What is with the Motorcycle Business?

This might not be the right place to bring up this topic, but I really couldn't find any
other place that fits.

My question for everyone is:

Is it just me or is the Motorcycle Business in the US totally crazy?

The reason I ask this question is that I've been riding off and on fro about forty years. I ride my bike whenever it is warm enough (above freezing) and dry enough
(I'm a wimp I don't like the rain). I go to work on my bike, I going traveling on it , I do as much as I can to use it instead of my car. This may be a bit weird in the US, is it?

I don't have the room or the finances to support more that one motorcycle at a time, so I when I buy a new one, I like prefer to trade in the old one. It costs a bit but the convenience is important.

The problem that I am facing is that none of the dealers in Minnesota seem to be at all interested in taking a trade. If they do, they low ball so much that I may as well give the them to Goodwill and take the tax write-off. I take care of my bikes, they usually look pretty much like new, even though they have a few miles on them. If I could find a dealer that would offer the Kelly trade in value, I think I would die of shock.

Now in the current climate, things have gotten even weirder. We have dealers with new motorcycles that are two or three years old, sitting on the showroom floor, and they still won't offer a decent trade in value. It's is beyond my understanding and it seem like no way to run a business.

So, for now, I keep my current machine, no transaction takes place, no jobs are created and the economy stagnates. I'm not really upset because I still have my money in the bank and I still have a bike to ride. I can keep it 'til the wheels fall off, but I suspect that by then some of these crazy dealers will be history. Oh well, to sweat off my butt.

Yep, that pretty much sums it up. If you wonder how some of the dealers stay in business, the answer is a lot don't. Those that do are often selling snow machines and jet skis, sometimes even lawn mowers and snow blowers. Single-brand m-c dealers are rare. My nearest BMW shop also sells Ducatis, Huskys and Indians, none of which have much market percentage but they must help the bottom line. Single-brand BMW (and probably Harley) shops have to be good to survive. Max BMW has just opened a third store (CT) so they are doing something right. A big multi-Japanese brand shop in my area has some very leftover bikes around. Word is there are a bunch of "new" 2010 Honda ST1300s in warehouses (there were no 2011s) but the dealers don't push them and don't discount them. Seems like they must be full-up with trade-ins or simply don't want money tied up in merchandise in this economy. The good news, if any, is that the current motorcycle market will weed-out the bad dealers and send their customers to the good guys.

pete

Dealers need revenues, not more used motorcycle inventory on their floors, especially going into a long winter in Minnesota. Approach that same dealer next March and I bet the story will be different. All this is in multifold given the general economy and the "leisure" aspect of motorcycling. No one "really" has to have a motorcycle, it is not a necessary stable of everyday life for the vast majorit, as it is with a car.

Wouldn't you want to get rid of expensive inventory?

It just seems strange to me that the dealers would rather have a $12K new machine sitting on the floor instead of a $2K trade-in. I suspect if interest rates where higher there would be a bit more action.

In addition, this isn't just the time of year thing. I have found this to be true even in the spring and summer. The old, 'You could probably do better selling it yourself' comment is all too familiar.

Well, yea, you can do better selling it yourself. I can also do better buying it from a 'Flea Market' listing. It's the convenience thing; I don't think that dealers understand that they are in the service business. The best way to get and keep customers is to help them solve problems. Let's face it, wouldn't we all rather be out riding, than going through all the hoops, just to spend some more cash?

RobG said:

It just seems strange to me that the dealers would rather have a $12K new machine sitting on the floor instead of a $2K trade-in. I suspect if interest rates where higher there would be a bit more action.

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If they paid all cash for the bike, then that would make sense. However, I'm willing to bet those bikes were purchased via financing. In the end, it's what brings the bigger bang for the bottom line. I think the trade in depends on the bike, it's condition, and price. If a dealer doesn't think they can sell the bike, they probably won't accept it as a trade in. This happens in the automobile side as well. Remember a few years back when gas was about $4 per gallon and people were selling their SUV's in droves. You couldn't sell an SUV and no dealer was willing to take one in on trade at any price.

Remember a few years back when gas was about $4 per gallon

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... that would be today; $4.09/gallon of regular.

I don't sell cars, I haven't bought a new one since the first one in 1977. My first "new" motorcycle, an R75/5, was purchased in 1974, and I haven't bought any other motorcycle since then. I still ride it daily.

But it makes sense to me that motorcycle dealers aren't offering a lot on trade ins; they have to make a buck on handling it too. It isn't a hobby. The same applies to automobiles. And refrigerators for that matter...

Supply and demand. If your dealer isn't taking trades, there is a reason (demand). And chances are there is an over abundance of used bikes (supply) available on craigslist, BikeTrader, etc.

