Understanding the Profit Margins of Camper Sales: What You Need to Know

When it comes to camper and RV sales, understanding profit margins is crucial for both buyers and sellers. Many customers often assume that the profit margin on new RVs is high, but in reality, the financial realities are quite different. In this article, we will explore the average gross profit percentage of camper sales and delve into the intricacies of how profit margins vary between new and used units.

Net Profit from New Camper Sales

When it comes to profit margins in the camper and RV industry, it might surprise you to know that the profit from the unit itself is not as high as most customers think. Much like the automotive industry, the profit margin on a new RV is relatively low, primarily because the manufacturing and transportation costs are high.

At Camping World, for example, our best practice was to cut the price of units that had been on the lot for over 90 days to dealer cost. This was done to ensure that we moved the unit off the lot without incurring the 90-day payment. The inventory on our lot is all financed, with the first payment due in 90 days. Our goal was to mitigate the financial risk and not have to make that initial payment. Salesmen would then push the unit, emphasizing its value and cost-effectiveness.

Why Are New Units Less Profitable?

The primary reason that new units are less profitable is due to the high initial investment. From manufacturing costs to transportation expenses, there is a significant upfront cost to bring a new RV to market. As a result, the markup on a new unit is designed to cover these costs and generate a reasonable profit. However, if a unit sits on the lot for an extended period, the financial benefit diminishes as the interest on the financed inventory accrues.

The Profitability Shift to Used Units

Contrary to popular belief, used RVs are often the most profitable units on the lot. The reason behind this is quite simple: the profit margin increases as the unit ages. A 3-5 year old 20,000 USD RV can actually bring more profit than a 35,000 USD new unit.

Used RVs are typically more cost-effective for buyers, making them a preferred choice. However, for sellers, the profit margins are more significant due to the lower overhead costs. Used units often have already seen significant depreciation, which translates into lower purchase prices for buyers. This factor also means that sellers can make a higher profit margin when selling used units.

Selling Strategies for Used Units

To maximize profits on used RVs, sellers often employ several strategies. These include:

Marketing: Utilizing marketing efforts to highlight the value of used units, such as their good condition and cost savings over new units. Creative Pricing: Offering packages or discounts to entice buyers to purchase the used unit at a higher perceived value. Customer Support: Providing comprehensive guarantees or warranties to build trust and increase the perceived value of the unit.

Sellers who effectively communicate the value and cost savings of used units can often achieve higher profit margins compared to new units.

Conclusion

Understanding the profit margins of camper sales is essential for anyone involved in the RV industry, whether as a buyer, seller, or investor. While new units may not offer the same profit margins as used units, there are still opportunities for significant gains in the right market conditions.

By focusing on used units and employing effective marketing and selling strategies, sellers can achieve higher profit margins and maximize their returns. The key is to balance the higher profit margins of used units with the need to maintain a healthy inventory of both new and used units to meet the diverse needs of customers.