I've worked for manufacturer & importer, and spent a year as a tractor dealers salesman. The manufacturer/importer will create a retail price for their products and give their franchised dealer an X% discount.
Nobody buys tractors at retail price, the dealer can offer a discount off that retail price to his customer. Dealer #1 may offer 10%, dealer #2 offer 12.5%, dealer #3 offer 15% , so a discount war starts.
Dealers HAVE to make a profit on sales of machinery, on spares & on service to survive & run their business; to look after their customers & machines they have sold. If they don't the dealership fails and farmers lose out because there are no dealers in their area.
What most dealers do is take their actual buying cost of the machine in $, and add either a $ profit or a % profit on that cost to arrive at the selling price to the farmer.
The dealer needs profit to be able to buy the farmers' trade-in tractor which until that is sold, that is owing the dealer big money. If that tractor is not what the dealer would like in his yard, he will try to get the trade-in price under-written by a secondhand tractor dealer. So as soon as it comes in, it goes out and the dealer isn't stuck with an expensive "lemon" on his books.
Tractor manufacturers operate a sales franchise in each area. The dealer must conform to the manufacturers terms in stocking parts & offering trained service men. The manufacturer sets an annual sales target for the dealer in that area to achieve to maintain that brand's market share. If the dealer fails to sell that number, he risks loosing that franchise.
Tractors are too expensive for any dealer to be able to purchase stock themselves. The manufacturer owns the tractor until they are sold, the tractors in the dealers yard are put there on low interest finance. No manufacturer could afford to lose that much money if the dealer fails. Every month the stock is checked, anything not in the yard has to be paid for - if its not already been done via finance to the farmer.
Occasionally the manufacturer may have some surplus models/specification tractors which they want to liquidate. These are offered at a small extra discount to the dealers. The dealers usually offer these special offer tractors in the farming papers - either a special price or 0% finance.
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