Music Trade Review

AUG UST 11. 1923
THE
MUSIC
TRADE
REVIEW
5
Selling Cost the First Depreciation
Plan of Automobile Dealers, by Which Cars Are Considered to Have Depreciated 25 Per Cent. Immediately
Upon Sale, That Figure Representing the Sales Overhead, Applicable to Conditions as They
Exist in the Trade-in Situation in the Piano Industry
The automobile d ea ler at the presen t time has
hi s trade-in problem jus t as has the piano dealer,
a nd it is a prob lem that is becoming increas­
ingly scrious w ith t h e grea t infl u x o f n ew cars
on th e lIl arket eac h year. Contrary t o s tate­
m e nt s th a t ha ve bee n made in the piano trade ,
the automobile indust ry has no ge ne ral sys t em
of allowances on us ed cars fo r th e g uidan ce of
its llle'11bers, but s tr e nnous efforts are being
put forth to develop and put into effect s uch a
schedule as a dir ect means for self· protection.
In vicw of th e attention th at has been given
to the plan for a depreci a ti on schedule on used
pianos, which has been for some time past re­
ce iving the attention of a comm itt ee of the Mu­
sic Industri es C:hanlber of Com merce headed by
C. Alfred Wagner, and was presented for con­
s ideratio n at the conventions in June, it is be­
li eve d that a d epreciation schedule for used cal'S
d eve loped by Clinton B. Amoro us, an automo ­
hil e man of New York, and prese nt e d to the
motor indu s tr y, s ho uld be of interes t as indi­
cati n g th e simi larity be tw ee n th e problem of
the autom o bil e dea le r and the piano retailer.
The pl a n as advanced b y \1r. Amoro us n ut s
ll,ed car d eprecia ti on on a fixed ' scale and it
has the adva nt age of dividing the scale into
monthly period s . It is a plan which seems as
!ikely to b e useful to the small dealer with onc
or two salesme n, or even to the dealer who is
his own salesman, as to the big city organiza­
tion with a dozen or more men on the sellin g
s taff. It is a p lan w hich might be employ ed
by a ll th e dealers of a ci ty, acting through th eir
associa ti o n, or by a n indiV idua l dealer. It is a
plan which provides a d efin ite method o f de­
preciating u sed cars and also pro vi des wha t
its spon so rs d ecla re is a lo g ica l, plau s ibl e s tory
to tell th e new car pros pect see king t o turn in
his old car.
Und er th e plan, which severa l New York
deal ers are trying out and whic h is being co n­
sider ed as an assoc iation plan b y th e Automo­
bile Mercha nt s' Assoc iation of New York, a ca r
is d epreciating 25 per cen t from list price as
soon as it is sold. This 25 per cent is the sellin g
cost, including the d ea ler's overhead, direct sell­
in g expense and profit. The car is depreciat ed
an additional 2 per ccn t per mon th for the first
year, 1 per cent p er mon th fo'r the next three
yea rs, and 0 per (e nl per month for t he next
two yea r s, whe n the car arrives at junk valu e.
a t th e ," nd of s ix yea rs. In the case of some
cars the period ca n be sQ,q~!-ened to four yea!';;;
o r even thr ee o r two, if the' d ealer u'si-n g th e'
plan d es ir es. Dep r ec ia ti on work s out li ke thi s
on a $1,000 car:
Ho w Depreciation Is Figured
L ist pri ce ...... .. ...
$1,000
Valu e a ft er sa le­ 25'/o ($250) deducted
for se llin g expe nse . ..
750
\ 'a lu e a t end of fir s t year-12 months at
2% per month, o r 24% ($240), dedu c ted
for use of car
. . . . . . . . . .
510
Va lu e at end of secon d ye ar-12 months
at 1% per month, or 12% ($120), d e­
ducted fo r u se o f ca r. . . . . . . . . . . . .
390
Va lu e a t en d of thi rd year-12 months at
1% pe r 111onth, or 1 2 for u sc of car .. .. .. ·.
270
Va lue at en d o f fourth yea r-12 month s
at 1% per month, or 12% ($120) d e ­
du c t e d for use of car. . . . . . . . . . . . . . . . . .
150
Value at en d of fifth year -12 months at
0% pe r month , or 6% ($60) deducted
for u se of car. . . . . . . . . . . . . . . . . .
