An essential revenue source – December 4, 2006
December 4, 2006
Filed under Features
The preowned market is becoming more and more important for powersports dealers’ bottom lines.
That’s the conclusion from a nationwide dealer survey that found the used bike business is a growing segment and a more profitable one than new unit sales. Sixty-three percent of the dealers surveyed said the profit margins on preowned bikes were higher than new units by an average of 14 percentage points.
Only 17 percent of dealers said they were making less profit margin on used motorcycles than new ones, according to the survey of 150 dealers conducted by Irwin Broh & Associates, Inc. for Powersports Business.
The preowned market is “becoming more and more important as the new (unit) prices erode due to our competition selling them at almost no profit,” said Rick George, co-owner of Two Brothers Honda, La Crosse, Wis., one of the dealers surveyed.
George wasn’t alone in his assessment of the preowned market.
“It’s very important for us,” said Jim Maslyn, general manager of Motoprimo, Minneapolis, another one of the dealers surveyed.
Recent steps taken by OEMs show that level of importance is being noted by manufacturers. Harley-Davidson in August started an online program linked with National Powersport Auctions that allows H-D dealers to sell preowned Harleys or metric motorcycles. Also, this fall Suzuki became the first Japanese powersports manufacturer to provide a certification program for preowned vehicles.
“If you have to achieve a minimum margin of 10 percent to pay your expenses, you just can’t do it on new bike sales. That’s one of the most compelling reasons to be involved in the used bike business,” said Bob Mueller, Suzuki’s sales development manager. “And that’s not even getting into the area why Suzuki is involved in (the preowned certification program). We want to see the inventory turn get higher. We want to see more customers come in the door. We want to communicate with these people and send special finance offers a little bit down the road.”
While almost all dealers are selling used bikes (97 percent of the dealers contacted) and even more take trade-ins (99 percent), there’s quite a disparity between how much emphasis they’re placing on the preowned market. The survey found the average selling ratio of new motorcycles to preowned bikes is 4 to 1.
But nearly 22 percent of the dealers surveyed did not come close to that ratio, with their ratios being 8 to 1 or worse. However, a larger number of dealers — nearly 33 percent — have a better than average preowned selling ratio of 3 to 1.
The latter finding coincides with the belief that the preowned bike business is growing. Forty-five percent of surveyed dealers felt the used business is increasing, 43 percent indicated it was stable and 12 percent thought it was declining.
Harold Levesque, owner of TSI Harley-Davidson, Ellington, Conn., sees a healthy preowned market. For many years, dealers in his area wouldn’t take trade-ins, giving him an influx of preowned inventory. Levesque’s dealership has taken advantage of the situation so that more than 40 percent of his overall sales are used bikes.
“It’s starting to get to where other dealers are starting to take (trade-ins) or just grab them and wholesale them out. So it still gives us a good market out there,” Levesque said.
One area of concern in the preowned business that Levesque and other dealers have noticed is the lack of parts and accessories sales that coincide with the used bike purchase compared to new bikes. Seventy-one percent of the dealers surveyed said parts and accessory sales to used bike buyers were lower than new bike buyers by an average of $300. Twenty-five percent thought parts and accessory sales were the same and 4 percent thought it was higher.
Dealers said that trend is often a reflection of the used bike, which often already has aftermarket parts, and the used bike buyer. George of Two Brothers Honda said that consumer is “typically the guy that does not want to spend the extra money for accessories at the time they’re buying the bike. Not to say that we won’t develop them into a customer who will buy accessories down the road or who will trade (the used bike) in for new, because that does happen too.” PSB