Jan. 21, 2008 – Just in time or past their prime?
By Matt Bolch
Contributor
So when does a preowned motorcycle fresh from the detail shop become a liability to a powersports dealer? After a month? Six weeks? Two months? Never?
The answer to that question depends on a myriad of factors, including the seasonality of the business, the condition of the bike, the efforts of the sales staff and the philosophy of the dealership.
While dealers agree that carrying preowned models is important to the dealership in terms of margins and being able to sell to those who can’t afford a new motorcycle, there are tradeoffs involved in carrying any inventory past a certain point or through the wrong season.
According to a national dealership survey conducted for Powersports Business, on average dealers hold a preowned bike in their inventory for slightly longer than 60 days before it sells. For 63 percent of dealers, however, that figure is 45 days or fewer.
Open Road Honda carries used bikes an average of 40 days before they’re sold, reports Annette Behm-Caldwell, a dealer principal at the Mandan, N.D., store. The dealership sells 240 new motorcycles and 150 preowned a year. She credits the dealership’s quick turnover to being selective about trade-ins and energetic salespeople who maintain “tickler” files on customers who have stopped in but not made a bike purchase.
“Our used bikes are showroom-ready and displayed just as prominently on the floor as our new ones,” Behm-Caldwell said. “Our salesmen have tickler files on people who were looking for a particular model or had ‘X’ dollars to spend. A used Gold Wing or a late model cruiser might last just a week before it sells.”
Some dealerships will take nearly any motorcycle in on trade, but Open Road Honda is picky about the models it selects. “Every bike we take in goes up on the bench, which means tech time, parts, chemicals and labor,” Behm-Caldwell said. “If a trade-in bike doesn’t make sense for us (financially), we’ll tell the customer that he can get more money on the open market than we can pay. We can’t lose money on a trade-in just to make a sale.”
In contrast, Watseka Suzuki Honda Kawasaki carries used inventory an average of 120 days, a time frame that Russ Bills, owner of the Watseka, Ill.-based dealership, is comfortable with after 30 years in the business. “Riding motorcycles isn’t a year-round pursuit in Illinois, so units we acquire on trade-in in September or October might not leave the showroom until April or May of the next year,” said Bills. He reports selling 200 new motorcycles and 75 used ones a year.
Bills is more concerned about new motorcycles from previous model years that remain in his inventory than the turn time of his preowned stock. “I’ve got two SV1000 Suzukis from the 2003 model year I’d love to get rid of, and a lot of the new (motorcycle) inventory is stacking up,” Bills noted.
For preowned models, the dealership advertises in the free, weekly Trader magazines, which circulate widely in the company’s sales area in eastern Illinois and western Indiana. Bills has wholesale outlets for preowned motorcycles that either don’t sell or aren’t a good fit with the dealership’s inventory mix, but Bills says he prefers to be picky on the front end with trade-ins.
Cycle City of Erie (Pa.) also has used motorcycles in its inventory for an average of four months before making a sale, says owner Gary Pustelak.
“In our area, there’s such seasonality that it can push our inventory higher,” he said. “But we grade on the curve here and recognize that it takes 12 months to make a year.”
The dealership moves 300 new motorcycles a year and another 140 preowned units. Pustelak says he often promotes the dealership as the largest used motorcycle retailer in the area, which appeals to those lacking sufficient discretionary income to purchase a new bike.
Cycle City employs a professional detailer who works exclusively on preowned bikes. The dealership offers a one- or two-year no-exception warranty on bikes within five years of the current model year, depending on what the original manufacturer warranty was. Buyers of used bikes six-years-old and older can purchase a one-year warranty that splits the cost of parts and labor between the purchaser and the dealership. Each type of warranty is $895, Pustelak says. The warranty “is huge because we’re not known as a dealership that gives bikes away,” Pustelak said. “We prefer to promote ourselves as the Mercedes of motorcycles where customers pay more but expect more.”
Preowned motorcycles move within 30 days at the C & C Powersports Inc. locations in Harlingen and McAllen, Texas, reports Lecia Chaney, general manager and vice president. “We have good salesmen here,” Chaney said. “We’re on the Mexican border, and in this area, credit can be a huge problem, so if people can’t buy new, we can get them into used.”
Both dealerships are in well-established, high-traffic areas, and customers know the used bikes are in front. Chaney says that C & C sells 600 new and 40 used motorcycles a year.
Mankato Honda moves 200 new motorcycles and 60 preowned ones through its showroom each year, reports Robert Anderson, bike manager for the Mankato, Minn.-based Honda automotive and powersports dealer. Mankato Honda sells preowned bikes as-is, showing the buyer at the time of purchase that everything is in working order.
Anderson says the dealership is picky about the trade-ins it takes, shying away from low-volume bikes that will have limited appeal in the resale market. The dealership carries preowned inventory an average of 45 days.
“There’s a lot of demand for used bikes,” Anderson said. “We don’t specifically run ads for them, but people coming through the door see them. If they want a clean used bike and believe they can save some money, that’s the choice they’ll make.”