"My dealer doesn't want my trade."
I've been hearing this one quite a bit lately from farmers stopping in to visit with their implement dealer to talk about their annual or every other year trade in and purchase of larger capacity tractors and combines. Here's a recent example from Ryan via a message to me our Machinery Pete Facebook page (www.facebook.com/machinerypete):
"Pete, what are your thought on late model used machinery values over the next 12 months? Buyers market? I have 2 year old S660 (combine) and 8310R & 8260R (tractors) that we want to trade in and the dealer doesn't even want to trade. $80,000 to boot for a 300 sep hours! Pricing exact same machine just a 2014 model. I think large late model equipment will get soft but small late model should hold there value. Thoughts?"
No secret there has been an issue with high levels of late model (1-4 year old) used combines on dealers' used lots going on 3+ years now. We've all seen the big summer consignment/dealer/online auctions featuring 10, 20, 30, 40+ late model combines for sale. No surprise those babies tend to sell a bit on the "soft" side. Simple supply & demand at work with these very large auctions and high #'s of any one item (late model combines). Harder to find that 2nd buyer. Mfg's rightly try to help the situation by squeezing the supply side, limiting how many new machines certain dealers can get to sell based on their competitive market share #'s.
But now late model large HP and 4WD tractors too?
Yep, since late Spring '13 I have been seeing more show up at auction and more sitting on dealers' used lots. Again, getting tougher to find that 2nd buyer. Now factor in the softer commodity price outlook going forward (lower farm income ahead), the uncertainty with the IRS Sec. 179 tax write off limits for 2014 (set to fall from all-time of $500K in '13 all way down to only $25K in '14) not too mention the potential for gradually rising interest rates and you can understand better why more implement dealers are offering much less on their customer's large late-model tractors and combines on trade this fall.
Quite frankly they (dealers) are a bit...I'll say apprehensive.
The farm implement biz is a great business but the risks involved (much the same as farming) have been skyrocketing with the rising cost of equipment. The bottom line for implement dealers is pretty simple......their business health is tied directly to the value of their used inventory. More particularly, how accurate their used valuations are. Not long ago a $10,000 miscalculation on any one piece of used equipment was a large gaff. Now? Try $40K, $50K, $70K...more?
...x's the 5, 10, 25, or 40+ large late-model units sitting out there on their used lots.
I'm not trying to paint any type of bleak picture here folks, just relaying current realities. Come along with me out to any auction around the country of late and you'll hear folks having this same conversation about softening values on large late-model used combines and tractors. But any statements trying to say that all used farm equipment values are falling would be flatly FALSE. Just check out my Facebook page and see the recent string of VERY STRONG auction sale prices for a wide variety of used equipment.
The common factor on those strong/rising auction prices? They tend to be on older (comparatively less $$ expensive) items in very good condition. When a new (fill in the ____) costs $200K, $300K, $450K....tends to make more folks interested in writing checks to acquire that super nice 6, 10, 15, or 25-year old item. Bunch of folks feel same way, it goes up for bid.....strong/rising auction values.
So a very interesting time indeed right now in the used equipment market. I suspect we'll once again see increased buyer interest & activity and holding to strengthening used values come the 4th Qtr. with folks viewing a possible last chance to grasp the large immediate $500K write off via IRS Sec. 179 write off.
Turn the page into 2014 and beyond.....we'll see.
But therein lies the true beauty of the "hard cash" auction sale price I've been compiling now for nearly 24 years....what's it worth? Put it up for sale and let's find out.