Don't sell for too little
"Don't do it Jim."
That was my advice Monday afternoon to a caller from eastern Iowa who called me up to ask my opinion on a machinery deal he was chewing on. Seems he had a nice 1982 JD 4440 tractor with 5,200 hours and a JD 566 round baler in good condition he was looking to sell.
He'd been offered $28,000 initially for the tractor and baler but was able to work with the buyer to up their offer to $30,000. Still, Jim's gut told him $30,000 could be a little light, so he gave me a ring.
Jim's gut was right - $30,000 wasn't enough.
Eight to 12 months ago I would have probably agreed that $30,000 was a reasonable offer for the 4440 and 566 baler. But as we all know, times have changed. Since mid-November 2007, used farm equipment values have jumped noticeably higher, making, in my opinion, $30,000 too light in this deal.
Here's the part I love. We don't have to guess on these deals or rely on our gut instinct. We can know what each item is worth without a shadow of doubt. Take Jim's 1982 JD 4440 tractor in good shape with 5,200 hours. I told Jim about a nice farm auction back on January 12, 2008, across the border in west-central Illinois. On this auction was a nice 1982 model JD 4440 with 5,109 hours.
It sold for $26,200.
Then I told Jim about the 1979 4440 with 7,025 hours (quad range) that sold last Saturday, February 23, 2008, on a farm sale in northeast Kansas. It sold for $26,500. Wow, so a 4440 that was three years older with 1,900 additional hours sold for $300 more one month later.
Bottom line: Used equipment values are RISING.
Now for the JD 566 round baler. On that same January 12, 2008, auction in west-central Illinois, a nice condition 1998 model 566 sold for $11,500. My Web site data shows the average auction sale price last year for 566 balers was $8,706, while the average dealer advertised price last year was $14, 944.
Now you see why I told Jim to walk away from the $30,000 offer. To get current market rate money for his 4440 tractor and 566 baler, the deal would have to be more in the mid $30K range.
I've been tracking auction sale price data for over 18 years now and honestly, I have never seen a time where this current pricing data has been more needed. I think about Jim. What if he sold his equipment for $5,000 less than it was worth? How good would that $5,000 look sitting in a bank CD, collecting interest, working for Jim's future? Or maybe to be used to pay down an operating loan balance?
Folks, times are very good for agriculture right now and that's wonderful, but that doesn't mean you should sell your equipment for too little or buy for too much. Don't do any equipment buying, selling or trading going off gut instinct on what equipment is worth. If you do, you're asking for trouble. Things are changing and changing fast.
Let's keep more of your hard earned money where it belongs, in your wallet.