Feb. 11, 2008 – The inside scoop on dealer loan programs
February 11, 2008
Filed under Features
By Jeff Hemmel
Loaner programs — where a dealer offers the use of a PWC to police, fire, rescue or other public agency — have been dubbed a “win-win” scenario for both dealers and the public.
Many dealers, however, still understand little about the programs’ advantages, let alone the process involved. Here’s a closer look at these programs, as well as a few hints on how you can make them work for your local community and your dealership’s bottom line.
To Serve And Protect
While all manufacturers have loan programs of some kind, Kawasaki continues to stand at the forefront. This year will mark the 19th anniversary of the company’s loan program, a concept that has since gone on to include a variety of public safety agencies, including fire and rescue, emergency management, even Boat U.S. Since the program’s birth in 1989, nearly 1,500 individual agencies in all 50 states have borrowed Jet Ski watercraft. That’s 5,600 at last count, a collection of machines valued at more than $35 million. Follow-up surveys reveal that each season hundreds of lives are saved through the use of loaned PWC.
The program, however, started with humble aspirations. According to Kawasaki’s John Donaldson, the original loan concepts were started simply as a way to generate positive exposure, and rein in unruly riders, during the start of riding area closures in the late 1980s.
“We determined the best way to take some of the heat off the ‘let’s close this water body’ movement would be if we had more cops out there,” Donaldson explained. “Sort of like if you have a lot of traffic problems, the answer is to get more cops out there, people will slow down and act like normal people.”
Starting at Yamaha, and shortly thereafter at Kawasaki, Donaldson was one of the first to be involved in the programs, which shortcut the normal management hurdles by taking advantage of existing programs in place for ATV and motorcycle safety training. “Our goal was not a sales quota,” he continued. “Neither Kawasaki nor Yamaha embarked upon this program to sell any product. We embarked on this program strictly to make equipment more readily available, so there would be more public safety presence on the water.”
Today, every PWC manufacturer — Honda, Kawasaki, Sea-Doo and Yamaha — engage in loaner programs. Agencies using the boats range from the typical law enforcement, to fire and rescue, even environmental agencies. In Kawasaki’s case alone, typically 200-225 units a year are in the program, spread among an estimated 150 agencies.
Loans typically start in one of two ways — either the agency contacts a dealer or manufacturer, or the dealer offers a vehicle to a local agency. Minimal paperwork is required. The agency fills out a simple one-page form, provides a note on letterhead of their intentions for the craft and agrees to provide the necessary insurance. The dealer can then take a boat directly out of his inventory or order one from the manufacturer if still available.
At this point, the dealer has technically bought the boat from the manufacturer, but there’s an incentive. Rather than pay for that vessel in the typical 30, 60 or 90-day terms, the dealer essentially gets free flooring for one complete year and is not required to pay for the craft until then. And once it is returned, the full one-year warranty is given to the retail buyer who next purchases the used boat. Most manufacturers also give a substantial discount on the price of the craft, in Kawasaki’s case 15 percent off the existing dealer net.
Technically, the watercraft is to be returned to the dealer with what is considered “normal” wear and tear. It’s the borrowing agency’s responsibility to provide proof of insurance, as well as pay for routine maintenance. Typically, a law enforcement or fire department is allowed to operate an emergency vessel without a state registration.
Rarely do problems arise. Typically, they take the form of the craft showing a little too much wear upon its return, but as Donaldson suggests, there are ways a savvy dealer can lessen potential problems. “We always encourage dealers to have conversation with the agency at the time the loan is initiated,” he said, “and discuss their expectations of how the machine is going to come back at the end of the loan period.”
When that vehicle comes back, the dealer typically now has a good condition, substantially discounted model on the showroom floor, that carries the full warranty of a new machine – and that he still has not been required to pay for. Example? A dealer might have loaned a boat this past April, had it returned by an agency in the fall, and now have till April 2008 to pay the boat off.
“Now he’s got a 2007 machine on his floor with a substantial discount and full warranty,” explained Donaldson. “He can offer that as a discounted unit to whoever wants to get $1,000 off on his machine.”
Accentuate The Positive
While it is certainly not advertised, there are ways in which a dealer can make the program work for them even more. One insider suggests if a dealer has an agency sniffing around for a loaner model late in the year, to give them a leftover unit. Chances are the boat will be used minimally, if at all, over the winter. In May, the dealer can offer to upgrade the craft to a new model year offering. The dealer now still has about half the year to sell the original boat, now featuring a substantial discount, full warranty and little use. And a public safety agency has a watercraft available that significantly expands its capabilities at no cost to the taxpayer.
“It’s our hope that the positive publicity the local dealer gets from participating in his local community on recreational boating public safety will compensate him somewhat for the little bit of paperwork and other things he has to do,” said Donaldson.
And that publicity does come. In Kawasaki’s case, Donaldson personally sends out a press release to all the newspapers in both the loaning dealer’s county, and the county of the agency receiving the vehicle. Typically, 10-15 percent of those run the release verbatim, a release that offers a nice pat on the back to the loaning dealer and reinforces the idea that a PWC is a valuable addition to the local agency’s arsenal.
Donaldson said: “I’ve literally had a dealer one time send a letter saying this is the best publicity we’ve ever had for our dealership.”
Not to mention another shot of great publicity for the PWC industry.