Used equipment values rising: A ‘perfect storm’

SALEM, Ohio – It’s a buyer’s market and a seller’s market – that is, if you’re in the used farm equipment business.
And these days, even with decent crop and milk prices, who isn’t?, asks one expert who has made it his livelihood to track machinery prices across the country.
Greg Peterson says current equipment values are wowing farmers, dealers and auctioneers nationwide with steadily climbing prices – sale prices often higher than what sellers paid for the piece years ago.
Deere season? It’s prime season to trade in the old, consign it to auction, or look for something new, Peterson says.
Traditionally, Thanksgiving through early March is the best time to sell, since harvest is in and most farmers know where their money is at, he added.
“What farmer doesn’t have an old something out back in the weeds he could stand to get rid of?” Peterson asks.
“Now is the best time ever to sell extra pieces off the farm,” he said, noting this year has the best used equipment market he’s seen in 15 years.
If you’re getting ready to buy or sell, hold on to your hats: The numbers you’ll find may amaze you, Peterson said.
Appreciate it. A rule of thumb is to assume any purchase – tractor, combine, truck, computer – is worth less every year, generally depreciating between 8 percent and 12 percent.
But the recent phenomenon is the exact opposite, according to Peterson.
“We’re seeing 10- to 12-year-old combines worth $15,000 more than what a lot of guys paid for them,” Peterson said.
And that trend is pushing many farmers back into the market for quality used equipment, he said.
“Last year, commodity prices were up and there were fewer guys selling out at auction. Now any auction with late-model equipment stands out like a sore thumb,” Peterson said.
Combines. Combine values are an easy target in the buy-sell game. Many manufacturers offer what Peterson calls a ‘lease game,’ where farmers roll over to a new machine every few years.
Those programs are popular but are being phased out to cut company losses, Peterson said, and the number of used combines at nearly any dealer from that program is “ridiculously high.”
“Now there’s this huge bubble of used equipment out there ripe for the picking,” Peterson said.
Peterson calls a 1991 John Deere 9600 combine a mild example.
His figures show that machine’s average resale value in 2003 at $29,250. In 2004, the same combine is bringing $33,250.
That’s a 13 percent jump and a big deal, especially because it’s appreciation instead of depreciation, Peterson said.
Real numbers. The figures for a 1996 JD 9600 are a little more startling.
In 2003, the machines brought an average $46,294 at auction nationwide. In 2004, averages are at $54,571, an increase of nearly 18 percent, according to Peterson.
“It’s the perfect storm, buying and selling used equipment right now,” he said.
Peterson’s figures are actual sale values reported by a network of farm dealers and auctioneers across the country.
He analyzes the figures from Rochester, Minn., and reports them nationwide on his Web site, www.machinerypete.com.
Most tools on the site are available with a paid subscription only. Some samples are available free.
Here’s why. The trend has a lot to do with wisdom passed down through generations of farmers: When the new price is too high, look for used.
And now, with a variety of international economic factors on the table, including skyrocketing prices for steel and other inputs, it only hurts worse to buy new paint.
Peterson’s figures show significant price hikes across all sections of used farm equipment: cultivators, skid steers and tractors are all up 15 percent to 25 percent over previous values.
For example, the John Deere 535 baler widely popular from the mid 1980s to early 1990s jumped in value from $7,600 to $8,350 since last year. That’s almost 10 percent more, Peterson points out.
Case 1845C skid loaders sold for $8,447 in 2003 and this year are averaging $9,162, sliding upward 8.5 percent.
A 42-foot Timpte grain trailer selling for $13,800 last year is now demanding $15,700, a jump of 14 percent.
Values can be even higher on machinery in good condition or with few hours.
Shop around. Peterson’s analysis says there’s more used equipment on the market today than at any point in the past 15 years.
Retiring farmers or those looking to sell out can capitalize on this trend.
“In trading, buy or selling, be careful,” Peterson warned.
“We’re used to selling something for less than we paid for it. But that’s not always the case.
“You can’t go on what your buddy sold his combine for last year and think you’re getting a good deal. It could mean a difference of $8,300 in your pocket,” he said.
“This isn’t what we’re used to, but it’s reality.”
(Reporter Andrea Myers welcomes reader feedback by phone at 1-800-837-3419, ext. 22, or by e-mail at amyers@farmanddairy.com.)