In part because of demographics. Not enough farmers in an area to really support a dealer? The company closes or forces them out. That reduces competition between the same brand dealers. They are not cutting each others throats. Plus JD/CaseIH/NH/AGCO has fewer places to deliver too, both new equipment and parts. That saves a lot of money by reducing the number of trucks and drivers. The companies want dealers to do well. They want dealers who carry a complete line. Both are good for bottom line. Farmer drives an extra 50 miles looking for a better deal on the same brand tractor and now a dealer, who may not normally support that size tractor, has to order one in and won't see that customer again until they again are looking for a deal. So the dealer makes a very small percentage on the sale because he had to beat the other dealer and gets none of the service or parts sales.
Here in the space of 60 miles you can go from the biggest quad tracs to 150 HP row crop tractors and smaller. JD to the west of me mostly carries only the biggest equipment as a large part of his area is the Red River Valley in west MN. JD about an equal distance to the east is in a much different boat with much smaller farms. Distance between the 2 dealers is right at 60 miles. The dealer that was 6 miles away is long gone. Imagine what the prices would look like if all 3 were fighting for the same sale. Sure, great for the buyer but bad for the dealership. No JD doesn't own the dealership but it's in their best interest to keep both going. If that means they have to eliminate the 3rd then so be it. They did.
What JD said was that parts sales generate the lions share of profit, not equipment sales. I know that car dealers make most of their money in parts and service. Margins on vehicle sales are not that great. Plus where the manufacturers use to actually own the car until sold now after it sets on the lot a certain amount of time the dealer has to pay for it. Most on revolving bank notes which means interest payments too. Advertising, building and grounds upkeep, sales and administrative staff all cut into profits. Then I can get online and price the same vehicle from 5 or 6 different dealers making all of them try to become the lowest bidder to get that vehicle sold cutting into profit. Can do the same thing when buying new equipment too.
Years ago (60's70's) on cars they reportedly had about 10% of the base price and 50% of options to play with. Plus people were not going to drive the whole state looking for a better deal. Today a lot of things are no long options. Plus fewer people are doing their own work. No add in the internet. No, they are not selling at a loss. But them making 2-3% total on what they pay after sales commission is normal. That don't leave a lot of money to actually run the business. Now when I worked as a mechanic if we had to get a part from the dealer as a business we generally paid about 15% less than a customer walking into the parts department off the street. And they were still making a profit on us. Bet profit margins on parts at Deere, AGCO or CaseIH are about the same.
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Today's Featured Article - Third Brush Generators - by Chris Pratt. While I love straightening sheet metal, cleaning, and painting old tractors, I use every excuse to avoid working on the on the electrics. I find the whole process sheer mystery. I have picked up and attempted to read every auto and farm electrics book with no improvement in the situation. They all seem to start with a chapter entitled "Theory of Electricity". After a few paragraphs I usually close the book and go back to banging out dents. A good friend and I were recently discussing our tractor electrical systems when he stated "I figure it all comes back to applying Ohms Law". At this point
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