I try to be very open about who I am, and will try to answer as many of these questions as truthfully as I can... I will address each page of the thread individually so sorry if someone else says the same thing before, I'll try to edit after the full thread read.
Ahead of the bike shows coming up I wanted to touch up on this subjects..
So dealers tell us they make very little money from selling bikes..
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I know of no business model that can survive without making significant return on investment.
So either bike dealers are morons compared to car dealers and like to make no money or we are lied to?
I am sure they make money on parts and labor and service. But in the business model they proclaim , the revenue generated from the service and parts would all be dumped into the purchase of the bike from which they claim hardly any revenue. That would result bankruptcy
For example GP bikes ... Do they take the $25,000 profitthey make from parts and service and buy a $25,000 panigale to only sell it for $1000-$2000 profit?
What about the overhead of employees and hydro and land tax and so on. The advertising...
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We as dealers make very little on each new bike sale. The issue isn't so much the cost of manufacturing versus what they sell for but rather what they dealers "buy" them for then sell them for. We all (dealers) have to buy the new stock bikes from some level of the manufacturers. Some manufacture's major unit supply chains are short, meaning less middlemen and more potential profit. Some are longer. Then there is a very real issue of competition (which isn't necessarily bad). If there is direct competition (same brands, same lines) every 15 km, it cuts down the chances for a dealership to hold to MSRP, because someone might want that sale just a little more. This isn't a bad thing, but it makes it tough to make money on something with very tight margins. Also, each brand has different margins based on their exclusivity. Ducati won't be the same as MV which will be different than Kawasaki etc.
Car dealerships work on a different model, where scale works in their advantage. What they don't make on one sale they can make up on the next used car trade in because generally their deal count per month will dwarf the powersports industry.
Agreed. The dealer markup is between 10 and 15 per cent, that's consistent for almost all brands. Whether the dealer wants to move older stock, last year's bikes that they are stuck with, or strange option combinations can determine the actual sell price. Ordering a bike is the most likely way to pay the most, although there are sometimes opportunities even in that situation. Used bikes are a far bigger opportunity for profit, with less investment.
Some dealers will sell much closer to their cost price, giving them higher volume and another service and parts customer, this goes for new as well as used.
cbccanada, I understand your logic of a 1000 cc bike costing the same as a 250. The only flaw in that is the quality and durability differences required in the bigger bike. Engine components and drive train parts are stressed more, there's more electronics, and so on. If your car theory was correct then a jaguar and a fusion should cost the same. There are also design, engineering and testing costs that have to be spread over the model run.
We do not make 10 - 15% on most bikes. That would be great. But the truth is we don't. Some of the more expensive/exclusive bikes that might be possible. The older stock does bring a new dimension into the mix though... Older stock can affect the profitability of a deal based on how the major units are financed by the dealership. If the dealer buys the units outright (for cash) from the supplier/manufacturer, it costs them less to sit on a unit than if it is financed (paying interest). I am very aware that money now is worth more than money later, but it will depend on the philosophy (accounting vs. economics) of the person in charge to determine how long they (sales people) wait for the right deal. I know of a couple dealerships that have 3-4 year old, new units because in their mind: it doesn't cost me any more to keep them. They are assests on the ledger (depreciating in my mind, but I don't do their accounting).
[...] The front end numbers are pretty damn slim, no matter how you look at it. The back end (that guy you see to setup financing, purchase extended warranty, etc.) is much more lucrative, figure at least a 100% profit margin on those services. It's very common to make 2-3 times the profit (sometimes more) on the back end than the front. That's why the F&I managers (the financing/extended warranty people) are some of the best paid among all dealer staff.
There is more money in parts and accessories, notice how the most successful shops (GP, Rider's Choice) have the biggest accessories departments? Don't remember exact profit margins, but I would expect them to be in the range of 50-100% depending on item.
Service department is another area of profit. don't know about bikes, but car dealerships are somewhere in the 70-80% range (retail labour - tech pay).
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Yes, there is some money to be had from the "back end". Financing and Insurance companies do pay for the referals service they recieve from dealerships (not all). Especially at large dealerships (automotive mostly), where there are many deals per day, F&I managers can do very well.
Parts and accessories margins also depend on the quantities you purchase in advance. It is rare to see 100% margin nowadays. Our customers are very price savvy and sensitive. We know that every time someone is in the showroom with their phone out, they are comparing our sticker prices with the internet advertised prices. Then they have to evaluate how much the internet purchase will actually cost (shipping, taxes, etc) and the time waiting for the item. They might also be evaluating the hassle if something is wrong and deterimne if hypothetically paying more now is worth it. Sometimes it is, sometimes it isn't.
Service departments can do well if scaled correctly. Good technicians are expensive. Most of our (dealership and independent shops) service customers are based on referrals and word of mouth. We know this and so does almost everyone else, hence why you don't hear much advertising for the service side of our business. Ford's new advertising model might be worth researching if it works.
I've noticed the same. Zero aggression from salespeople. Does seem to indicate that margins are crazy low on new bikes.
Yep, small bikes especially. It is easy to sell things for a loss, no sense in working hard to not make anything (sales person's point of view).
