When it comes to the value of used equipment, there are two key questions: who decides the value and how do they decide? Figuring out the process or reasoning behind used values is probably the more important question to answer.
As an equipment dealer, you have to assess the worth of that piece of used equipment you’re taking in on trade. This cuts right to the core of running a successful farm implement dealership, doesn’t it? Sure, it’s great to keep that shiny new stuff cranking out the door. But even when times are good, maybe even when they’re great, you know how important it is to keep a close eye on the values you assign to all that used equipment you see sitting on the lot. You can’t afford to get caught with too much overpriced inventory. After all, interest rates won’t be this low forever.
So again, who decides? And how do they decide?
An outsider’s perspective. I got thinking along these lines after talking with a dealer I know. He mentioned that his dealership recently hired a sharp new salesman. This salesman didn’t come from the implement business, so they were throwing a lot of information at him and trying to bring him up to speed as best they could.
The topic at one point was trade-in values. The new guy listened, then listened some more. Finally he asked a simple question: "Who decides what it’s worth?" Like I said, this guy is sharp. He wanted to know who at the dealership decides the value and how they decide. Is there a specific formula? Or is it more of a "feel" thing?
I compile "hard cash" sales price data for a living and have been doing it for nearly 22 years now. Of course, I hope that our auction sale price data, updated on the fly every day from throughout North America, is a useful resource to help you and your team answer the "What’s it worth?" question. That said, I know and acknowledge that there is also a "feel" element in this equation.
The big picture. You know your dealership’s customer base. Hopefully, your sales force does as well. You have a sense for how quickly a proposed trade-in item will move and in what price range. But we’re all so darn busy these days, who has time to keep tabs on fluctuations in used equipment values? Better make time. In today’s machinery market, it pays to root out the answers to valuation questions.
On the following page, look at the auction prices I have compiled on John Deere 7820 tractors. I’ve selected examples from February 2005 to April 2011. See how they’ve gone up in value recently? That’s good information to know for your business.
To my way of thinking, having access to information like this can greatly improve the "feel" you and your sales staff bring to the "What’s it worth?" question. How do you decide?
Greg Peterson researches and analyzes auction prices. At his website, www.machinerypete.com, you can find databases of auction sale prices on 75 categories of equipment. Subscription information is available online or by phone, (800) 381-0423.