MILWAUKEE, Wis. – Trying to rev up motorcycle sales in a depressed economy, Harley-Davidson Inc. is launching a program that guarantees the trade-in value of some Sportsters when traded for a more expensive bike.

Harley riders who either buy a new Sportster or trade in their recently purchased one between Dec. 26 and March 31 will get the bike’s original manufacturer’s suggested retail price credited toward the purchase of a qualifying Harley Big Twin or VRSC motorcycle.

It’s similar to previous promotions Harley has used to stimulate motorcycle sales through trade-ins.

The good thing about the program is it doesn’t diminish the brand’s value and reinforces used motorcycle prices, said analyst Craig Kennison with Robert W. Baird & Co.

“Of all the things that Harley can do to be promotional, leveraging the fact that its bikes hold their value well is a strong message,” Kennison said.

Showroom traffic at some motorcycle dealerships has slowed to a crawl in recent months as unemployment and recession fears have kept even the most loyal enthusiasts from getting new bikes.

One local Harley dealership recently said its sales were down 35 percent from a year ago.

It’s probably the leanest time Harley has faced since the company went public in 1986, according to analysts.

“My sense is, you would have to go back before then to find a more challenging business environment. It’s one heck of a downturn, and it’s getting worse,” said analyst Edward Aaron with RBC Capital Markets.

Harley dealers expect 2009 sales to fall 8 percent to 10 percent on average, according to a dealership survey by Baird.

The maker of Fat Boy and Softail motorcycles has cut production to match weakened consumer demand and has been cautious not to flood dealerships with bikes they can’t sell.

“We think it’s important that Harley produce the right number of bikes so that supply and demand are roughly in balance at the manufacturer’s suggested retail price,” Kennison said. “Up until last April, there were too many bikes in the retail channels, and some were selling for below MSRP. Harley said that wasn’t acceptable and is now producing closer to demand. The percentage of its bikes selling at or above MSRP has been on the rise.”

In the new program, riders who buy a 2008 or 2009 Sportster 883 or 1200 motorcycle, excluding the XR1200, have a year to trade it for one of the Big Twin or VRSC models and get the Sportster’s original manufacturer’s suggested retail price as the trade-in value.

Riders trading in a 2007 model year Sportster during the special promotion period also can get the MSRP back.

The value used for a trade-in will be the factory-delivered price, including factory installed options, regardless of the price paid by the consumer.

“The bike has to be in decent condition. If not, obviously you aren’t going to get the full retail price back,” said Todd Berlin, sales manager at Suburban Motors Harley-Davidson/Buell in Thiensville, Wis.

A 2007 XL883 Sportster had a suggested list price of $6,855 new and currently sells for about $6,175 in good condition, according to the guide to used motorcycle prices published by the National Automobile Dealers Association.

By comparison, the 2009 VRSC starts at $15,000. A 2009 Ultra Classic Electra Glide has a suggested retail price of $20,999.

Harley could probably afford to lose a few hundred dollars on a Sportster trade-in if it leads to the sale of a more expensive motorcycle with a higher profit margin.

“And for a variety of reasons, it’s healthy for Harley to have stable residual values” on used bikes, Kennison said.


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