Do you dream of opening a motorcycle dealership one day? It’s an exciting opportunity for those who have a passion for motorcycles. It’s quite profitable, especially if you are in the right place. But how much money do motorcycle dealers make?
Dealer margins are relatively low on the sale of new motorcycles. It can range from 12 to 20% when you consider the overheads. That’s not a lot of margins, so motorcycle dealerships rely on other methods to make higher margins.
How profitable are motorcycle dealerships?
This is a tough question to answer because it depends on the brand of the motorcycle and if the brand equity the dealer has built over the years of trading.
If you consider the maximum margin could be as low as 12% on the sale of a motorcycle, you would have to think a motorcycle dealership is hardly worth the effort with so little margin.
In a recent survey among franchise dealers in the UK, only Harley Davidson thought the future was promising for the motorcycle industry.
A five-year margins forecast indicated the highest margin was 23.5% in the same survey. That’s across five years of trading without knowing how world events would change the landscape.
Is it any wonder when you visit a motorcycle dealership that there are many add-ons and you are being offered finance?
It makes no sense to pay outright cash for your motorcycle in some circumstances. With low-interest deals to be had, you can earn more money by keeping your money in your bank account.
But for those of us who can’t afford to buy a motorcycle outright, we need finance. The dealership will credit check you and offer you a finance interest rate based on your credit history.
Depending on the finance offer and agreed interest, the dealership can expect a significant kickback from the finance institute making the loan.
The same will apply if you insure your motorcycle through a dealership. The dealership will be paid a commission that will support the bottom line.
A dealership is more likely to make a higher margin on selling a good used motorcycle, he will have the profit margin, and with luck, you will return to the dealership to maintain your service records.
What is the profit margin on motorcycles?
On new motorcycles, margins can be as low as 12% and 20%. It’s a low margin for any business to survive on.
However, the dealership will be servicing your motorcycle at least for a year so that they will have the revenues from exorbitant labour rates.
Warranty claims will be charged back to the manufacturer, generating a small margin.
So the picture is not all doom and gloom for the motorcycle dealership, but it does depend on the franchise or if the dealer is independent.
An independent dealer will have more scope to avail of other products that can be rolled into the sale.
At this time, being a motorcycle dealer is not a desirable proposition for most business people, so don’t be too hard on your motorcycle dealership.