High gas prices, down economy fuel used sales
January 2, 2008
Filed under Uncategorized
By Matt Bolch
Higher gas prices and consumers tightening their belts amid a slowing U.S. economy are seen as two primary reasons why sales of pre-owned motorcycles are increasing for many powersports dealers.
Thirty-eight percent of respondents to the national survey conducted for Powersports Business indicated their preowned sales were higher in 2007 over the same period in 2006, with just 14 percent reporting declines.
Although dealers would prefer that both new and pre-owned sales were increasing, their desires are tempered by the fact that they can get higher margins on preowned products and are insulated from price shoppers since no two used bikes are alike.
“If you take in the right machines, they’re about impossible (price wise) to compare,” said J. J. Person, sales manager at the St. Petersburg, Fla., location of Barney’s Motorcycle & Marine. The dealership, which has a second location in nearby Brandon, reports that new bike sales are off 10 percent while used sales are up a similar percentage. “Mileage; color; exhaust pipes: Unique features narrow the playing field to make it harder for customers to shop on price.”
The dealership can offer factory financing and a two-year warranty on qualifying Honda and Yamaha motorcycles, which gives customers peace of mind, Person says. “They don’t think of it as a used bike but a nice preowned one,” Person said.
Barney’s also makes money on the warranty, but markup on those policies is regulated by the state insurance commissioner.
Duane Snow, owner of Street Cycles Inc., Falmouth, Maine, reports a 30 percent decrease in new bike sales, mitigated somewhat by a 20 percent bump on the pre-owned side. Snow says the pre-owned trend started this year, coupled with an increase in his parts and service business.
“In this state, 85 percent of homes heat with oil and most drive trucks, so they don’t have money to spend on new bikes when fuel prices are high,” Snow said. “In these times, they’re driving what they have and fixing what they have.” Customers have been bringing in old bikes that have been sitting unused in backyards and garages for new parts and service, he reports.
Like many dealers, Snow says he was caught with too much inventory when the economy turned and still has new bikes from the ’04-’05 model year. “We’re still carrying (excess) inventory because I didn’t see the downturn coming,” Snow said. “My crystal ball must have been broken that day.”
In early December, Street Cycles had 18 preowned units in stock that were located in the service department. Normally they get moved outside the building each day but not during times of heavy snow.
Elk River Powersports only takes in clean used vehicles and displays them together with the new Kawasakis, Suzukis and Yamahas the Fayetteville, Tenn., dealership carries, says Aaron Wickam, business manager. “Sometimes it’s hard to tell the difference (between new and used),” Wickam said. “That’s why the tags are different.”
Showing preowned amid new units allows customers to compare and contrast directly between features, options, mileage and price, he notes. “Shoppers are looking for a deal, but they definitely have a price point in mind,” Wickam said. “They might be willing to spend a little more but not much.”
The preowned business in the $5,000 and under category at Elk River Powersports picked up noticeably in September 2005, after hurricanes Katrina and Rita knocked out oil processing capacity and sent gas prices soaring to new highs, Wickam says. During the survey period, the dealership reported new sales off 10 percent and used sales up 15 percent. “Many people who are buying bikes these days are not buying necessarily for recreation but as a necessity for better fuel economy,” Wickam noted.
Used bike sales picked up during the same period at Celli’s Cycle Center, Scottsbluff, Neb. New motorcycle sales are down about 12 percent, while pre-owned sales are up by the same amount, says Vicki Celli, one of the owners. “We’re selling Yamahas on allocation, and we’re happy about that,” Celli said. “We’re getting good money for new bikes, better than from companies that are over producing.”
On the preowned side, the dealership accepts trade-ins, buys directly from consumers and works with a couple of wholesalers who know the types of bikes the dealership is looking for. The dealership also advertises that it buys preowned units. Used bikes are run through the service department for any fixes and reconditioning before being moved to the showroom, where they are displayed prominently. “People often look at our used bikes and say, ‘I didn’t know you were a Honda dealer or a Suzuki dealer,’” Celli said. “We’re not, but our used bikes look as good as new ones.”
A 25 percent increase in preowned sales has outpaced a 20 percent decline in new bike sales at Fix Power Sports, reports Jerry Fix, owner of the dealership in Byron, Minn. The dealership accepts trade-ins and also buys bikes directly from walk-in customers, as long as they’re from the four major manufacturers. Fix estimates he obtains 10-15 percent of preowned bikes this way and has made no changes in his business plan amid the new sales priorities.
Those who have found success selling preowned bikes usually spruce up bikes taken on trade, display the units prominently and make a point of showing them to prospective clients. Since dealerships get a higher margin on used bikes, salespeople are only too happy to show them to customers.
“We’ve always taken trade-ins, and we see no reason to change that philosophy,” said Person from Barney’s. “We can control the cost of the machine and the margins on preowned, whereas new bikes are under the manufacturer’s control.
“While we all hope that the new bike business picks up,” Person said, “I also see the pre-owned segment only getting better and better.”