Machinery Pete: Why Used Equipment Prices Have Dealers Worried
After discussing used combine prices in last week’s AgriTalk segment, Machinery Pete dove deeper into what may be a troubling trendline during his weekly appearance on AgriTalk with host Chip Flory.
Pete is seeing significant downward pressure on used equipment values in the auction world, just as he witnessed in 2014 and 2015 – years that he refers to as the “buoy in the water” because of how pronounced the year-over-year drop in values was. Dealers are taking note.
“They’re…they’re worried,” he said. “Farmers are under tremendous pressure – the price of corn and beans – and dealers are under production pressure, particularly in the large ag areas here (in the U.S.).”
Peterson is not patching takes together with baseball card bubble gum. He has the data and the predictive metrics (backed by decades of used equipment market experience) to back it up.
He takes the average auction price on a particular model, and divides that by the average dealer advertised price on the same model. Historically, Peterson says, that number should come in around 71-76% in a healthy equipment market for dealers and buyers. His reasoning being that a purchase at auction should be roughly 75% or less than what one would pay for new, off the lot at the dealer. That seems fair.
When that number dips below 60% and even down into the fifties, that’s when dealers start to feel a bit of a squeeze, since at that point buying used is so much more advantageous to buying new (when price is your main decision point).
Case in point: a 2022 John Deere X9 tractor’s average auction price is just over $500,000 currently, while the average dealer price is around $740,000. That’s a big gap.
“The last 15 months, the average auction price has dropped. So, again, it’s (the market) recalibrating, it’s softening. But the difference here is, the price jump of new equipment in the last two, three years is unprecedentedly high,” Peterson says.
When auction prices are dropping, and dealer prices for new and even slightly used are chugging higher, well, you don’t have to be a rocket scientist to come out ahead in that market. It’s something to keep an eye on in the months ahead. Now, if only used car prices could go ahead and follow suit.
Pete’s Pick of the Week
This week Peterson shined his spotlight on a 2004 John Deere 8220 (2316 operating hours) that sold last Tuesday in Elvinston, Ontario, at a farm auction. Someone plunked down $141,713 for the now two-decade old machine. It’s the second highest auction price ever for that model, according to Machinery Pete data.
“It's a weird market now…the nice older stuff is what everybody wants,” he adds. “That newer stuff is depreciating big, but it still is not dropping as much as it did ten years ago. And again, maybe in two, three months, maybe our data will show that, but right now we're not quite there.”
Upcoming Auctions
Tuesday will feature two online used equipment auctions that Machinery Pete will be keeping his eye on.
There is a Marlin Herford online farm estate auction tomorrow, April 16, in Pigeon, MI, at 5:00 PM CT. More info here: bit.ly/Marlin1
If you're looking for used tractors, don't miss the Forrest Junction, Wisconsin, Spring Consignment Auction by C.A. Tesch Equipment. More info here: bit.ly/CATesch
Keep an eye on Machinery Pete’s Facebook page for the latest used equipment auction news. Follow Machinery Pete on Facebook.
Have a used tractor you’re looking to sell? List it on MachineryPete.com and reach millions of potential buyers.
