Machinery Pete’s Used Equipment Value Index lights up
Used farm equipment values have been at an elevated level since 2007’s fourth quarter. Check out the trend line of my Machinery Pete "Used Value Index," which highlights the overall market rating going back to 2001.
This is my take on the current status of used equipment values on a quarter-by-quarter basis. My 1-10 score ratings (with 6 being normal-to-stable used values) are based on the mountains of auction sale prices my company has been compiling on all types of farm equipment since 1989.
Since 2004, the value of used equipment has been on quite an extended climb. In my 24 years of tracking auction sale price data, I’ve seen nothing like this.
The current trend for used equipment values blows away the last up cycle, which was from 1996 to 1998.
Of course, the bull run was followed by slogging years of "down" values from 1998 to 2003.
Then in 2004, we saw an uptick in the trend line of my Used Value Index overall rating. The price of steel shot up, sending new equipment prices higher and ushering in the "availability" factor.
Farmers who wanted to buy a new grain cart suddenly were told "sorry; we’re sold out" or that it would take six months to get a new one.
So what are the forces that have been driving used farm equipment values to these elevated levels during the past six years? Here’s my short list of key factors:
- Strong farm income for multiple years
- Increased price of new equipment
- Limited production of new equipment by manufacturers
- Scarcity of machinery auctions (down 55% to 60% versus 2000 to 2006)
- Low interest rates
- Tax policy: IRS Sec. 179 allows for immediate large write-offs of equipment purchases.
Tax implications have been such a key ingredient to this perfect storm of extended high values for used equipment. Notice the timing that used equipment values have increased during the fourth quarter of each of the past 11 years.
Why? Tax-motivated buyers are out spending money to get those last-minute tax deductions.
Since 1989, Greg Peterson has compiled more than 500,000 auction prices, which he updates daily at www.machinerypete.com. To read his blog and watch auction videos, visit www.agweb.com/machinerypete. Contact Peterson at email@example.com.