Much of life is timing—particularly when it comes to all things financial. Nobody wants to buy high then sell low, whether it’s a house, farmland, stocks or used farm machinery. The opposite is the Holy Grail we all shoot for—buy low and sell high. It’s much better for our balance sheets.
But it’s nearly impossible to time a financial buy/sell decision just perfect. The best any of us can do is come up with a sound long-term business plan and then stay in tune with what’s happening around us. Opportunities come when they come. It’s up to us to recognize them and be ready to act.
My ears were open in February at the National Farm Machinery Show in Louisville. I sensed farmers are pulling in the reigns, which is understandable given today’s profit pressure.
Since this past fall, I have been pointing out the many opportunities to upgrade into late-model used equipment. At Commodity Classic in New Orleans in March, I talked to several farmers who are paying attention and taking advantage of good deals. After the “U.S. Farm Report” live taping, Larry, a farmer from western Iowa, said: “Pete, I took your advice. I bought a 2012 combine in December from my local dealer. I got a good deal. This is a second machine for me, I still have my 2014 combine.”
While others are hesitant, keep your eyes wide open. The best time to get a good deal as a buyer is when others are pulling back.
To illustrate this, let’s examine a common used tractor with slightly more than 200 hp and now 15 to 20 years old—the John Deere model 8300, made from 1995 to 1999.
In 2004, the average auction price for a John Deere 8300 was $57,213 for what was a five- to nine-year-old tractor at the time. Now zip ahead five years to 2009. Obviously, the ag economy was in much better shape then. John Deere 8300 tractors were now 10 to 14 years old, yet their value went up 13.6% to an average auction price of $65,000.
More farmers felt like buying, so the tractors started to sell for more.
Values remained higher through 2012, when the average auction price on a John Deere 8300 was $63,183. At that point, values started to slip—down 5.2% to $59,920 in 2013; down 5.5% in 2014 to $56,640 and off a significant 12.2% in 2015 to $49,732.
Check out the data table below to view recent auction prices on John Deere 8300s. Note the sale prices of tractors with higher hours started to dip as low as $25,000. The nicest low-hour models netted very strong sale prices, such as the 1996 model with only 666 actual hours that sold for $95,000 at a Feb. 11, 2016, farm estate auction in south-central Nebraska. That is the fourth highest auction price I’ve recorded on a John Deere 8300. It garnered competitive bidding and a premium price because buyers were excited to find a very nice low-hour model.
In regard to timing, let’s look at a Sept. 20, 2000, dealer-only lease return auction in northeast Iowa. There were 22 John Deere 8300 mechanical front-wheel-drive tractors, with a 2,503-hour average, sold at that auction for an average price of $58,352.
So what would a nice John Deere 8300 with only 2,503 hours be worth today? It would be significantly more than $58,000. A 1997 model with 1,814 hours sold at an Aug. 18, 2015, auction in west-central Illinois for $83,000. A 1998 model with 3,654 hours sold at a Feb. 28, 2015, auction in northeast Kansas for $91,000.
It’s all about timing. As you’re able, be mindful about the deals in the used farm equipment market for good late-model used iron. Talk to your local dealer. Keep your eyes and ears open. It just might be time to be an aggressive buyer.
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