Buying a Motorcycle Part III: The Economics of New Motorcycles
Modern communications have helped and hindered the motorcycle dealer's mission of making maximum profit on everything they sell. On one hand, they have a better idea of what the competition is doing right and wrong. On the other hand, customers can often access information that can cost the dealer much of the profit, or even the entire sale. Customers often call a competing dealer while sitting in the sales office!
The problem with shopping by phone or internet is that a salesperson can - and will - say anything to get your boots in her showroom. Getting you there is half the battle: once you are inside, the chances of selling you something increase to something over 50%, even if you have a negative perception of the salesperson or the shop. They can tell you half-truths by not quoting certain fees like freight and set-up, or they can just quote you a price on another model and say they misunderstood you. Most commonly they will just give you a bit of a run-around when you try to get a firm price: "just come on down, we'll work you a hell of a deal" was my response. Still, how a salesperson answers the phone can tell you a lot about the shop, how they do business, or what kind of inventory they have, so don't hesitate to call them up. Once you are in the shop, make sure you talk to the salesperson you spoke to on the phone. She will be grateful and more inclined to work harder to save a deal from going bad. The Internet is basically just another form of telephone for sales purposes. However, a printed-out email or price-quote is much easier to prove than the word of an anonymous salesperson talking on the phone, so make sure you print it out and bring it in!
At some point, the salesperson will present you with a piece of paper called a "worksheet" or a "four-square." It will most likely have the full MSRP of the vehicle, with all taxes and fees. If you told him you were financing, there will be a huge down payment and an unaffordable monthly payment next to that. He will ask you to sign so he can "start the paperwork."
This is where your measly experience as a vehicle buyer is clashing with thousands of years of experience selling vehicles. You will make an offer much lower than MSRP, with a lower down and monthly payment. The salesperson will make huffing and sighing noises, and say something like, "I don't think we can do that - there's not a lot of room in these things, but let me see what my manager has to say." He will then walk out, promising to be "right back."
This might take a while, especially on a busy day when two or more salespeople might be clamoring for his attention, so be patient. They usually want your business! Don't schedule anything else to do that day, and for the love of God, please leave your dogs, cats, children, golfing partners or other non-decision makers at home. Bring a book, video game or something to do while you're waiting. Expect a vehicle transaction to take at least four hours.
Where did he go, anyway?
He really did go to the sales office to talk to a sales manager. In the office, he will explain some details about you and what you want, and the sales manager will do a little research into the unit you want and your relationship to it, as well as how his month is progressing, how much money your salesperson has made or will make, how easy the bike is to get, etc. He will then formulate a bottom line for this particular sale, and then take $75 off of MSRP and send the salesperson right back to you.
What the...? $75! Are they serious? That's not negotiating! But it's a wise tactic. You were probably asking for an enormous discount, usually $2,000 or more. But how are they to know that you really want all of it? Did you truly give them your "highest price?" This way, any concession they give you will seem more signifigant than if they had knocked $500 right off the top, just for asking.
In Herb Cohen's famous 1980 book, You Can Negotiate Anything, he outlines a great many strategies for getting your way, and I recommend you check it out. In the book, Cohen points out that you get your way if you have some power to wield. Power can manifest itself in many ways. One is in having information. Know how much they can realistically sell the bike for. Another is that of investment. The more time and energy the dealership spends with you, the more they will invest to "win" your business. Yet another is risk-taking. Don't be afraid to stick to your guns, if you have done your homework and know it's reasonable. Just remember, they want this sale as much as you want the bike, so be honest about what you want and don't be afraid to ask for it.
And finally, don't be afraid to walk out. Unless this is the last bike in the last dealership in 500 miles, another opportunity will present itself.
And finally, don't be afraid to walk out. Unless this is the last bike in the last dealership in 500 miles, another opportunity will present itself. Being prepared to truly walk out the door, even with four or five hours invested, gives you a mighty weapon against the sales department. The time and energy of the sales team and the dealership are valuable and expensive, but your time is free, if you had a day off anyway. Don't be surprised if you get a phone call soon after you walk out with a surprisingly generous last-ditch effort to salvage the sale.
6. F & I;
After you say "yes" to a price, you might be ushered into a room with a whole other person, the F&I Manager. This stands for "Finance and Insurance", although it is less and less common for dealers to offer insurance for their customers. This person will explain your financing terms, do your DMV paperwork, and sell you some add-on products.
One of the biggest issues customers have is financing rates. They are usually shocked, after years of being bombarded with ads for low auto financing rates, to find that motorcycle loans are often at much higher rates. Make sure you ask if there are any special rates available for the make and model you want, as factories offer special deals for the bikes they want to move, and find out if your own bank or credit union will finance for less. But also keep in mind that a point or two of interest on a $6,000 loan will only save you a few hundred dollars over five years, much less over three.
Some of the add-ons you will be offered include:
* Gap Insurance: Gap Insurance is worth it, especially if you have a small down payment. The insurer will pay the "gap" between what the vehicle costs to replace and what you owe on the loan, rather than just paying off the loan like your comprehensive insurance will do. This means if you total your bike, you will have some money left over after they pay off the bank to get into a new bike so you can do it all over again.
* Extended Warranty: Sometimes this is a good deal, sometimes not. Some brands tend to have a lot of warranty issues, some not. The price of your warranty will reflect this. Also, make sure the extended warranty is transferable and useable at any dealer. And keep in mind that you can "cash in" the unused portion of your warranty if you change your mind or sell the bike later on.
* Service Plans: This is an opportunity to pre-pay your vehicle's serviceing at a lower rate. This is a good deal if you plan on staying near this dealership and keeping this motorcycle for the length of the plan.
Lastly, all these "add-ons" have profit margins built into them. How much depends on the product, but don't be afraid to walk away from it if they don't move on the price. Extended warranties can be purchased at other dealers, or you can purchase it in a reasonable time if you change your mind. There's a tendency to overbuy once a customer is approved for financing, so try to stick to your budget!
I hope I've given you some ammo to use against a very wily and competitive industry. Remember to do your homework, don't take anything personally, and that motorcycles are fun, so have a good time shopping!