Our local Harley dealership, interestingly, has been buying used metric bikes in order to have some low-end inventory to sell to entry-level riders. That is smart marketing when you can buy out the inventory of dealerships going under, and make money to boot. This dealer also does trades based on blue book values and still does well. The funny thing is that the low end used stuff sells well, and the high dollar Ultras move quickly. The mid price bikes are where the stagnation seems to be.

Some dealerships will not take trades, but will allow consignment selling in their shop. When you look at it, you can have a lot of capital tied up in used trade-in iron that might not move too well, and not have liquidity to be able to buy new inventory items when necessary. There is a lot to be said for that business model in this economy if you want to stay in business.

I guess it depends on the business acumen of the particular dealer principal.

I'm willing to bet those bikes were purchased via financing.

I'm certain that most of the new stuff is purchased with financing. At the current interest rates, they can sit on something for a long time before it becomes too costly to keep. Not a great way to make money with your capital, but if the capital belongs to someone else; why not?

It just seems to me that if you look at the Kelly numbers on most motorcycles, there is a healthy margin for dealers to work with. What I see is that they pay to little and charge to much. The whole flow of transactions is slowed down.

Personally I think it be in their interest to have more people out there on the road where they consume the bikes and well as the tires and jackets and regular service charges.

It's true that the most economical way to own a motorcycle is to keep it forever and rack up as many miles as possible. I just don't see how that is in anyway beneficial to a dealer's bottom line. yet it seems that the way that they approach the business really encourage riders to just keep on riding the old stuff.

RobG said:

It's true that the most economical way to own a motorcycle is to keep it forever and rack up as many miles as possible. I just don't see how that is in anyway beneficial to a dealer's bottom line. yet it seems that the way that they approach the business really encourage riders to just keep on riding the old stuff.

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As far as I know, automobile dealer makes more on the service end of things than the sale of the vehicle. I'll bet it's the same for motorcycle dealers.

We sold three bikes in April this year, ranging from $1500 to $3500 in value. The R80RT went the first weekend, the K75 took a week on Craigslist, and the R1100RS a little longer. The market moves quickly if you are priced right.

Just sell the bike yourself now, then take the winter to pick up a new bike for a great price.

I have visited motorcycle dealers all over the US and Canada and most are horrible. They do business in spite of themselves. They just don't deal in the same world as car dealers. If they had the same brand selling at different points all around the city like say Chevy or Ford then it would be different. In reality they can be bad and get by with it if you want that bike. That is why in this economy many have disappeared as they have no loyal base of customers and no word of mouth advertising. Perhaps this has been one silver lining in the down economy. In the end you may have to travel but buy elsewhere where you are appreciated. I bought from the BMW dealer that was the longest distance from me but had the best dealer philosophy. I had no idea of the price until I showed up there but i could tell from talking to them they knew how to do business. Turned out it is run by an old car guy, go figure.

The dealer doesn't offer you much for a clean bike with miles on it because he can't sell it for much. There are many used bikes available with very few miles on them and that makes higher mileage bikes cheap. Higher miles don't hurt most bikes at all but when the buyer goes to buy a bike, he is going to buy the low mileage bike or pay far less for a bike with miles on it. High miles doesn't bother me with cars, trucks or motorcycles because I know I can buy them cheap and get good value. I also know I will have to sell them cheap if I don't do as I normally do and give them to one of my kids.

Maybe I could add some insight if only I knew the year, model, and miles we were talking about. Absent that, I haven't a clue.

In the course of doing my job, I have the opportunity to see the financial statements of dealers. Most are in horrible shape. Most have significant cash flow problem. The bikes on their floor are financed. It is not that they don't want to sell you a new motorcycle. Most don't have enough cash to execute the transaction with a trade-in. Many are struggling to meet payroll each week. They have maxed out the credit cards with vendors. Most cannot get N30 terms.

One option you might try if you suspect a cash flow problem. Offer to allow the dealer to sell your bike for you. Have them pay you once the bike is sold, and they can keep a percentage. If you buy the bike before your bike is sold, that will sweeten the deal even more. This plan allows them to make money without using cash they don't have.

"Most have significant cash flow problem. The bikes on their floor are financed. It is not that they don't want to sell you a new motorcycle. Most don't have enough cash to execute the transaction with a trade-in. Many are struggling to meet payroll each week. They have maxed out the credit cards with vendors. Most cannot get N30 terms."

It's hard to believe that this is true when it takes two weeks to get a service appointment, but it may be the case. Where I live, we are lucky to have four BMW dealers within 60 miles. The three that I have had experience with are all pretty good and I wouldn't have any problems working with any of them. I suspect that the problem in Minnesota is that the market is actually healthy and the dealers just don't have to deal. It's just seems weird to me that with a declining and aging user base that they wouldn't be trying to make it easier for customers.

well,

what was it that they used to tell the first george bush during his re election campaign about the economy?

