mart or Home Depot and pluck down 20 grand. I'll bet you could get a pretty good deal. Speaking of markups, you can't even begin to imagine the overhead these retail stores have. I worked in the grocery business for over 35 years. If you can cut a 3% net profit, you were doing good.

If a tractor dealership can come off his price 25% and still shake your hand, you can bet your sweet petunia he made money.

Rocketman · May 24, 2003

Well.............hasn't this been an interesting exchange. Sorry I missed it.
Earlier in the thread someone ask what I considered the "Off" season". The "Off Season" in the tractor business is generally considered late fall - early winter. That is when most manufacturers offer the greatest discounts.

There seems to be a slight misunderstanding regarding the profit margins in tractor whole goods; so, I thought I'd share.

Although the manufacturers all have slightly different programs and there are many influencing factors (time of year, special program, dealer volume, etc); in round numbers, a dealer will pay 20-25% (off of MSRP) for unit purchases. This could be as low as 15% and as high as 30% -depending upon the influencing factors.
Now take your typical $16000.00 Kubota BX22 and apply a typical 20+5+5 (volume dealer) discount and you get a cost of $11552.00. Or a typical straight 20 discount for lower volume dealers and you get a cost of $12800.00. You read it right ...... with only "dealer volume factors" there could easily be a $1250.00 "profit difference". Add in time of the year, special programs, and incentives, and you could sway the price another 5% or so. The lesson here is a dealer is not a dealer, all dealers are not paying the same price, and size DOES matter.

For the purposes of this discussion, lets say you are dealing with the "high volume" dealer and he buys his BX22 for $11552.00 + freight of $150.00. The tractor will arrive crated and require setup which will probably take 3 hours to get from the crate to the showroom. Out of pocket expenses is now around $11850.00.

Mr. informed customer walks in and sees the $16900.00 MSRP and negotiates a 15% reduction and pays $14365.00. Not a bad deal - the high volume dealership pocketed $2500.00 on the transaction the lower volume dealer pocketd $1250.00 - right? Not so fast tonto. Commisions (2% of gross at $231.00), caps (premium wool style with logo $20.00) , a free service (1.5 hours or $75.00), and baseball tickets ($25.00). The real number delta now sits at $2209.00 (or $959.00 for the low volume dealer). Taxes, insurance, light bill, wages for the salesman and sweet-thang behind the desk, a 51% IRS burden on the remainder, and finally the owner gets what is left over - believe me it is a negative number for even the largest dealerships.

Now - how many BX22s do you have to sell per year to maintain a profitable sales program? I'll tell you that it takes over 125 units per year and there ain't too many dealerships out there that push that much iron.

The $$$ is in parts/service - not sales. So what is the best negotiating technique? Buy when the discounts are greatest and convince the dealership you are a repeat parts/service customer.

OK guys - I'm on vacation. I'll look at this again in a couple weeks. Be sure and give a moment of silence on Monday - our warriors (past and present) deserve at least that much.

MikePA · May 24, 2003

believe me it is a negative number for even the largest dealerships. Now - how many BX22s do you have to sell per year to maintain a profitable sales program? 
Hmm, if it's a negative number, then if you sell enough BX22s, the dealer will go broke! /forums/images/graemlins/grin.gif

5030 · May 24, 2003

I've found that the best negotiator of price is CASH . When I buy a new tractor, implement or even a car, a large down payment will adjust the dealer's bottom line. I usually deal with the same 2 dealers here and they know that Forage Services, L.P., will either pay cash or put a sizeable amount down. Dealers use the cash for their operating expenses. Credit payments have to come from the parent company and there is a time delay. Dealers, like you and me like cash. It's liquid and immediate. Besides, I don't like to pay interest charges.

r0GuE · May 24, 2003

W O W...
Rocketman sure seems to have a handle on the bussiness. Here's a wrench in the theory though. I worked with my 2 closest dealers. I am certain that the closest one would be considered large volume. As well i have no doubt that the one slightly farther away is lower volume. He beat the large volume dealer by over $600.
I agree that every dealer has their own circumstances and may not be able to match prices. If we are talking a few hundred and I reallyt liked the dealer and they were closer to me etc, I'd consider going with them. But really for 5 or 6 hundred or the thousands others are talking about... geesh, forget about it.
If they are that far off the mark based on their costs, perhaps they need to find another line of work. Cold to be sure, but reality is ugly. Ask me I know, I'm in telecom. I've seen so much reality in the last 2 years I could make a small farmer cry!! /forums/images/graemlins/wink.gif

Gary_in_Indiana · May 24, 2003

the best negotiator of price is CASH 

Unless the dealer is carrying the paper himself (like a buy here, pay here operation) the "delay" in converting the note you sign to cash is only a day or two in most instances (maybe as many as four or five over a holiday weekend).

I know that a large down payment won't change my bottom line on any conventionally financed transaction. There are actually advantages to the dealer if you DO finance your transaction through them. The dealer can make money on the finance reserve and on the CLA&H insurance.

Personally, I always get a kick out of someone who emphasizes over and over that theirs will be a "cash deal." I can't help but think, "It's all cash to me." /forums/images/graemlins/smile.gif

To be fair, there is one difference. With the large, large number of people today who have credit problems, a cash deal is one that the dealer knows will be a deal once he sells it. Lots of dealers today are seeing 40-50% of the deals they write turned down for financing.

spencer200 · May 24, 2003

Well I have read this thread and kept quiet until now. There are a lot of assumptions out there about how much margin a dealer has,so let me clear it up for you on New Holland equipment. The TC tractors have a 20% margin plus whatever programs New Holland is offering that month anywheres from 1% to generally 9% in addition to the twenty it just depends on how hungry the manufacturer is that month.
The attachment for the TC tractors have a standard 20-23% discount plus whater ever programs the manufacturer is running that month generally an additonal 75.00-250.00 dollars
The implements also have a volume discount to the dealer at the end of the year of 1-3% depending on the dealers volume. The TC tractors however have no paid volume on them regardless if you sell 1 or 20001 New Holland did away with volume on the compact tractor over 10 years ago because of the competitive nature of the compact tractor business. I hope this clears up a few misconceptions about voulume and profit margins I have read in this thread, at least for NH compact tractors. I can not say what other manufacturers do. /forums/images/graemlins/smile.gif

spencer200 · May 24, 2003

Hate to disappoint you put as a new holland dealer the minute your credit is approved the money becomes available over the internet for imediate use so it is just like having cash in hand. /forums/images/graemlins/smile.gif