Reco to shut?

[sleepy]

Reducing prices means you will stimulate demand for both 2nd hand and new machinery..

Most manufacturers cannot afford to reduce prices.

If they reduce the price of new kit, the prices of secondhand kit will also fall.

Most dealers have a large amount of stock on their forecourts, financed based on their current value.

If the value of the stock dropped, many would go bust.

Reducing prices is simply not possible

 

[Cowabunga]

The only reason they have paid to much for the 2nd hand machine is to make the difference between the 2nd hand and new machine as small as possible as the new machine is over priced to start with!!

See comments above.

 

[Grassman]

I had a magazine in the post from Claas this morning. It showed the process of getting the genuine part from them to us. It looked a very slick and well designed business but very expensive. But in less than a day the machine is back up and running. What's that worth?

 

[Drillman]

You seem to have little or no idea of how a business that has stuff travelling both ways through the gate works. If used machinery is too expensive it is either because it has not found the person that wants it, and/or because they paid too much for it to a farmer in the first place and can't afford to sell it under cost.

thing is if a machine has been sat in a dealers yard for a while, simply because the price they are asking, appears to be too much in the current climate. what is the point where they say Bugger it and drop the price to below cost simply to keep cash flow going?

 

[Dealer]

If a John Deere dealer hasn't sold 3 of a part in the last 12 months they are now not allowed to stock it..

My point was that very few dealers will carry 8 million's worth of parts!!

That's not true

A dealer decides his own parts stock. They have a recommended stocking level of each part based on previous sales

Why would anyone carry 8 million pounds of parts

4 times turn over is the target number but most carry more than this

Used prices are driven by supply and demand

And condition and replacement value

Cost of used is based on above plus a small margin.

Simple as that.

Average profit on a new deal will be single percent gross.

They won't be making 10k. On 100 k tractor that's for sure.

 

[gone up the hill]

Most manufacturers cannot afford to reduce prices.

If they reduce the price of new kit, the prices of secondhand kit will also fall.

Most dealers have a large amount of stock on their forecourts, financed based on their current value.

If the value of the stock dropped, many would go bust.

Reducing prices is simply not possible

Im afraid many of them will have no choice unless they can afford to keep the same machines in the yard for 3/4 years and have no turnover in the meantime!!

Noticeable at local farm sales here the last two months that dealers have been keeping their hands in their pockets and have not been bidding on large machinery/ tractors etc..

 

[Cowabunga]

Most manufacturers cannot afford to reduce prices.

If they reduce the price of new kit, the prices of secondhand kit will also fall.

Most dealers have a large amount of stock on their forecourts, financed based on their current value.

If the value of the stock dropped, many would go bust.

Reducing prices is simply not possible

In many cases that is indeed true. Margins are not big enough to allow used stock to be financed from cash reserves. The bigger and more expensive the stock, the more difficult it is to justify buying it back into stock without a retail customer lined up already. Retail customers for much used kit does not grow on trees. Indeed some kit might stand for quite some while, eating up capital if not interest charges.

 

[gone up the hill]

That's not true

A dealer decides his own parts stock. They have a recommended stocking level of each part based on previous sales

Why would anyone carry 8 million pounds of parts

4 times turn over is the target number but most carry more than this

Used prices are driven by supply and demand

And condition and replacement value

Cost of used is based on above plus a small margin.

Simple as that.

Average profit on a new deal will be single percent gross.

They won't be making 10k. On 100 k tractor that's for sure.

Used prices are driven by supply and demand...

Well currently there is massive over supply of machinery and very little demand for it so that should mean lower prices!!

 

[Grassman]

thing is if a machine has been sat in a dealers yard for a while, simply because the price they are asking, appears to be too much in the current climate. what is the point where they say Bugger it and drop the price to below cost simply to keep cash flow going?

That's just a business decision that has to be made. And another reason that the dealer needs a good margin on some machines to cover the ones that just don't sell as expected.

 

[Cowabunga]

Im afraid many of them will have no choice unless they can afford to keep the same machines in the yard for 3/4 years and have no turnover in the meantime!!

Noticeable at local farm sales here the last two months that dealers have been keeping their hands in their pockets and have not been bidding on large machinery/ tractors etc..

Of course not. When times are tough the last thing they need is more stock to increase their costs and eat their capital. Which means also that they cannot support their customers at such auctions, even when that customer bought the machine from them originally.
When times are tough, there are no winners.

Really we should charge you for this education, because everyone of us has our costs.

 

[gone up the hill]

Of course not. When times are tough the last thing they need is more stock to increase their costs and eat their capital. Which means also that they cannot support their customers at such auctions, even when that customer bought the machine from them originally.
When times are tough, there are no winners.

Really we should charge you for this education, because everyone of us has our costs.

No it should be me charging you for the education as you haven't made any valid point why machinery dealers shouldn't have to cut costs in tough time's thou any other business in any other industry would do just that!

 

[Cowabunga]

Used prices are driven by supply and demand...

Well currently there is massive over supply of machinery and very little demand for it so that should mean lower prices!!