90
Va lue a t e nd of s ixth year-12 month s at
/ -:;% pe r 111onth, or G% ($60), brin g ­
30
ing car to junk \'aluc ............... . .
\Vhilc spo n SOrs of th lO p lan do llOt c1ailll that
the percent ages arc necessarily correct, it w ill
be not ed that a year -o ld car is depreciated 25
plus 24 per cent, or 4<) per cent, Ivhich is not
far from th e fi~urc used in se veral of the "book
value" or ll1aXilllU1l1 a ll owa nce plans in op era­
tion in a nunl.ber of cotllll1unitic,. A two-y ea r­
old C:H is ciepreciated 2.1 pili, 24 pIllS 12 per
cen t, or 61 pcr cent, al,;o approx illlatin g; SOIllC
0 1' t he "1.lO·ok va lli e" depreciation plan'.
Monthl y Depreciation an Advantage
The plan offers, among ot h ers, this ad va nta ge
ol'e r t he "book va lu e" arrange ment s:. The lat ­
t er p lans in most cases list ca rs by ye ars, th at
is, a 1922 ca l' of a cer tain make and model has a
lis t ed va lu e and there is no a llo wa nce for th e
fact tbat the ca r lllay h ave been bought ear ly
or late in th e year. It may have been run a
flill year o r on ly s ix mont hs, but its book valua ­
ti o n is the sa m e. The proposed New York
IJian d ep rec iates tile ca r month by rnonth, recog­
nizin g, for instance, in.the case of a $1,000 car
a $20 a mon th or $120 difference in valu e be­
tw een a ca r s ix months old anrl one twelve
IllOntho o ld, wh ile there is a differenc e of $10
a month , or $60, be t wee n a car a year and ahalf
:Ind o ll e t wo yea rs o ld .
SpoJl sors of the pl a n c la im fo r it three pr in ­
c ip a l adva nta ges :
I-Th a t it providf'S a definite method of de­
preciating used car va lu cs w ithout r esorting to
maximum a llo wa nc e a rrangements o r to aver ­
aging of use d car sa les report s, which arc not
always acc urat e. With such a plan, th ey s ta te,
sa lesmen ca n put a definite valu at ion o n a used
car offered in trade without callin g in an ap ­
praiser or eve n seeing the car, the va lu at ion,
of co u rse , being based on a car in good oper ­
at in g co ndition and subject to modifi ca tion if
la ter inspec tion establishes the need of repaint ­
ing, install a ti o n of new eq ui pment or parts or
other extens iv<:! r eco nditi o nin g. D ealers w h o
have tri ed the plan On a number of prospects
report that it h as bee n poss ibl e for th e ir sa les­
men to go throu g h their se Ilin g talk witho ut
calli ng in a lIs e d car :1 ppraise r ; th e sa lesman
in each: case has been able to conclude the
transaction, putting a definite trade-in value on
the used car, subject to possible modification
dter inspection by the u s ed car department.
A ' Reasonable Story for the Prospect
\'2-That it furnishes an easily told, reasonabl e
s tory to t el! the new car prospec t seeking to
tra d e a used ca r. A good many d ea lers h ave
f6 1.i'nd it difficult to convinc(-' p'rospec t s th a t a
. " bo o k valu~'.'-'&obP,X a national or local associa ­
tio ll on hi s used ca r is a r ea l mark e t va lu e. The
prospect wa nt s to 'know how th e " book va lu e"
was arrived a t , w h o fixed it, and a sks ot her
quest io ns so metim es cmbarrassing to a n swe r
J 'articu larl y have pro.spccts rc vo lt ed at va lu es
h~ed und e r maximulli allowance arrange1l1ents,
provided they knew lh at , u ch a rran gements
e>.. iste d. The proposcd NeVi York plan, its pro­
po ne nts c laim, cnables th e salesman to work
o ut the d ep reciation lInder th c cyes of the pros­
pect, cx plainin," that thc 'c llin g cost o f 2S per
cent is s mall in cOlllparison 'w it h thc SIl, 100 a nd
cI'cn l~() 1'('1" cenl gro,;s profits ill SOli lC lines
ot b usi ness; that thc 2.; per c e nt in c lude s all
t he d ea ler's sa les, se r vice a nd oyerhea d expense~
and hi s ve r y s mall nc t pr o fit ; then exp la inin g
t hat 2 per ce nt a month " re nt" t he fir st yea r,
1 pe r ce n t the ne x t thre e years and 0 per ce nt
the next t wo yea rs ce rt a inl y is a reaso na bl e
cha r ge for thc usc of th e ca r, much less than
th e ow ncr woule! have had to pay if he had
C;OllC o ut a nd rcntc (1 tile car. It i s a lso pointed
Ollt th;1l a ,.;llc"lI;lll III ;c; llt s upp ort the deprccia­
lio ll figures by stating that thcy follow closely
th e ac tu al sa le prices of used cars ol'er a con ·
s id erable perio d of yea rs.
