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[Jbbrown73]

I have done some research regarding HD dealerships and What Harley56 is saying is completely consistant with what I have learned.
 HD dealerships do not follow the business models that most auto dealerships subscribe to. (the back end makes the money, not the front)
Their money is earned through Motorcycle sales. (the front end makes the money)
Clothes accessories and parts go along way to making profit, but the real issue is that Motorcycle sales pays the rent, overhead and payroll.
A drop in cycle sales impacts the dealer severely. Think about it 1 bike can bring in $4000.00 profit dollars and it would take over $11000.00 in acc (and more like $20000.00) to make the same profit dollars. look at the labor cost difference in the 2.

This is an interesting thought.  And with this in mind, you may see many dealers go out of business unless they drastically change their business model.  With the production numbers where they are now, this model will no longer work.  Dealers are going to have to start being "auto dealers".  I just bought a bike for 4K under msrp.  I don't know if they made any money or not.  I am sure they did, but not much.  Mostly I am sure they were wanting this high $$ bike off their floor plan.

The local dealer here changed owners and the new owners are very aggressive on having tons of bikes in stock and selling on volume.  The landscape has changed, and only the business savvy will survive.  I think this can only be good for us as owners and maintainers of bikes.  We should start seeing some "back end" specials on accessories, labor, clothes etc...  These guys that have a ton of money in a $10,000,000 building will have to sell some serious volume to make it up. 

[Keats]

In light of the current economy, many business's are faced with modifying their business model to make it work with today's climate.

The key word is "modify", They cannot make service and parts make up for all revenues of lost sales.

They (dealers) will be more motivated with cash right now for that is the name of the game (short term).

It does not matter how much money (profit) you make if cash cannot be generated to meet requirements.

Stronger Dealers may not need to take drastic action if their cash situation is stable, but trimming their payroll may be necessary.

Cash is king now more than ever and do not get me wrong, profits are important for long term stability and values may be had especially from cash strapped dealers.

I do not believe that Harley Dealers can survive with their present overhead if sales tank. The back end is under a lot of pressure with discounting parts, independent servicer, back yard mechanics and self servicing owners.

How many of us will work on our own bikes, but never consider doing it on our own cars?

The biggest reason I think is that most cycles are not necessary transportation and having down time on a cycle is superfluous to the operation.

The Model would have to change back to the days that walking into a Harley dealership was like walking into a garage bay.

The mechanic was the sales person and often had conversation while he repaired bikes.

[hard10]

This is an interesting thought.  And with this in mind, you may see many dealers go out of business unless they drastically change their business model.  With the production numbers where they are now, this model will no longer work.  Dealers are going to have to start being "auto dealers".  I just bought a bike for 4K under msrp.  I don't know if they made any money or not.  I am sure they did, but not much.  Mostly I am sure they were wanting this high $$ bike off their floor plan.

The local dealer here changed owners and the new owners are very aggressive on having tons of bikes in stock and selling on volume.  The landscape has changed, and only the business savvy will survive.  I think this can only be good for us as owners and maintainers of bikes.  We should start seeing some "back end" specials on accessories, labor, clothes etc...  These guys that have a ton of money in a $10,000,000 building will have to sell some serious volume to make it up. 

This is the exact same conversation that Rjob & I were having about automobile dealerships in another thread. Over 600 auto dealers have gone out of business so far this year. You are right that the fittest will survive. However, the second highlighted line may not be accurate. As more of the weaker dealers go out, the prices are going to increase. The fewer dealers, the less competition. Someone has to pay for those $10M buildings. Don't know if this applies outside of the auto business? 

[FNGw/08SERK]

This is the exact same conversation that Rjob & I were having about automobile dealerships in another thread. Over 600 auto dealers have gone out of business so far this year. You are right that the fittest will survive. However, the second highlighted line may not be accurate. As more of the weaker dealers go out, the prices are going to increase. The fewer dealers, the less competition. Someone has to pay for those $10M buildings. Don't know if this applies outside of the auto business? 