They can't sell under cost as a general rule. You assume that they have a massive margin and no responsibility when selling this used kit. You have been told and told that this is not so. Eventually you may see the light, but on current evidence it is not going to be anytime soon.

 

[Dealer]

Used prices are driven by supply and demand...

Well currently there is massive over supply of machinery and very little demand for it so that should mean lower prices!!

I believe used prices has reduced

Look at the selling prices at Cambridge over the last 6 months

Takes along while for dealer to clear stock at old money

How much are you expecting them to fall

If you want cheaper buy older or less quality

It's not all broken tractor sales down circa 15 % last time I looked,

That's only 1500 tractors or just about 120 per month less than last year

Less new sold means less good used around as used bring kept longer with more hrs on

Good low houred used will increase in price

 

[Drillman]

In many cases that is indeed true. Margins are not big enough to allow used stock to be financed from cash reserves. The bigger and more expensive the stock, the more difficult it is to justify buying it back into stock without a retail customer lined up already. Retail customers for much used kit does not grow on trees. Indeed some kit might stand for quite some while, eating up capital if not interest charges.

We got pretty much turned away by a dealer this spring when we were trying to part ex a 1 year old baler for a different breed. They just couldn't find a trade home for it and didn't have the balls ( in fairness they were probably right in doing this )to take the competition out themselves.

In the end we changed it for a new model of the same brand. at half the cost.

 

[gone up the hill]

They can't sell under cost as a general rule. You assume that they have a massive margin and no responsibility when selling this used kit. You have been told and told that this is not so. Eventually you may see the light, but on current evidence it is not going to be anytime soon.

Okay how long do the majority of dealers warranty 2nd hand machinery/ tractors for generally??

 

[Cowabunga]

I had a magazine in the post from Claas this morning. It showed the process of getting the genuine part from them to us. It looked a very slick and well designed business but very expensive. But in less than a day the machine is back up and running. What's that worth?

That is indeed how the manufacturer justifies charging his dealers and the customer over £600 for a water pump for a 2 litre engine. It is an industrial machine and if used in a road gang, as many are, then it breaking down might hold up a gang of 20 men with their own machines plus trucks and tarmac factory etc. In which case £650 is chicken feed.
In my case I was in no hurry and therefore was quite happy to import a cheaper pattern part from the USA and wait a week for it. In the middle of Winter when it is depended upon for hours every day, I would consider £650 to be far more reasonable for a same or next day repair, even though it is a ridiculous price from a farmer's point of view.

 

[Grassman]

One local salesman I know will do his best not to take a trade in.
And it's basically there's little profit to be had unless he has a customer lined up to take the trade in.

 

[Dealer]

No it should be me charging you for the education as you haven't made any valid point why machinery dealers shouldn't have to cut costs in tough time's thou any other business in any other industry would do just that!

Yes I did many post ago most of there costs is staff wages / costs

reduce parts numbers service levels drop experience lost

Reduce service guys same as above

Reduce sales

Less chance of achieving new sales. Equals list income

You could reduce administration but most dealers don't have enough to do it properly

Reduce stock

Yes your right most dealers would like to do this but not below cost as the lending facilities are based on balance sheet you need to reduce lending and stock equally if you don't you will run out of capital

So your answer is to stop having open days and advertising

Probably the smallest expense they have

So small saving big impact

How do you attract new sales or try and sell new kit without telling people about them?

How do you sell your used stock at less than cost without advertising it?

 

[Dealer]

Okay how long do the majority of dealers warranty 2nd hand machinery/ tractors for generally??

How long do you give the dealer for your trade in.

Or how long does the guy on eBay give you.

Dealers will stand by a machine for a reasonable time even after that they will help with repair on a shared basis

If you want warranty buy new simples

 

[Cowabunga]

Okay how long do the majority of dealers warranty 2nd hand machinery/ tractors for generally??

What has that got to do with anything? If something major goes wrong within the first week or two on a reasonably expensive machine, such as five year old £30,000 tractor, of course the dealer will repair it or take the machine back and refund the purchaser. He still has to repair it and in some cases a substantial repair today could be easily in the thousands.
All such costs have to be accounted for on aggregate. It is all a cost on a trading business. As I mentioned previously, it is impossible to run a reputable professional business on a shoestring. As Dealer has given you the figures, most main dealers work on a net margin after costs of only 1% to 2% on a very large turnover. How much more 'efficient' do you expect them to become? Consider how much less net profit margin this is than most farms most of the time.
Those figures are what they net in the good times. How much do you expect they make now with drastically decreased farmer spending?

Farmers won't buy more because an used tractor, or new, is sold for a few thousand less. Farmers will just not open their cheque books at all. Spending nothing on new or used machinery as it gets tougher for longer for them, while the export market is dead as well.

It certainly surprises me that UK farmers are spending as much as they are at the moment. As I understand it, and certainly in this area, sales of both new and used machinery is holding up very well indeed all things considered. It is a very very long Winter that is ahead of all agriculture and allied industries though.