In the August issue of Dealernews, we examine one of the industry’s few bright spots: the pre-owned market. Dealers share how they’ve been moving used metal. In anticipation of this special magazine section, here is what Ron Seidner, owner of legendary Bert’s Mega Mall in Covina, Calif., had to say about selling pre-owned units. He’s an expert at maximizing profits while minimizing liability.
On average, Bert’s Mega Mall is now retailing about 100 used units per month, a rate slower than it experienced in 2007, when it sold 1,700 for the year. Then, as now, used units comprise roughly 15 percent of its total unit volume.
The store is located in one of the hardest-hit areas economically in the country. Owner Ron Seidner estimates that his potential customer base has been halved. But because he’s run a successful business for more than 50 years, he has the cash to buy inventory. “It’s a big advantage that a lot of dealers don’t have,” he says. ”They don’t have the money to write a check. If you can stock $150,000 to $200,000 worth of bikes, you can build a pretty good inventory.
“We’re finding out,” he adds, “that with the smaller shops not carrying the product, we’re still getting the consumer — the guy who wants to come in and pay for it today.”
For advertising, Bert’s mainly uses Recycler publications, Cycle Trader, and its website, the home page of which proclaims “We Buy Used” in a couple of places. Bert’s also hosts Red Tag clearance events in which it proclaims it has taken in too many trades, and they must all go.
But the supreme marketing, Seidner says, may not be print, digital or events. “Word of mouth is absolutely the best,” he claims.
To balance his showroom selection, Seidner buys from a couple of different auctions. “If we don’t need anything, we don’t go that month,” he says.
Seeing such a varied selection of units at one place is just one reason why customers buy from Bert’s instead of a private party, Seidner says. Another is OEM financing. About 70 percent of buyers receive financing handled by the store. Bert’s has relations with local banks, but most of the funding is done through OEM programs. The majority of these programs are again financing at least used units of their own brands. Seidner says American Honda’s installment plan in particular is approving well.
Bert’s sells extended warranties provided by Western Service Contract to about 30 percent of buyers. To ensure employees offer the contracts, and to avoid implied warranties, Bert’s asks customers who decline a warranty to sign a waiver. This is a standard practice, but Seidner thinks some dealers don’t realize that these “as is” agreements don’t encompass safety equipment. “Dealers have the responsibility under their dealer licenses to make sure the vehicles are at least safe,” he notes.
Bert's doesn’t have a certified program, but it does inspect and recondition all units. The store buys all brands, but it sticks to its own when it comes to service after the sale. So BMW and Harley buyers, for example, go elsewhere for that.
When initially appraising trade-ins, Bert’s employees disregard aftermarket accessories and start low. “We always price it hard enough to negotiate with the customer if needed,” says Seidner. Only during a negotiation can customers receive more money because of accessories. Depending on the bike, time of season, and how busy the store is, Bert’s may leave on a valuable accessory or, if the stock counterpart is handy, remove it for eBay.
After deciding the initial trade-in values, employees send all units to the service department for inspections and compression testing. The customer is then presented the reconditioning bill, and that amount is deducted from the appraisal.
When a trade-in involves a lien, Bert’s pays it off within 24 hours while turning in the new-bike contract and processing the DMV paperwork. Some struggling dealers, Seidner claims, delay doing these things to free up cash. He remembers a case in which a customer of a now-closed dealership eventually had his bike compounded by the police as stolen property. “The manufacturers,” he says, “need to make sure that their dealers are in good standing while representing their product lines, because it could be a nightmare.”
Bert’s accepts consignments, but Seidner says a new California law doesn’t allow consignments with loans attached to them. The dealership and consignor agree on a price, as opposed to a commission, and then the store sells the unit for as much as possible above that price.
Bert’s salespeople sell used units as they do new, and are compensated the same percentage. Margins for used units are usually between 23 percent and 29 percent.
Because Bert’s carries most of the major brands, customers can often walk across the showroom to compare the price between new and used, often debating whether they want a lower loan amount or a lower monthly payment.
Unlike other dealers we've spoken with, Seidner hasn't seen a recent increase in used-bike values. Regardless, his margins show that this side of the market continues to treat him well. "I think there's always been a demand for used bikes," he says.