All of the factors mentioned above apply but I think a lot depends on the dealer's eagerness to draw in a new customer. I'm about to do a deal with one of the major single brand dealers and they are taking my Vespa scooter on trade. A scooter!

I think there are several things going on here. First I'm new to the brand, so I represent an opportunity to get a new person "hooked" on BMW and spread the word around that dealership X is fantastic and worth the 100 mile ride to the shop. On top of that, they are going to get years of service fees out of me since I'm unlikely to do my own wrenching. They'll give me a few grand for the scoot, probably sell it for more on Craigslist, and easily make that money back in accessories that I want to strap onto my new bike. For the $3000 outlay on my scoot, they'll get a good return, I think.

But they key is, the dealer is hungry and willing to generate business and create new lifetime customers. Not all dealers can afford that financially. Not all dealers, sadly, understand that they have to invest a little in their customers!

My local dealer, for example, seems indifferent as to whether anyone buys a BMW from his shop. Never comes over to talk if customers are looking at the bikes. Does not offer test rides......it's as if he doesn't want to make the sale. He deserves to go out of business if he's not willing to earn the customers. Trade ins are one way to provide a little extra customer satisfaction.

RobG said:

"Most have significant cash flow problem. The bikes on their floor are financed. It is not that they don't want to sell you a new motorcycle. Most don't have enough cash to execute the transaction with a trade-in. Many are struggling to meet payroll each week. They have maxed out the credit cards with vendors. Most cannot get N30 terms."

It's hard to believe that this is true when it takes two weeks to get a service appointment, but it may be the case. Where I live, we are lucky to have four BMW dealers within 60 miles. The three that I have had experience with are all pretty good and I wouldn't have any problems working with any of them. I suspect that the problem in Minnesota is that the market is actually healthy and the dealers just don't have to deal. It's just seems weird to me that with a declining and aging user base that they wouldn't be trying to make it easier for customers.

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Many if not most dealers who sell new motorcycles, cars, trucks, RVs, etc. have all of their new vehicles on a floor plan. The vehicle goes to the dealer but the paperwork goes to the bank that pays for the vehicles. The dealer pays the interest each month and only pays for the vehicle after it is sold. If he has a cash flow problem (as many do), he can't come up with enough money to pay for the vehicle if he takes in an expensive trade in. The mark-up on new vehicles is not as much as it used to be and the invoice price of many vehicles is readily available on the internet. I was on a manufacturer's website a while back and even they gave the invoice price.

Let me as a question and come at it from a different direction - Why do we expect dealers to be dumber than us? With all due respect let me use the OP as the example of my point.

The OP has a business model of how he 'floor plans' (short term financing from bank/from under the mattress) his garage rolling inventory (bikes cars snowmobiles snow blowers lawn mowers etc) and finances/pays for business (life, use of inventory and maintenance) expenses for the fixed inventory in the garage. The 'profit' from the garage for the OP comes from the ratio of Fun of using to cost of ownership.

The OP sees a new bike that would maximize the fun factor in the garage profit ratio. He could: A ÔÇô add the new bike to the garage floor plan while trying to sell the old bike, B ÔÇô first sell the existing bike while taking the risk of loosing the opportunity to buy the new bike that caught his eye or C ÔÇô come up with another option.

Based on the post option A wasn't in the game plan, yet given the way floor plans work for dealers that is what is in effect what is being asked of them without the fun factor benefit because the dealer is not going to ride it.

If option B is the route the OP has to accept the risk of lost opportunity if the new bike is sold before he sells his.

So structure an option C. Do it along the lines of putting a deposit on the bike with the deal to close at some future date. Negotiate for perks such as accessories, free 600 mile checkup or whatever. Sell your bike in the interim. You become responsible for maximizing the 'profit' from selling your existing bike while locking in the new bike.

It is a beautiful day in MN right now but people talking about snow. Dealers are shifting from motorcycles to snowmobiles and ATVs to sell to the winter crazies and ice fisherman. They don't want bikes that realistically won't return a profit (however they define it) until spring (when ever that comes).

Good luck with your garage floor plan, my plan is to go riding right now.

For model yr 2010 some mfg didn't even bring out a new model, let alone dealers put lots of slow stuff on the floor. Comparing service appts. to bike sales,etc., is apples to oranges anyway. Best advice so far from our ambsdr.!!!

I'll ad that in road traveling in this country it is common to see many types of businesses shut down, sure not limited to bikes & is all too common!