This story originally appeared in the Dealernews August 2010 issue.
When it comes to carrying pre-owned units, there’s a lot more work involved than just calling up your OEM and ordering a new batch of bikes. The payoff, however, can be very rewarding (some dealers are seeing margins of 21 to 25 percent on used-bike sales). The thing is, who has the perfect formula for creating a used-bike section in your dealership? Do you sell as is or refurbish them? If so, to what degree? How about floor-planning? Is it better to pay cash or spread it out along a lender’s credit line? And, where should you get the used bikes? With 14 years of continual new sales growth behind us, there are a lot of bikes in the hands of consumers. Turns out that auctions and trade-ins are pretty popular ways of sourcing units. So we took a survey of our 2010 Top 100 dealers to find out how they approach the pre-owned market and heard back from 34 respondents. Here’s what they had to say.
How do you structure pricing on pre-owned units?
“We use NADA book as a guide. Sometime we go above NADA on very hard-to-find units, but generally are more concerned with being at a fair price that we can make a fair margin versus trying to make a lot on an individual unit.”
“20 percent markup.”
“Based on quality and demand for the unit. We strive for at least 20 percent over trade-in allowance, and we use the NADA book to establish a baseline. We set pricing about $1,000 to $1,200 higher than cost.”
“What the market will bear.”
“What the market is doing at the time. If new prices come down, then the used of the same models come down as well.”
Do dealers floor-plan their used inventory? Some do, the others pay cash. So what do they do?
“We own the stuff. NPA units go on GE flooring.”
“We try to keep as much of our used inventory liquid with no flooring. We use Honda for their units and GE for all others when we decide to floor them.”
“We buy all units cash and do not floor-plan used units. We do have a line of credit secured by real estate that we can use if needed to buy additional used units.”
Reconditioning: Most Top 100 dealers recondition used units, but some dont. So what are they doing?
“Change oil, service air filter if needed, general cleanup, replace tires if not at 50 percent tread or more. All lights and safety items must work. Bike brought to level that we would ride it ourselves.”
“We use a C.R.A.P. sheet — Criteria for Rapidly Assessing Product. We work off that.”
“30-point safety inspection. We replace tires, brake pads, cables, fork seals and steering head bearings. Also carb cleans (lots of carb cleans), new chains, sprockets, anything to make the motorcycle safe. Not back to new, just safe.”
“We recondition our brand only. All other makes are sold as-is.”
“Goes through the service department. Often is dyno-tested to ensure operation is good.”
Do you offer warranties on pre-owned units? If so, what are the terms?
“30-day, 50/50 warranty, unlimited miles. Also, we take care of anyone with an issue shortly after purchase for free.”
“If we do, it’s on reconditioned units and it’s a six-month limited warranty, major components. Also have the ability to sell aftermarket extended warranties on used product.”
“60 days always, and longer when we sell something during the nonriding season. May go as much as six months to close a deal. If over 60 days, we usually do a 50/50 warranty.”
97.1% of dealers surveyed offer consumer financing on pre-owned units. What are they offering?
“Over time you knock on enough doors and gain your local bank’s trust to help with lending of money. The days of HSBC and GE are gone for the pre-owned stores.”
“Freedom Road has programs for the Europeans and Harley-Davidsons.”
“We use Eaglemark Savings Bank (H-D credit) and also are involved with CUDL with credit unions.”
“Financing for pre-owned units is extremely difficult through OEMs. Typically, OEMs will only finance cruisers/tourers. Local credit unions are often the only option.”