Let’s talk used combines. Yes, sales of new units have been strong–very good. Yes, interest rates have been and are at historic lows–very good. Yes, the federal government upped the Section 179 IRS tax write-off limit on business asset purchases (new or used) back up to record level of $500,000 for 2013–very, very good.
But you know the score. All your great effort and work pushing new combine sales to high levels over the past few years won’t mean much if you can’t get out from under the large number of late-model used combines sitting out there on the lot. Just as farmers are finding more risk, you too feel the increased risk involved with selling and taking in on trade higher priced equipment.
Remember the days of $5,000 or $10,000 mistakes on your trade-ins? Ah, the good old days. Now you know these potential trade-in mistakes can easily run $50,000 per machine, multiplied by the 20, 30 or 60 units sitting out there on your three, five or eight used lots. The dollars involved get huge fast.
This is all the more reason for your entire sales staff at each of your sites to be acutely plugged in to current used values. Identifying current used values means determining what it sold for yesterday and today. To not know the current trend line is to run in the dark with no headlights. Don’t do that.
Watch the numbers. Two out of the past three years, I’ve seen late-model used combine values fall from spring through summer. It happened in 2010 and again last year. I’m no betting man, but I think we’ll see the same in 2013. The oversupply issue is just too strong. Pick your favorite dealer listing website. Pick your favorite late-model used combine. See how many are listed.
Does that number freak you out? It freaks me out, and I’m not a dealer.
I’ve seen the number of machinery auctions fall by 60% compared to the number of auctions seen from 2000 to 2006. Even so, with hardly any auctions around, I saw 68% more John Deere 9870 STS combines sold at auction in 2012. Nearly 43% more John Deere 9770s sold at auction last year. Wow, those are eye-popping figures.
Check out the accompanying data below from the www.machinerypete.com calculator pricing tool, which focuses on John Deere 9770 and 9870 STS combines. See how the average auction price fell 9.1% on 9770s last year, from $179,724 to $163,301?
Now note how the average dealer advertised price fell only 1.5%, from $231,880 down to $228,495. That tells me that wholesale values were dipping much more than retail values. You’ll see the exact same pattern on 9870s. You must be aware of these value shifts if you want to accurately value your used combine inventory.
In 2009, average auction price on John Deere 9770 combines ran at 84.7% of the average dealer advertised price. Last year? That figure fell to 71.5% of the average dealer advertised price.
What will happen to late-model used combines values in 2013? I’ll be there to find out.
Greg Peterson researches and analyzes auction prices. At www.machinerypete.com, his website, you can find databases of auction sale prices on 75 categories of equipment. Subscription information is available online or by phone, (800) 381-0423.