Would Discourage Exaggeration
3··-T ha t it points o ut to pur c ha sers that they
l11u st expect d e prec iatio n of th e ir ca r s, j ust as
t hey accep t as a matter of fa c t d e prec iation of
lll ac hin ery, f urnitur e, c lo thin g and eve r y thin g
e lse that they bll Y. Its sponsors ur ge that wide
usc o f the plan wou ld ovcrco m e th e troub le­
some cond ition that is created by some sales­
lIlen telling buycrs that "this car will be ju st
as good two years from now." It would help,
th ey say, to put the motor car wher e it belongs,
as a well-bu ilt piece of machin e ry, \",ith many
qu a lities of durahility, but certain to depreciate
s teadily in va lue, like any other piece o f ma­
ch inery.
An Interesting Point for Piano Men
A featur e of the s uggested p la n th a t sho uld
p rov e of parti cu lar int e res t to t he p ia no me r- .
c ha nt is that a s soon as th e car is so ld it i111­
IIlediat e ly depreciates in va lu.; 25 per ce nt to
cove r the sales expense and that definite ini ti a l
pe r cen ta ge is the basi s for building up a ge n­
c:ra l depreciation schedule based up on the period
in which the car had been us ed.
T hi s is a point that ha s apparently been lost
s ig ht of in the piano trad e and mig ht we ll be
g ive n consi deration in any schedu le of a llow­
a nces for depreciation that is cons idered in the
futu re. The piano deal er can take 25 pe r cent,
o r $400, from the pri ce of a new $2,000 gra nd
for hi " sa ks expe nse, and then fi g ur e the de­
prec iation of th e in s trum e nt accor din g t o th e
len g th of usc. The problem of ha ndlin g thc
trade-in wiIl be considerably simplifi e d, for th e
initial sales expense is somet hing th at ca nn o t
be recov ered by any ordinary met hod o f r('
se lling the used in str um e nt.
The fact that th e a ut omobile plan calls for
t lte fig uring of depreci atio n on a month ly basis,
whereas pianos are fi gur ed on a yea rly basis,
is unimportant, but conditions und e r whic h the
pia no and automobile operate are materially
different.
ANNUAL OUTING IN PORTLAND
Employes of Portland Branch of Sherman, Cla y
& Co. Have Real Family Picnic
PORTLAND, ORE., Au gust 4. Sh erman, Clay & Co.,
retailers and whol esa lers, recently h e ld their an­
nual picnic on the b ank, of th e b eautiful Gales
Creek. Employes and th eir fami li es an d a few
frie nds made up a joll y caravan o f over one
hundre d, who left th e .< tore in private motors,
bro ught up at th e rear with the big She rman,
Clay & Co. tru ck, la d ene d with "ca t s," a port­
ab le Yictrola a nd a ll th e late s t Vic tor hits. J H.
D und ore, re ta il manage r, a nd famil y, and Elmer
Hunt, who lesa le Illa nager, and hi s fa mil y, were
a ll there a nd when th e ro ll was call ed eve ryo ne
con necte d with the firm in any s hape o r form
answered "Here. "
Gales C r eek is sit uated
twenty miles south of rortland and p r oved an
ideal spot for a big "falnily" picn ic. Baseball,
races, garncs and S \\ · i1l11l1il1g \vere 011 (ap.
O. L. AARON GOES INTO BUSINESS
PrnSIl URG H, P A., A ugust 6.· D. L. Aaro n, who
for the pa s t four years has been buyer and
mana ge r of th e p ia no departme n t of the Kauf­
man Departme nt Store, ha s a nnounced that h e
wi ll resi g n fr o m that pos ition o n Septembe r 1
to enter bu s in ess for him self, w ith o ffice s and
5ale5roo111s at 708 1'ellll B uildin g , that r it y.