Like many businesses their business model is/will be challenged. Only HD is not like any business. It will be an interesting read.

[skreminegul07]

This is an interesting thought.  And with this in mind, you may see many dealers go out of business unless they drastically change their business model.  With the production numbers where they are now, this model will no longer work.  Dealers are going to have to start being "auto dealers".   I just bought a bike for 4K under msrp.  I don't know if they made any money or not.  I am sure they did, but not much.  Mostly I am sure they were wanting this high $$ bike off their floor plan.

The local dealer here changed owners and the new owners are very aggressive on having tons of bikes in stock and selling on volume.  The landscape has changed, and only the business savvy will survive.  I think this can only be good for us as owners and maintainers of bikes.  We should start seeing some "back end" specials on accessories, labor, clothes etc...  These guys that have a ton of money in a $10,000,000 building will have to sell some serious volume to make it up. 

That's the problem around here, the auto dealers are buying the HD dealerships.  I know what you meant about dealing under MSRP, but the car dealers sell a lot more cars and can therefore afford to let em go 500 over invoice.  They also do not expect to see you back for service.  The HD dealers need you to add on stuff and do your $500 oil changes.  It's a different animal.  Back when very few dealers sold at MSRP, they would not sell to anyone not local because they needed your return business. 

[HUBBARD]

All very interesting reads, but I still stick to my guns on operating a retail business, whether it be commercial or recreation, or luxury, referring to cars, Trucks, and Motorsickles.  What most have overlooked is back-end profits.  Namely, finance reserve.  Some HD Dealers around our immediate area have absolutely robbed people in that area.  Don't get me wrong, profit is not a dirty word to me, but I don't believe in robbing people.  Case in point, I know a person that traded up from a Soft-Tail Custom to a Road King, to an Ultra Classic over about a 30 month period.  He then wanted to trade up for a SEUC.  The pay-off on the '08 Ultra was $37,000.00!  His interest rate was 21.9%!  I know some folks don't care about anything but the payment, but JC, I think this guy was taken advantage of in the heat of the moment.  My HD Dealer friend told him he didn't want to insult him, but he needed $22,000.00 cash, to trade!  Although there is no cap on interest in WV, (on a Commercial Vehicle, that is), that's just plain hi-way robbery.  I've even heard of some HD Dealers financing New Motorsickles for 96 months!  You just can't keep raping people like that, and stay in business forever.  Even though I could charge whatever I wanted in the way of interest, I have never bumped my buy-rate more than 2%, and sometimes I have passed the buy-rate right on to Customers, if that's what it took to close the deal.  Why?  Because I know they are going to come back for parts, service, and more Trucks.  You guys may be right, but I just can't seem to accept the great gulf fixed between the 2 Business models.  But, WTH?  I'll stick to what I know.  Later--HUBBARD           

[miker]

Lots of bad paper man....


http://money.cnn.com/news/newsfeeds/articles/apwire/24d05239f7836a7313b229f21e169a79.htm

[Jock]

Some interesting thoughts posted here...

[Keats]

All very interesting reads, but I still stick to my guns on operating a retail business, whether it be commercial or recreation, or luxury, referring to cars, Trucks, and Motorsickles.  What most have overlooked is back-end profits.  Namely, finance reserve.  Some HD Dealers around our immediate area have absolutely robbed people in that area.  Don't get me wrong, profit is not a dirty word to me, but I don't believe in robbing people.  Case in point, I know a person that traded up from a Soft-Tail Custom to a Road King, to an Ultra Classic over about a 30 month period.  He then wanted to trade up for a SEUC.  The pay-off on the '08 Ultra was $37,000.00!  His interest rate was 21.9%!  I know some folks don't care about anything but the payment, but JC, I think this guy was taken advantage of in the heat of the moment.  My HD Dealer friend told him he didn't want to insult him, but he needed $22,000.00 cash, to trade!  Although there is no cap on interest in WV, (on a Commercial Vehicle, that is), that's just plain hi-way robbery.  I've even heard of some HD Dealers financing New Motorsickles for 96 months!  You just can't keep raping people like that, and stay in business forever.  Even though I could charge whatever I wanted in the way of interest, I have never bumped my buy-rate more than 2%, and sometimes I have passed the buy-rate right on to Customers, if that's what it took to close the deal.  Why?  Because I know they are going to come back for parts, service, and more Trucks.  You guys may be right, but I just can't seem to accept the great gulf fixed between the 2 Business models.  But, WTH?  I'll stick to what I know.  Later--HUBBARD           

