Buyers Tips: Trade-In Allowances & Used Bike Values

Back To the Auction! How do you think dealers determine fair market value for used bikes?

harley-davidson, h-d, harleys, used bike values
Harleys have been known to withstand depreciation better than other brands.©Motorcyclist

It's been more than a year since I first mentioned how dealers use auction houses to move stale inventory and replenish their used stock (see Retail Confidential in your March '14 issue of MC). The auction is a great place for dealers to get a feel for used-bike values, and we use this data to determine the fair market value. The NADA (National Automobile Dealers Association) Appraisal Guide comes out three times a year, but there are auctions every month. Because NADA is slower to react to market values, the auction plays a big part in real-time information.

Now that we have a little history to look back on, we can see the result Harley-Davidson's Project Rushmore, which debuted in August 2013 as '14 models, has had on the value of used Harleys, wholesale and retail. If you were one of those who waited just a bit to pull the trigger on a Rushmore-class FL, you were probably disappointed with the trade-in value offered for your pre-Rushmore Harley.

There’s a good reason for that. Early into the 2014 model year—actually late in 2013—dealers were still generous with trade-in allowances because at that stage it was difficult to gauge exactly what kind of impact the new models would have on used-bike prices. But demand for Rushmore bikes was massive, and the market became flooded with older Street Glides, Ultra Classics, Ultra Limiteds, and Tri-Glides. As a result, dealers were feeling the pressure associated with taking in inventory and tying up cash flow on bikes and trikes that were now less desirable. This inventory moved through the auction houses, and with values falling, dealers had to be careful to not offer too much on a trade-in to be sure they wouldn’t lose money at auction.

By the spring of 2014, dealers weren’t referring to the NADA book for trade-in values because the auction prices were already dropping. Everyone was sitting on so many 2009–2012 Harleys that it became a buyer’s market. Early on in this cycle, dealers had no hope of getting anything close to retail for them, so we became gun-shy about taking any more in trade unless the price was right. Very right. Unfortunately, customers were not happy with the deals they were getting, and new-bike sales were lost as a result.

Harleys have been known to withstand depreciation better than other brands, and I still believe this to be true. Anytime you make big improvements to specific models you have this ripple effect. We experienced the same thing when the 2009 FL-series touring bikes received a major chassis overhaul along with a host of other changes. Same deal in 2007 when Harley brought out the 96-inch engine and six-speed transmission. As time passes and the dust settles the market will stabilize—and it will this time, too, at least until Harley does something else radical and we see a glut of Rushmore bikes traded in.

Jeff Maddox is the sales manager for a multi-line dealership in the Midwest. Questions for him? Email us at mcmail@bonniercorp.com with "Retail Confidential" in the subject line.