A New Take on the Trade Dilemma

by Roger Herd

As a manufacturer or a dealer, the dreaded “trade” can either sink a deal or perhaps, if taken, drive a healthy margin down considerably. Holding costs, repairs, marketing, brokerage commissions, etc.; it all adds up. Yes, you can call your wholesale buyer who is going to give you 30% less than book, but you can’t pass that on to your buyer, so you bury it in the deal making your margin slimmer than ever.

I would like to present you with another option. One that makes the deal a win-win for all parties. This option is not for everyone, perhaps not even for most, but it can work for some of your buyers depending on their financial status, the trade in question and how anxious they are to take possession of their new boat.

Think Donation.

Here’s the scenario:

Your buyer has interest in your new boat, but he wants you to take his 2002 60’ Flybridge MY on trade. He believes his boat is worth 900K but you know the boat will really retail for maybe 800K and in order for you to take the trade, you can only give him 650-700K. So you bury the cost on the front end, driving your margin down. You ACV the boat too high on the back end to cover holding costs and in the long-run it’s just not that profitable.

Suppose your buyer is well-heeled enough that he could benefit from a write-off? He has his boat appraised by a qualified surveyor and that number becomes the basis for his write-off, which he can use for up to 5 years. If the valuation meets his needs and he opts for donation, problem #1 is solved.

Since you do not have to take his trade you can sharpen your pencil a little more on the price of the new boat. This savings makes the donation even more palatable because he’s getting a better deal.

His donated boat stays with you as a central listing for which you are compensated for. After we materially improve the vessel you will make a commission when the boat goes out on lease and an option commission if the lessee exercises the option to purchase after 3 years.

The net benefits to you are:

1. No Trade equals higher margins
2. No holding costs eroding the trade value
3. Reasonable compensation for your work
4. A happier client who is released from his old boat and enjoying his new boat.