If you're doing it by the book, you may be losing out
- Key Points
- Dangers of selling trade-ins before they're reconditioned
When a rider comes in with a trade-in, does your appraiser just look up the average trade-in figure and demand that amount? If so, you're missing trade-ins and, therefore, new-bike sales.
If you read the explanation pages in the front of all of the guidebooks, you will find that they indicate that some bikes must have their value adjusted up or down, depending on the market and the condition of the bike. It may be as much as 10 percent to 15 percent. Maybe more.
The books are merely guidelines, not bibles. The books reflect statistical analysis from six months to a year earlier. A lot can change in six months to a year. Plus, a clean, low-mileage bike may be entitled to a boost in value because of what it is (the model sells well in your area) — or simply because that's what it will take to get it as a trade-in.
Recently I had an opportunity to trade for a bike that was particularly clean. What's more, it was a desirable model for my local market. To top it off, the new bike the rider was buying was a slow-selling model.
Now, had I stubbornly priced the bike at the average trade-in value, we would not have made the new-bike sale. So I stepped up about 10 percent over the clean trade value to get the trade and to help the dealership make the sale. The trade-in eventually will sell and make a handsome 20 percent profit. So the dealership will cashier the gross profit on the new bike, and within 30 days will cashier another decent profit.
The rider who purchases this trade-in, when turned over to the F&I manager, will be exposed to the opportunity to invest in additional-value products. This extra income varies depending on the dealership, but should be around $1,500 on a properly managed deal.
Plus, many riders after purchasing their "new" used bike will go into the P&A department and purchase riding gear and other accessories. Further down the line the rider may come in for service, which also will generate income. None of this would have taken place if I'd done it by the book.
Jay Williams is the owner of Motorcycle Maxx Ltd. in Raleigh, NC. E-mail questions and comments to firstname.lastname@example.org.