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John Deere Tractors Discussion Forum
Show Parts for Model:

What percentage of sales are parts?

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Blue_tractor_man

08-09-2018 19:35:37




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I have a JD 2755 and I fix every little thing that breaks. I buy everything from the GreenPartstore. A few hundred here and a few hundred there and you can spend a thousand or more per year.
I've never bought a new tractor. I was wondering if anyone knew what percentage of revenue parts would be for a tractor company. I wonder if interest is a big income producer like it is for car companies. Anyone know?

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JD Seller

08-12-2018 13:58:24




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
Bob this is also dealer cost not retail cost. A new combine would easily be in the $250K range , and larger tractors are there too. You still looking at needing to sell 20 units total to get to the starting point.
See how the chain dealer has an advantage??? IF he owned 10 stores he only needs a few sales at each store to reach the beginning level of volume.



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JD Seller

08-11-2018 13:08:06




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
I was involved in the business side of two different dealerships. The average margin on JD parts is 28%. That is the average. Oil and filters is around 4%. Rarely sold parts can be as high as 60% margin. Example would be a transmission shift valve housing. High margin but rarely sold. The more often a part sells the lower the margin. It is not a straight percentage.

Also JD dealerships do not get a kick back like car dealers do for financing. The JD dealers actually pay 1% into a fund to cover any losses on repossessed equipment. Meaning if your JD note is for $10,000 the dealer only gets $9900 back from JD financial. This fund is capped at a certain level. So after that there is not cost.

The parts sales generate the most profit of the entire store. The shop usually breaks even but usually sells 50% of most stores parts. So the shop makes the store money that way. Never should any service department manager at a JD dealership take a job where a major portion of their pay is based on the shops profit. The shop rarely makes much money under JDs book keeping system. The majority of the over head is charged against the shop.

New equipment sales average 4-5% margin. Then you may get a volume bonus at year end but you have to reach a gross sales number and meet JD market share targets. Just talked to a dealer other day. Still a one store entity. Volume starts now at 5 million of new equipment sales. That is a lot of equipment for a single location to sell. Multi store dealerships get to pool all the whole good sales into one pot. One way JD is stacking the deck against single location dealers.

Looking at the entire dealership profit centers the parts department usually makes 60-70% of the total profit of the store. Sales is unusually 30-40% and the shop 10-20%.

Both the store owners I worked for said they would close the shop in a heart beat if they did not have to do warranty repairs. The shop uses the most labor and causes the most headaches.

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Bob Harvey

08-11-2018 20:39:40




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 Re: What percentage of sales are parts? in reply to JD Seller, 08-11-2018 13:08:06  
"Starts at 5 million". How many new big machines does it take to fulfill that number ?



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Blue_tractor_man

08-11-2018 13:15:46




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 Re: What percentage of sales are parts? in reply to JD Seller, 08-11-2018 13:08:06  
Thanks. The question I was trying to ask is what percentage of Mother Deere's gross revenues are from parts, new tractor sales, or finance charges. Is it 33-33-33?



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JD Seller

08-11-2018 15:16:45




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-11-2018 13:15:46  
For them New equipment sales is the driving force. So they must derive the majority of their income/profit from that. All the rest gets second class treatment at the Corporate level.



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Tx Jim

08-10-2018 04:11:53




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
During my 13 yrs experience of serving as a dealer service manager I found it very difficult to show a profit in service dept. but dealer didn't want to charge some expenses to correct other departments. A lot depends on how much warranty repair must be performed. Keep in mind I'm referring to 40 yrs ago.
Dealers selling parts for MSRP + 10-15% should find it easier for parts dept to show a profit than dealers selling at MSRP.

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dwag

08-10-2018 17:19:47




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 Re: What percentage of sales are parts? in reply to Tx Jim, 08-10-2018 04:11:53  
Agree, there was a constant whine by dealers about their shop losing money. The shop didn't get credit for parts they used in repairs, parts dept did even though at least half of sales were through the shop. Now the dealer complaint is "independents" are getting the gravy/pay work while the dealer is stuck w/warranty work.



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Tim S

08-10-2018 17:36:10




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 Re: What percentage of sales are parts? in reply to dwag, 08-10-2018 17:19:47  
Maybe that's why the don't answer the phone...



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Tim S

08-10-2018 07:10:44




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 Re: What percentage of sales are parts? in reply to Tx Jim, 08-10-2018 04:11:53  
When I worked at the Dealership back in the 70's the fuel used for the salesmen and pick up and delivery , most of the set up cost,heat for the building,,was billed to the shop,,there for the shop did not show any profit... Deere dealers have around 55-60% over cost profit on there parts, so that is a large amount,,but the over head can soon eat that up I am sure.. From what I am hearing from some of my friends that work at the Mega Dealer they are hurting right now with low equipment sales,, and the parts departments in the 2 nearest dealers is a mess,,High over head will put a huge bruise on a Fancy store..

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lfnel

08-10-2018 03:48:52




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
After spending a career in the farm equipment business, I've heard it many times from many directions, and do believe that at the local dealership, the profit is made at the parts desk and on the shop floor, not on the sales floor. But you've got to sell 'em if you're going to get the parts and service business.



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Jon Erickson

08-09-2018 20:53:36




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
Very good question. And Brenden's answer is concise and accurate.



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Brendon-KS

08-09-2018 20:47:43




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 Re: What percentage of sales are parts? in reply to Blue_tractor_man, 08-09-2018 19:35:37  
The gross profit margin on part sales is a lot higher than if all those parts were assembled into a complete machine and sold as a wholegoods unit. On the flip side it takes a lot of overhead to support a service parts supply chain due to the huge number of part numbers each sold in relatively low quantities. As a whole the net profit margin probably isn't much different by the time all the expenses are paid.

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