Pre-Owned Sales: The New Cash for Clunkers

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MANY SHOPS ARE ENJOYING a healthy return on pre-owned sales. One reason used units sell well is because the customer can't shop them around. Pre-owned units have one-of-a-kind mileage and usually a unique group of accessories that can't be found on the same model across town. That creates an automatic sense of urgency to buy now before someone else does. And, of course, used units cost less. John Abbey, GM of Arizona's Superstition Harley-Davidson, says that saving just $30 to $50 a month in payments these days can steer a customer away from a new bike with a 24-month warranty, toward a used one with a 90-day warranty.

But making money in the pre-owned business isn't as easy as buying used bikes at auction, giving them a spit shine and putting them on the floor. It starts with a proper pre-inspection and includes a thorough refurbishment. That responsibility falls squarely on service.

The pre-inspection is just as important as a first impression. Do it right, and your relationship blossoms. Screw it up, and you're forever in an uphill battle. That's why Houston's Team Mancuso Motorsports developed what it calls its "Check for Sale" program. Dennis O'Brien, Mancuso's pre-owned bike manager, told me they started with a 10K service-and-inspection list and then customized it to include much-needed attention to cosmetic items and accessories. Service is paid for 1.5 hours of labor, not counting additional repairs, to perform the Check for Sale service. The inspection results give O'Brien concrete information to determine trade-in value. Plus, his exceptional industry experience allows him to set the sales price for a quick sell-through and reasonable profit. Mancuso's makes few mistakes, and it sells several hundred pre-owned bikes per year.

Another independent and much smaller pre-owned operation is located in my hometown of Prescott, Ariz. Street Dreams performs a 31-point inspection before hanging a price tag on its pre-owned units. Chris Conway, a factory-trained tech who also teaches motorcycle classes at the local college, performs the refurbishment.

You don't have to be a big dealership to make money in pre-owned sales. But you do need to start with a thorough pre-inspection. Don't do as my old Honda dealer did. He once bought a used Honda CM-400 even though the Bondo slopped on both sides of the gas tank told him it had been repaired. The rest of the bike looked pretty good, and the price was cheap. Service prepped the bike for sale. When we pulled the tank to adjust the valves, we discovered someone had fired a bullet through the fuel tank. Then we learned during our test ride that the bike would stop running when hot. That must have been what provoked the previous owner to pull the trigger. We lost money on that deal after repairing the frame, replacing the ignition system and replacing the tank. Whoops!

The moral of the story is to do your homework. Failing to perform a thorough pre-inspection could cost you dearly. But the inspection is only one piece of the pre-owned pie. You need to have a pre-owned plan that includes knowing what you want to sell, what you'll keep, what you'll toss and what you'll do to refurbish your used units for sale. The following suggestions come courtesy of Street Dreams, Superstition H-D and Team Mancuso Motorsports, which all do well with pre-owned motorcycle sales (discuss this list at your next managers' meeting):

  • Know which brands, models, years and condition of units you want to sell
  • Acquire units at auctions, car dealerships and, most easily, at your store via trade-ins and owner buy-backs. Especially good are units originally bought from your store because they likely have service records
  • Wholesale the trade-ins not fit for your floor to other stores. This allows you to take just about any trade-in, which is crucial to selling your new vehicles and still maintaining your hard-earned reputation
  • Maintain a stock of take-off parts for refurbishment such as bodywork, handlebars, stock controls, windshields, wheels, seats and saddlebags
  • Remove accessories that are illegal or high-risk. For example, sky-high ape-hangers (if they're over your state's legal limit) or tow hitches (if they're not OEM-approved — note that Harley-Davidson does not approve of tow hitches)
  • Remove accessories your shop won't sell or service, such as drag pipes that are ticket magnets or EFI systems you can't tune. You want pre-owned buyers to become regular service customers. You don't want to alienate them by refusing to work on the bike they just bought from you
  • Make sure that used units are roadworthy and can pass any state inspection criteria. Remember, selling a pre-owned "as is" is no excuse for selling something unsafe
  • Pay special attention to high-risk areas, which are anything that affects handling, stopping or controlling the vehicle or that could lead to a fire or reduce conspicuity (the ability to be seen). If you're not sure, fix it. It's better to be safe than sorry
  • Repair leaks. Few shoppers want a bike that leaves a mark, unless it's a vintage machine
  • Consider replacing tires that have less than 50 percent tread left, are mismatched, have been repaired or are more than two years old
  • Replace batteries not passing the load test
  • For borderline issues that don't affect roadworthiness, offer the buyer a discount coupon to come back to service when it's time to replace or maintain
  • Remove substandard, worn or damaged accessories, especially those damaged in a fall — they'll raise a customer's red flags
  • Perform two 10-mile test rides to full warm-up: one for the pre-inspection and one after the refurbishment to catch hidden issues (remember the CM-400)

This article originally appeared in the Dealernews November 2009 issue.