Despite a strong farm economy and robust equipment sales in most areas, there seems to be a growing used equipment problem causing concern. Some dealers see it as inevitable.
Not that long ago, used equipment problems arose when dealers traded in bad equipment that sat on their lots, sometimes for years. This came mainly from salespeople who bought equipment at inflated prices with little or no prospect of reselling it.
I called this "astronaut equipment" because it took up space; dealers called it "lot rot." Some were old or in poor condition. This equipment often ended up on the auction block. This problem seems almost benign when compared to the used problem today.
Today’s problem. Today, the problem is not "astronaut equipment." It is the almost-new piece the farmer trades in on a new one. Large tractors fall into this category, although the biggest
headache seems to be combines. These trades are not in poor condition, and many are only a year old. They are the result of roll programs where the original owner rolls into a new piece every year or every two years. Several factors contribute to this:
1. Manufacturer pressure to grow market share by selling new equipment. To do this, dealers must take trades.
2. The price paid for the trade. Dealers often have to pay a premium price because of pressure from the manufacturer, as well as competition.
3. The price of new equipment. In their zeal to gain market share, manufacturers provide generous programs on new equipment. They make it more economically advantageous for the farmer to roll from trade into new, shrinking the price difference between the two. Farmers who would normally buy used can get a new piece for almost the same amount with the new warranty.
4. Growth of a dealer’s stake in the trade, limiting the ability to make a reasonable profit.