Road Cycling - Dealer cost for new bikes

I am currently shopping for a new bike, and I was wondering if anyone had a formula for calculating the dealer cost for a new bike. I have seen afew new old stock bikes in the stores at a discount (2000 model 7200 trek for $249) compared to $369 for a new one. Some dealers around here want the msrp. , but I would like a discount , and knowledge of the cost would put me in a better position. I am now leaning toward a road bike instead of a hybrid. These forums are fantastic. Thanks in advance.

There is roughly a 33% profit margin. That number can flucuate depending on brand and price point. For instance a $2000 bike will have higher margin than a $300 bike. What is a profit margin? Its the percentage of the selling price the dealer gets. Do not confuse it with markup.

Example: If a bike has a MSRP of $1000 and a 30% profit margin, the dealer pockets $300. Dealer cost is $700.

Example: If a bike costs a dealer $700 and they sell it for $1000 they are getting a 43% markup.

Example: If a dealer pays $500 for a bike and seels it for $1000 they have a 100% markup and 50% profit margin.

Something you must consider in all of this is the dealer expenses.

Exapmle: Dealer sells a bike at MSRP for $800 with a 33% profit margin. Dealer pockets $264. (33% of $800 is $264) $264 minus shipping $35 minus assembly $45?? minus free tune-ups for a year............that $264 can get wittled down pretty quick.

So, the question remains, how much to pay? If your buying a left over model shot for a 25% off MSRP. The dealer isnt making much but they arent lossing anything either.

You must keep in mind a dealers expenses are fixed for every bike they sell. It costs them the same to ship, assemble and service every bike they sell. If expences are say, $75, thats a higher % of the dealers profit on a $500 bike than it is on a $1000 bike.

Example: Assuming $75 of fixed expenses. A $1000 bike with a 33% profit margin pockets the dealer $333 minus $75 expenses. $75 is 24% of the dealers profit.

Example: assuming $75 of fixed expenses. A $500 bike with a 33% profit margin pockets the dealer $165 minus $75 expenses. $75 is 45% of the dealers profit. 45% of the profits gone!!!!!

Basicly on a less expensive bike dont expect much, over a $1000 or so they better be doing something for you. For instance, I was in my LBS and they will give me $200 off a Bianchi stickering for $1300. Thats 15% off of a current model year bike. Not bad. when that bikes a model year old I'll expect nothing less than 25%

Accessories have a higher profit margin, they cost the dealer less from a % standpoint, than bikes. If your considering accessories and they offer you $100 in free access or $100 off the bike take the $100 acces. Its the same to your wallet but better for the dealer.

Hope this helps....Jim

Dave, the Trek 7200 for that price is probsably close the what the dealer paid. I bought my Trek 6700 MTB for $599. It was an '01 model I bought this past spring. I think MSRP was $850. I saved 30%.

Something to consider that I havent commented on is dealer service. Some dealers asking MSRP (that better be for '03 and '04 models only) may give better service after the sale. Personaly I take care of all my own service so thats a non-issue. If your not mechanicly inclined paying a little more will get ya more service.

one thing you have to remember about the cost of s bicycle, is that the dealer usually has to pay the shipping, he has to pay a wrench to build it up, and he has to pay for the storage and display space. the raw margin [that is retail minus wholesale] is usually 20-30%. the margin is typically highest at the low end, where a $600 bike wholesales for about $400. margins at the high end of midrange -- that $1500-$2000 sweet spot where there is huge competition -- are often less than $20. at my lbs, serious bikes are typically sold at about 7% below msrp. for example, the kona jake the snake has a msrp of $1500 cdn, while the shop sells for $1400 cdn, so there's already a cut into the margin there.

the long and the short of it is that you shouldn't expect a bike shop to be very flexible on bikes themselves -- unless they're really motivated to clear them out, as with mtbs. you'll get better deals on accessories and components, which often have a margin close to 50%.