You probably wouldn’t think twice about buying an RV from an RV dealer, but the truth is that some RV dealers are worse than used car salesmen. The reason this is so, is that they are dealing with a much more expensive product and so if they stack the deck, they can make a lot more money then a car dealer. Although there are good, honest RV dealers out there, this article is written to help you understand some of the tricks of the trade.
Another reason they can be worse, is that RV dealers are working in a smaller market, and so margins can be much higher due to fewer competitors and less overall inventory than the car market. People are often lazy and RV dealers know a lot of people will make decisions based on imperfect information. If someone walks onto a lot and says, “I need an RV to go to Disneyland this weekend,” they are most likely going to pay more for it and find the sales person more likely to sell you on the product benefits and less likely to negotiate on price.
A third reason is that RV dealers can make a huge profit on each RV they sell. RVs are expensive, luxury products which are easy to buy and hard to sell. Dealers take this into account and often buy used RV’s back at very low prices and sell them for more than double of their original cost. Often dealers use a step down sales approach. A new RV is likely to have cost the dealer $100,000. After the standard mark up of 40 percent, the RV is priced at $140,00. The dealer makes a deal with couple X, and they buy it for $135,000. A year later, they try for a few weeks to sell it but aren’t able to, so they bring it to the dealer to trade it in. The dealer know he can buy a new model for $100,000 so he may offer them $65,000 for the RV, because to him, the RV has lost 1/3 of it’s invoiced value in the first year. However, after buying back the RV, the dealer may have it sitting right next to a new one listed for $140K and offer to give it to you only one year old for $120k. A savvy buyer may be tempted to buy the older model because it is listed for $20,000 less than the new one.
My friend, an RV salesman for more than fifteen, years told me a little secret. No two used RVs are ever the same. New RV’s are the same and so this forces them to sell for similar prices. Once two new RVs leave the lot, they will be driven by different owners, taken care of differently, and they will no longer be the same. If an RV dealer is selling the RV, he may emphasize this fact by telling the potential buyer quite truthfully that the RV they are selling is different than any other because of X, Y and Z. When buying, they will tend to focus on the negative differences and therefore drive down the price.
Because RVs are seasonal, the amount of buyers can fluctuate greatly depending on the season. Savvy RV dealers know about this and often use seasonal fluctuations in the market to their advantage
Upgrades: Most upgrades are a great way for a dealer to make extra cash. A $25 antenna may cost as much as $250 to have installed. This gives the dealers nearly a 90% margin of pure profit. Dutch star was one of the first companies to include the most popular standard upgrades in the base price. This allow them to be more competitive. After all, the dealers will only charge the consumer a 30%-40% margin on the upgrade rather than a 90% upgrade. Extended warranties are another area where RV dealers make an 80%-90% margin. If the dealer sells a $15,000 extended warranty package, for instance, it only costs them $1,500 and so they will keep the rest.
Financing: It is usually a good idea not to answer the question, “What payment can you afford?” A lot of dealers would rather negotiate payment amounts than on final sales price. After all, monthly payment seem less intimidating and it can be easier to sell upgrades like Satellite tracking for only $11 a month for 10 years, sounds a lot nicer than $500 extra today.
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