Calculating a fair price

[krsmitty]

A question for you business/math folks.

Out doing a little 5th wheel shopping today and had a discussion with one of the salesman on how I was coming up with my offers. I explained that how I understood it, that there is roughly a 35% mark up on RV's. To give a fair profit margin of 10% I was subtracting 25% from the MSRP; for example 30,000 MSRP - 25% = 22,500. The salesman explained that it is not the correct way to do it. He showed me to figure this way; 30,000 / 1.25 = 24,000.

He explained this way. If I built a widget for $10 and wanted to add 20% for profit; $10 + 20% = $12. But a buyer wanted a 20% discount; if I took $12 - 20% = $9.60, which is less than I made the widget for. Salesman explained I should calculate this way; $12 / 1.20 = $10.

So, if there is a 35% mark up and to give a profit margin of 10% should I: (30000 / 1.35) (gives me invoice) x 10%....30000 / 1.35 = 22,222 x 10 % = 24,444?

Or should I; 30000 / 1.25 = 24,000?

Or should I; 30000 - 25% = 22,500?

So, if there is an approximately 35% markup what is the correct way to give a 10% profit instead of the full 35%?

Walked out on two dealerships because they would not come down to what I had calculated as a fair price. Maybe I was calculating wrong?

Thanks

 

[C Nash]

Re: Calculating a fair price

To heck with all that math Ken :laugh: Offer them what you are willing and walk if they dont take it. You KNOW he is not going to give you the correct way to discount it :laugh: They do have to make a profit to stay in business so figure that in :laugh: Good luck and aint it fun :bleh:

 

[krsmitty]

Re: Calculating a fair price

Yep...walked twice today...lol :laugh:

Just want to make sure I am giving them a fair profit.

 

[Grandview Trailer Sa]

Re: Calculating a fair price

I just love it when someone tells me what it takes to keep my doors open....Unless you have owned a business, you don't have a clue.

 

[krsmitty]

Re: Calculating a fair price

That is why I am asking? What is a fair price? How do I determine what is a fair price? Not sure I was telling what it takes to keep your doors open. All I want to know is how determine a price that is fair to me and to the dealer.

 

[Grandview Trailer Sa]

Re: Calculating a fair price

A price arrived at by both parties that makes both happy.

 

[krsmitty]

Re: Calculating a fair price

Grandview Trailer Sa - 2/27/2010 8:54 PM

A price arrived at by both parties that makes both happy.

I agree 100%, but since the dealer has the advantage (I assume, since he knows what he paid for it and I don't). So how do I as a potential buyer at least get in the ball park?

 

[TexasClodhopper]

Re: Calculating a fair price

Why, you get "the government" to require that all dealers MUST publish their costs and not make any profit! Elect another Progressive! :clown:

It's called capitalism, Ken. Do your best and guess. That's what we all do, and then we go have some fun and live with it.

 

[Triple E]

Re: Calculating a fair price

Lets say that a dealer has a mark-up of 35% on a motor home. Within that 35% mark-up the dealer has to account for shipping, set-up, flooring, flooring tax's, employees, employees tax's, property, property tax, business and opportunity tax's (B&O), license fee's, business license fee's, state and federal tax's, and support a home and family. Now that 35% is under 10%. OH YES, LET DON'T FORGET "REDISTRIBUTION OF INCOME"

So if the asking price $60,000.00. I will tell the salesman, $60,000.00 out the door and not a cent over plus a long lasting wax or protection applied. I have never been turned downed. I leave happy and the salesman seems happy.


:8ball:

 

[krsmitty]

Re: Calculating a fair price

Good reply Triple E

I have never thought of it this way. Something to consider.

 

[akjimny]

Re: Calculating a fair price

Like Triple E said, get the "Out The Door" price and if you can live with that, fine. Just make sure that's out the door, not the price before they add in sales tax, dealer prep, title and registration, document processing fees, etc, etc.

 

[keithb]

RE: Calculating a fair price

Well I cannot speak to buying MH's at this point but my experience is mainly buying/selling motorcycles. I go straight to NADA value. Never Kelley Blue book because KBB favors the seller. Then I go to websites where bikes are for sale to get comparison prices so I can make a reasonable offer I want to buy the bike.

 

[Grandview Trailer Sa]

Re: Calculating a fair price

That is good advise on used vehicles, but NADA does not work on new.

 

[utmtman]

Re: Calculating a fair price

Not to get off subject here but I saw a news report yesterday on pay as compared to profits of a business, they showed that up to around the late 50's early 60's pay and profits basically corresponded with each other than in the 50/60's the profits started rising but the pays basically stayed the same or raised very little. They showed that the difference in that money went to the owners, managers, of businesses for high priced cars, yachts, homes and so on. Had the pay corresponded with the profits we would never have had the problems we had this past year.
Ok I could not resist. lol

 

[Triple E]

Re: Calculating a fair price

Lee your point is a valid point of large Corporations. But if you take a ma and pa business like most of these dealers, you will not find that kind of spread that you are talking about. These dealer are responsible for not only their family but their employees and vendors. Day to day they have no idea what will happen tomorrow. Think of the days when nothing is sold, but the employees are still being paid. No thank you. I wouldn't want the pressure.

:8ball:

 

[krsmitty]

RE: Calculating a fair price

All over but the shouting... :laugh:

We are the owner of a 2010 Jayco Eagle Super Lite 28.5 RLS.

Thanks for everyones input.

 

[Michguy]

RE: Calculating a fair price

I sold Motorhomes in the 70's and boats up until 1992, and I'll bet you a dollar to a doughnut that , especially in this economy, if they let you walk, it was only because they just couldn't afford to sell for the price you offered. If they still had wiggle room, there is no way that they would let you walk without at least making another counter offer. Rule of Thumb: If you're leaving without them stopping you with a counter offer, then they can't afford your terms. The only way it would make sense is if they have a waiting list for that particular item, and they can't replace it in inventory readily. As long as they're still making them and the dealer can get more, he's going to sell if there's a legitimate profit to be had.
I would suggest that maybe you should go back, pepared to do business, "right now", and be willing to submit a deposit check with your offer, subject to their acceptance of your price. Nobody ever sold anything tomorrow, so today really gets their attention.

I used to hear people tell me that I just didn't want to do business. Now, how insane is that? After you've invested in land and buildings and equipment and parts and employees etc. etc, and because you can't meet a customer's desired price, does that really mean that you "don't want to do business"?

 

[Grandview Trailer Sa]

Re: Calculating a fair price

Ahh,,,he stated he bought....