How Much Do Tractors Cost Dealers and Why is My Deere Dealer's List Price High?

I received a viewer question today about pricing and why the online list price for a Deere tractor is vastly different than what's on Deere's website. Many of the manufacturers have websites where you can "build" a tractor and when you've added all of the options and attachments you want, it'll tell you the list price of the package. This viewer's local Deere dealer's list price is quite a bit higher than Deere's quote. What's going on?

First off, I never pay any attention to list price. I doubt that any dealer ever sold a tractor for full list, it's just a fantasy number from the manufacturer and the only purpose it might serve is to make the actual price look lower. Does that even work?

List price is usually meaningful as a way of setting the net price to dealers, or the invoice cost. When I was in the equipment business, the invoice cost was 23% of list on most premium models. If it was a basic or economy tractor, that percentage would be less, it might be 15%. So, if you know list price, you could determine dealer cost, right? The answer is no.

Most tractors get additional factory discounts that are taken off the invoice number, before freight. It's usually a percentage, it could be a flat rate, or it could be both. So, to know a dealer's cost on a tractor you're trying to buy, you'd need to know the invoice cost, and the current programs.

There's also what's called a "cash in lieu" discount. If you use the manufacturer's low rate program, you don't get that discount. I recommend finding out what the cash in lieu is, because it may cost you less to borrow the money from the bank and pay the dealer with that (which counts to him as a cash deal) and take the cash discounts. You should keep that in mind when shopping.

To answer the original question about why the dealer's list price and Deere's list price didn't match, I suspect either the salesperson made a mistake or just pulled a bunch of numbers out of the air instead of calculating the actual list price. I've been in sales a good part of my life and if there's a shortcut to take to get the job done earlier, most of us will take it. This time the customer caught him.

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