margin?

[Cliff_Johns]

What margin should a dealer make on a tractor and options
when they sell it? I mean, what's fair to the dealer and to
the buyer?

On a 20K Purchase, how much does a dealer need to make
to stay pleasently profitable without over charging their
customers?

Cliff

 

[BigAl]

Tough Question ! It depends also on the overhead a dealer has . A dealer with a great big fancy new store is going to have more overhead than "Old Joe Tractor Sales " that have been there for 30 years and is a two man operation . That being said , I had seen profit and overhead margins from 15 percent to 34 percent . A dealer has a right to make a honest living and a buyer wants to be treated fairly .They usally have a lot of money invested in inventory setting on their lot . Some dealers take advantage of buyers and raise the price if they have an exclusive sales area and no competitors . This has happened in my area . I tried to run my company on about a 20% margin . I had a loyal customer base and took good care of them after the sale . After 8 years I sold that business and retired and the new owners have never been able to reach my sale figures . Why ? Because they are constantly adjusting their overhead and profit margins to the way a person looks when they walk through the door .
Big mistake !
Be fair to your customers and they will be fair with you .
When you start shopping tractors get three bids if possible . Make sure those bids are apples for apples . Compare the service after the sale that each dealer can provide .That is worth something . I would discuss the bids with the dealers and get there input on why they might be higher priced than "Old Joe " down the street .
Remember you can always make a lower offer before the sale but you can't offer less after you and the dealer have agreed on a price and then you decided it was to much to pay .Well ? I guess some people might ,but I would'nt .
Big Al

 

[Woodbeef]

I'd say there are way too many variables for a hard and fast rule. Different areas, with different market conditions, different costs of doing business, even different brands all have influence on the bottom line for dealers.

 

[JDgreen227]

BigAl,

Well written post and excellent advice, I would never begrudge a dealer for making a fair profit and I feel 15-20% is fair to both buyer and seller. You make a good point about some dealers making higher profits if they have an exclusive sales area and no competition, I feel sorry for a new tractor buyer who has little choice but to buy from one of those dealerships.

While I was shopping for my new JD package I visited four dealerships, all of the quotes were within $1000 of each other and I'm sure none of the salesmen based their price on how I was dressed or what I had parked in their lot. However, I did my homework well ahead of time and knew exactly what I wanted and I'm sure they adjusted their prices accordingly.
My feelings are, if someone goes shopping for a tractor and depends on a salesguy to help them choose the model and options....that person is going to pay more than someone who has already decided what they want.

 

[MessickFarmEqu]

In my area margin is 5-12%. It all depends on where you live. That much margin can quickly be blown by a long setup time, extra freight charge, and all kinds of other things. Even with this low of a margin, people still beat us up and hop between dealers several times to work us down further. We sell over 300 Kubota units a year so the volume makes up for the low margins.

My recomendation is simple. Walk into a dealer once and be upfront with them. Tell them that you are going to their local competition and need a price that will be competitive. 1 Price, no bickering, end of story.

Another interesting thing that most people do not realize is how the pricing actualy breaks down. On a typical TLB, assuming everything goes well, I will have about two full days of shop time to pay for. In comming freight runs around $350, out going delivery at $60 hr, sales commisions and then a bit of profit. The overhead costs of selling tractors are very high and that is why you will see a significant regional variation. Someone mentioned that a big building may be indictive of a higher price. I would disagree with that because those dealers still have to compete with guys selling out of their garages. Many manufacturers also have discounts based on volume so that gives another edge. Big dealers can offer things that smaller ones can't. For instance we stock several million dollers in parts and have mechanics dedicated to working on Kubota equipment.

Interesting industry isn't it /forums/images/graemlins/smile.gif

 

[MDNY]

Being in sales its my job to get the most margin, but when I am a customer its my job to keep as much of my margin as I can. I always find it funny but I consider it fun to work the deal so all parties are happy.

The tough part about a tractor vs a car is the tractor will be worth something in 5 years and you will keep it for 15+ years or much longer. So the tractor dealers really need to earn your business in the service end and your refferals to new customers.

When I started looking I was all syched about a NH TC29D or a JD 4210 but time has marched on and I am glad I waited I realized I don't need machines that big, but something smaller but more versatile. The X585 is my pending toy.

But I need to really work the deal side. I have two local JD dealers each about 10 miles from me. One will be good for a test run on pricing the other is the dealer I would go with. But I do need a third just in case.

Its about a long term relationship, value, service and I am willing to pay a (small) bit more for that.