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By: Robert Janis

Powersports Shops Doing Their Best to Weather Economic Storm

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Stark said that he is also going to local banks and credit unions to get his customers loans. “The local banks and credit unions have been very good to us,” he said. “Restrictions were tightened up a little. But, as long as we send them customers with reasonable credit, we have been able to get pretty solid interest rates and terms.” He said that he is able to get decent deals from the banks because of the long term relationship the shop has had with the banks. But Stark also pointed out that the local banks he deals with are slightly more conservative than other banks. “They are able to extend good credit customers better terms because they didn’t get in trouble overextending themselves.”

Stark gets his floor plan loan from General Electric Credit. “We are fortunate to be part of a major dealer network which has helped us weather the storm and get good floor plan loans,” he said. “I have seen dealers fail in this area because their floor plan providers have raised the interest on the loans. Floor plan interest in general has gone up. Dealers who don’t own all of their products are paying more to have them on display.”

Ace Powersports is part of the Coast-to-Coast Powersports Network. The company has 15 stores around the country including Oklahoma, Texas, Arkansas, Missouri, Illinois, and Michigan. “It is a real benefit to be in a network,” commented Stark. “The general managers of the different stores speak to each other regularly. We have the collective heads of 15 stores, GMs, and an upper level team, whom we can bounce ideas off of, and the network gives us collective power dealing with distributors. Also, we are having an easier time getting credit because we are part of a network.”

The best time of the year for ATV sales for Ace Powersports is August through September. “People are revving up for hunting season,” said Stark. “Also with winter coming people need a machine to get out and plow and do things of that nature. Also, manufacturers tend to put their promotions together in the fall.”

Stark noted that utility ATV sales definitely dip during the summer and sports quad sales tend to rise. “But generally speaking, our ATV business is year around,” he said.

He thinks things will bottom out this year. “I’d like to see 2009 start to pick up, and I am counting on a good 2010,” concluded Stark.

Kirk Copton is the general manager of State 8 Motorcycle and ATV, Peninsula, Ohio. The dealership has a second store in Medina, Ohio and carries ATVs and motorcycles from Kawasaki, Honda, Yamaha, Suzuki, and Aprilia. The Peninsula store opened in 1995, and the Medina store opened in 2006. He has 60 to 80 employees depending on the season. He noted that his business is seasonal, and there is a certain amount of attrition every year regardless of the economic situation. So, when employees leave due to attrition, he does not replace them.

Copton said that the manufacturers he carries provide him with incentive programs including rebates and marketing incentives for dealers. “Typically, in the past, the incentives have been for the non-current products,” he said. “Now the manufacturers are even doing it for the newer products.”

McKenney Salinas Honda Powersports Showroom
McKenney Salinas Honda Powersports Showroom

His best year was in 2004. The Peninsula store earned a total profit of $17 million that year. The biggest drop profit wise was in 2008. “But that year was still bigger than some other years,” he said. Last year was the downturn from a rising trend.

He gets his loans for customers from HSBC through the manufacturers and from Honda. He has found that manufacturers are restricting the total amount of the loans and restricting whom they lend to. Application documents are becoming more complex too, he said. “Some lenders are flat out refusing loans that they accepted in the past. It is very challenging.”

He also gets customers loans from local banks. He said that he has used local banks in the past regardless of the economic situation. “Any dealerships operating before 1998 have been using local banks,” said Copton. He added that there have been “quite a few” incentive programs from the manufacturers working with their lending partners that have helped to increase sales. He is able to sustain sales by working at a lower profit and working with customers over time to try to achieve the required down payment necessary. “In the end it’s the credit score that decides if they get the loan or they don’t,” he added. Copton estimates that he has lost 15 percent of his business due to the credit crunch. Also, that figure has become “substantially” higher over the last three to four months.

According to Copton, State 8 is developing its own marketing programs. “One of the biggest things is to get people involved with the product,” he said. “Right now people are involved with motorcycles as part of their lifestyle. What we are not seeing is an influx of new people we used to get. Last year we did have a spike in motorcycle sales due to the gas prices. But now motorcycle sales are down. So there is less of an influx of new customers.

“ATVs have two things going for them,” continued Copton. “The customer base wears theirs out, and they need another one or they want to upgrade. However, now ATVs are $7,000 to $8,000, and they are 750cc and bigger. So, the wear out and normal buying cycle has been extended. People are using their older ATVs longer, and they are reluctant to buy a new one.”

Copton said that this situation could cause the price of used ATVs to go up. “As prices go up on the new ATVs, the value of the old ATVs goes up, too. But when manufacturers are putting $1,000 rebates out on the new models, it restricts how much an ATV can be valued. I sell used ATVs and if there were no programs for the new ATVs, I guess that the percentage of sales of used ATVs would be extremely high--maybe better than 30 percent.” And the incentives to buy new ATVs mean that he has to keep the older ATVs on the floor longer. “The turn cycle is lengthened,” he said.

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