V-twin data shows shift from new to pre-owned

Market has seen move to used over past 10 years

An ADP Lightspeed study of new and pre-owned V-twin unit sales during the past decade shows that market share has shifted 30 points from new to used (Charts A and D).

As the ADP Lightspeed data provided exclusively to Powersports Business details, the shift was gradual but steady and sustained from 2002-04. In 2005, the rate of change increased, but in 2009 sales began dramatically moving from new to used, resulting in a complete 30 point shift by November of 2011. The change in market was most apparent for Harley-Davidson units — a full-30-point shift — while Victory saw a much smaller change of 10 points.
In Chart A, a survey of 732,000 Harley units shows a confluence of new v. pre-owned in November 2011.

In that month, among the 210 Harley dealers and 820 metric dealers included in the survey, 1,848 new units were sold. (Sales of used Harley and Victory units by non-franchised dealers are included.) In that same month, 1,752 pre-owned units were moved. (The survey excludes wholesale sales.)

However, in the first week of December, when ADP Lightspeed took the survey, 208 new units and 230 pre-owned units were sold, continuing the trend that was apparent for the entire year.

During the same time, Victory sales had moved to a position in which new and pre-owned were separated by 52 percentage points. New, with 122 units, held 76 percent of the market, while pre-owned, with 39 units sold, carried 24 percent of market share.

“When you look at the future mix of new versus used, first you have to consider that this trend has been prevalent for 10 years or more,” said Hal Ethington, a 40-year industry veteran who produced the survey as senior analyst at ADP Lightspeed. “Victory has not seen the same size shift as Harley, but we must consider the relatively small number of used units for that make that are in the marketplace. As the brand matures and as owners naturally desire to move up, we will see more used Victory units available. Given the probable availability of used units, and with no expectation of a quick change in the national economy, it is likely that used Victory sales will continue to grow in importance, following the Harley trend.”

Chart A, D (Click image to view larger)

Impact on cash contribution
Charts B and E show the change in cash contribution to sales by both new and pre-owned units. For Harley, the change in unit counts was 30 points. This was accompanied by a drop of 19 percentage points (from 83 percent to 64 percent) for cash from new. Pre-owned rose from 17 percent of sales cash, to 38 percent of sales cash, or an increase of 21 percentage points.

“The relative importance of these two sources of cash has shifted considerably,” Ethington said. “The implications for the dealership that does not recognize this shift in the market will be substantial. A dealer not focusing on used units could see a drop in cash from new units of 19 points, which could be difficult to overcome. However, a dealer with a strong pre-owned operation would replace that lost revenue with the increase in pre-owned sales, and probably be able to survive.”

The change in cash contribution for Victory dealers is not as dramatic as it is for Harley dealers. Cash from new unit sales drops 6 points, from 88 to 82 percent. Cash contribution to sales from pre-owned rises 6 points, from 12 to 18 percent.

Count of units sold
Charts C and F show the relative number of new and pre-owned units sold for both Harley and Victory dealers over the 10 years studied. Harley new unit sales decrease sharply from 2009-11, but pre-owned units continue to grow.

The two trend lines are a dramatic indicator of the strength of the pre-owned market. In June 2008, dealers in this study delivered 8,682 new units and 2,641 pre-owned. This is a ratio of 3.3 new for each pre-owned unit sold. By November 2011, sales of units had changed to 3,185/2,812, or a ratio of 1.1 new for each pre-owned unit sold.

Chart B, C, E, F (Click image to view larger)

For Victory units, the ratio in June of 2008 stood at 170/42, or four new to each pre-owned sold. In November 2011, that ratio had changed to 281/88, or three new to each pre-owned.

Strengthen pre-owned sales
In order to build pre-owned V-twin inventory, Ethington provided some suggestions to dealers:

1. Use actual cash value of a trade. “Values used in the sales deal may or may not reflect true market value of the trade, as the selling price of the new unit may offset any overallowance or underallowance of the trade,” he said. “Without an adjustment to proper market value, the trade may be over-priced in subsequent sales attempts. Those units will sit a long time just because they have not been properly valued and costed.”

2. Turn fast. “Get the reconditioning done and get it back on the floor. Selling seasons are short, and days lost in the shop translate into lost sales,” he said. “It also increases the amount of money the dealership has tied up in used inventory. Few trades are ready for the showroom floor. The appraisal process should include a time estimate for return to the floor as a condition of acceptance of the trade.”

3. Indoor storage. “New units will never be left outside. You roll them out, and you roll them in. Treat your used the same way. Weathering is a constant process, and every 24 hours left outside will detract from the appearance of a used unit. Obtain indoor storage, as well as indoor display. Treat used as you would new.”

4. Record costs meticulously. “All reconditioning must be charged against the unit,” Ethington said. “Parts, labor and sublet must all be applied correctly to any unit being processed for the floor. Letting such costs simply fall to ‘overhead’ will obscure the true cost of sales, and the overall pre-owned operation may show well on the front end, but end up with a department loss.”

5. Advertise, and pay incentives. “Used bikes are seldom floored, so the money must turn,” Ethington said. “Use advertising separate and apart from new-unit advertising, and use sales incentives to motivate the sales staff. If you don’t have sales personnel dedicated to the pre-owned department, make sure it is worth their time to deal with the product.”

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