Hubbard I might have to disagree with on this one.
I hate to disagree with a fellow West Virginian since I was born in Princeton and escaped (only kidding)
but the example you presented is not far off the numbers I ran despite not including interest.
Buy a Softtail Custom for what 16K and keep it a year and trade it in for 10K (still owe 6K upside down) put 6K debt on new RK that cost 19K (now owes 25K) trades that in on Ultra that costs 21k and gets 13k for trade. Now owes 33K on a ultra that really costs 21K.
trade that in ? how? Ultra used worth 16K?  that does'nt begin to cover taxes, tags, or interest. Pretty big hole this fella dug. 

[HUBBARD]

Hubbard I might have to disagree with on this one.
I hate to disagree with a fellow West Virginian since I was born in Princeton and escaped (only kidding)
but the example you presented is not far off the numbers I ran despite not including interest.
Buy a Softtail Custom for what 16K and keep it a year and trade it in for 10K (still owe 6K upside down) put 6K debt on new RK that cost 19K (now owes 25K) trades that in on Ultra that costs 21k and gets 13k for trade. Now owes 33K on a ultra that really costs 21K.
trade that in ? how? Ultra used worth 16K?  that does'nt begin to cover taxes, tags, or interest. Pretty big hole this fella dug. 

We can disagree there, 'Bro, and not be disagreeable.  I would guess situations such as this begat GAP insurance, for purposes of accidents or theft.  Just don't make sense to me.  Hell, the whole World is upside down.  When the twig is bent, so grows the Tree.  There endeth the lesson.  Later--HUBBARD

[harley56]

All very interesting reads, but I still stick to my guns on operating a retail business, whether it be commercial or recreation, or luxury, referring to cars, Trucks, and Motorsickles.  What most have overlooked is back-end profits.  Namely, finance reserve.  Some HD Dealers around our immediate area have absolutely robbed people in that area.  Don't get me wrong, profit is not a dirty word to me, but I don't believe in robbing people.  Case in point, I know a person that traded up from a Soft-Tail Custom to a Road King, to an Ultra Classic over about a 30 month period.  He then wanted to trade up for a SEUC.  The pay-off on the '08 Ultra was $37,000.00!  His interest rate was 21.9%!  I know some folks don't care about anything but the payment, but JC, I think this guy was taken advantage of in the heat of the moment.  My HD Dealer friend told him he didn't want to insult him, but he needed $22,000.00 cash, to trade!  Although there is no cap on interest in WV, (on a Commercial Vehicle, that is), that's just plain hi-way robbery.  I've even heard of some HD Dealers financing New Motorsickles for 96 months!  You just can't keep raping people like that, and stay in business forever.  Even though I could charge whatever I wanted in the way of interest, I have never bumped my buy-rate more than 2%, and sometimes I have passed the buy-rate right on to Customers, if that's what it took to close the deal.  Why?  Because I know they are going to come back for parts, service, and more Trucks.  You guys may be right, but I just can't seem to accept the great gulf fixed between the 2 Business models.  But, WTH?  I'll stick to what I know.  Later--HUBBARD           

