Posted by JD Seller on March 17, 2016 at 20:32:43 from (208.126.198.123):
In Reply to: JD Tractor buying posted by Spudm on March 17, 2016 at 11:03:31:
Well guys let me tell you how the JD program actually works!!!! There is JD list price. There is JD dealer price, 77% of list price on most items. Now both of those prices are WORTHLESS!!!! The reason being is the sales incentive programs. These programs are the cash discount and attractive finance programs. Then there are additional sales incentives that are limited to your area of responsibility or customers you can prove a prior relationship with. The standard sales programs are the same all across the US and you can get them at any JD dealer you chose. The trouble starts when you want to buy from a dealer and your not in that dealer's area of responsibility. If you have bought from him in the past, this usually requires a new piece of equipment in the last five years, then you can get the additional local area sales incentives. If you have not bought from that dealership and are out of his area of responsibility than you nor the dealer will get the additional incentives. None of the proceeds go back to the local dealership that you did not buy from unless it is a JD skid steer loader and some models of compact tractors. The skid steer loaders sell under a program made to mirror Bobcats and there local sales incentives are hefty. Some models of compacts do this too and that is because Kubota does this on some models as well.
Here are some real world examples that are several years old but the principle is the ame today:
JD 8220 tractor;
general sales programs: 5% cash 2.0% financing for 24 months 2.5% financing for 36 months
Unpublished local sales incentive $5000 discount if ordered before Dec. 31.
The cash discounts are figured off of dealer invoice cost. On the JD 8220 that would have been right at $105,000
So the %5 cash discount would be $5250 plus the unpublished discount of $5000 for a total of $10,250.
Most dealerships would sell that tractor for a $5000 profit so the sales price would be in the area of $100,000 if your in that dealer's area of responsibility. If your not that the price would be more in the $105,000 area.
Many of these area restricted discounts are unpublished. Meaning that the territory representative tells them to you verbally and you write them down. Then if you sell it he will give the dealership settlement auditor a program number that will allow a credit to be used when the tractor is paid for.
The main item that is different than this is the skid steers loaders. The dealerships get a certain territory. They get the sales volume incentive on all the skid steer loaders sold in that area unless there is a prior relationship. That is usually 3-4% of dealer invoice. So if you buy from a dealer that is not local and the invoice price is (example) $30,000 then JD will send around $900 to the dealer that has the area that the skid steer is sold in.
It has been ten years since I have been totally up to date on the exact programs. There has been some additional kinds of equipment added to the area restrictions regarding volume. Skid steer loaders where first, then some compact tractors. Now the self propelled forage harvesters and self propelled sprayers/applicators have these type of programs too.
In defense of JD and the local dealerships. This volume program is applied to items that require larger investments for the local dealer to compete for sales. If you notice most Bobcat dealerships have tons of "new" inventory. They will demonstrate just about any type of attachment/skid loader you can think of. So this is an additional cost for the stocking dealerships. In the case of self propelled forage harvesters to be a responsible area dealer you have to keep a "new" machine in inventory to get the extra discounts. That is $350-400K for each machine that have to keep in stock.
While I do not like these type of programs on anything it does make some since on these more special items. The unpublished discounts on common stuff like tractors and combines, is not as clear cut.
I think that JD will have a hard time in the years ahead. The prices are looking to be low for a period of time. So new sales are not going to be there. So these programs may very well go by the wayside. Other brands might be able to pickup some market share during this period. Although I am not sure that there will be much new stuff sold anyway.
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