HUBBARD, here in California 21.9% is not possible unless buyer's credit can barely get them a loan and Harley Credit will take their high risk for a high return. That loan exists and rate is about 22%, dealer makes $150, no bump in the buy-rate.  You say you bump your buy-rate by 2%, that's a pretty common number, we're capped at 3% and often times sales happen at buy-rate - to quote you - "If that's what it took to close the deal".  I believe 96 month financing is out there although harley credit stops at 84 months, but a new CVO at msrp runs as much as $40K with tax and license out here, so 10% down and 7.99% financing is $725/mo.  What's wrong with 96 months for "motorsickles", how long a term are you able to get for your customers?  Like your area, we have a dealer, that takes advantage of customers, but not the norm and shame on them.  None of your competition does that?  I agree there is not "The great gulf fixed between the 2 Business models" on vehicle sales.  So, in that respect, I'm not sure of your point.  I do believe you do not know the revenue and margins that exist in the rest of the dealership, nor the total overhead (trying paying $2.00 sq.ft. for rent), nor do I claim to have any knowledge of yours.  Take care!

[hard10]

HUBBARD, here in California 21.9% is not possible unless buyer's credit can barely get them a loan and Harley Credit will take their high risk for a high return. That loan exists and rate is about 22%, dealer makes $150, no bump in the buy-rate.  You say you bump your buy-rate by 2%, that's a pretty common number, we're capped at 3% and often times sales happen at buy-rate - to quote you - "If that's what it took to close the deal".  I believe 96 month financing is out there although harley credit stops at 84 months, but a new CVO at msrp runs as much as $40K with tax and license out here, so 10% down and 7.99% financing is $725/mo.  What's wrong with 96 months for "motorsickles", how long a term are you able to get for your customers?  Like your area, we have a dealer, that takes advantage of customers, but not the norm and shame on them.  None of your competition does that?  I agree there is not "The great gulf fixed between the 2 Business models" on vehicle sales.  So, in that respect, I'm not sure of your point.  I do believe you do not know the revenue and margins that exist in the rest of the dealership, nor the total overhead (trying paying $2.00 sq.ft. for rent), nor do I claim to have any knowledge of yours.  Take care!

I don't know the West Coast real estate market but I find it hard to believe that any showroom / warehouse can go for $2/sf. I'm sure taxes have to be 6-8 % at least on leased property.

[harley56]

I don't know the West Coast real estate market but I find it hard to believe that any showroom / warehouse can go for $2/sf. I'm sure taxes have to be 6-8 % at least on leased property.

I can understand your disbelief, it's not cheap out here, that is a real number and there is no distinguishing between showroom and warehouse.  Taxes are less than 6-8%, but still six figures annually.  Takes $200-275 sq.ft. to build in our market.  Now you're 25,000 sq. ft. building is between $6 and $7million when it's all said and done. 

[Jbbrown73]

I can understand your disbelief, it's not cheap out here, that is a real number and there is no distinguishing between showroom and warehouse.  Taxes are less than 6-8%, but still six figures annually.  Takes $200-275 sq.ft. to build in our market.  Now you're 25,000 sq. ft. building is between $6 and $7million when it's all said and done. 

I don't see how anyone survives out there with that kind of pricing structure.

[hard10]

I can understand your disbelief, it's not cheap out here, that is a real number and there is no distinguishing between showroom and warehouse.  Taxes are less than 6-8%, but still six figures annually.  Takes $200-275 sq.ft. to build in our market.  Now you're 25,000 sq. ft. building is between $6 and $7million when it's all said and done. 

Ok, I understand the $200-$270 construction cost and that is in-line with the South Florida market. However, most commercial buildings are leasing for anywhere from $10-$22 per sq.ft. triple net down south. On top of that there is a 6% sales tax applied to a lease. So your 25k s.f. @ $10 X 6% would be $22K a month. That's a lot of vehicles to sell. I just thought $2 per sq.ft. was cheap. If you've got that $6-$7 million to carry as a monthly nut, I could see where a business would find it hard to survive.