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Is now a good time to buy new iron?

Agriculture.com Staff 06/11/2009 @ 10:10am

For the last 3 years, the trend lines for tractor sales all followed the same basic pattern. So far, for 2009, that's been true, with one major exception: The line looks the same, only it's a ways lower on the chart.

Tractor sales have dropped this year, a sign, some say, of the tough economic times. According to the Association of Equipment Manufacturers (AEM), year-to-date sales for 2009 are around a quarter lower than they were a year ago. For the month of May, a total of 17,782 tractors have been sold, AEM data shows, compared to 24,068 at the same time a year ago. That's a 26.1% sales decline. Those numbers contribute to a 66,676 figure for total tractor sales for the year so far, down 22.6% from last year's 86,091 figure at this point.

But, a look at combine sales paints a totally different picture. In May, farmers bought 739 combines nationwide, compared to 513 for the same month a year ago. That's an almost 44% increase. And, year-to-date, 2,928 combines have sold compared to 2,206 by this time a year ago. (See more sales data from AEM)

The economic downturn has clearly reached into the farm machinery market, but that doesn't mean it's standing between you and new iron, farmers say. While it may seem too heavy a lift to bring new equipment onto your farm, it all depends on how you do it, says Agriculture Online Machinery Talk member rrustydawg.

"I think the key is to not trade up in one giant step," he says. "$100K to $150K will buy some excellent used iron, and you can use it for 3 or 4 years and probably only drop the resale/trade-in value by 25%. Then, if you want to get some newer paint, you just bump up again.

"Personally, I love low-hour used iron. Great value as long as you are willing to do the extra maintenance."

Others say the economic downturn that's thought to be the culprit of lower sales actually could entice more sales. It's all about how you write off equipment depreciation, says Machinery Talk member Pupdaddy.

"In this economic environment, we have what may be possibly the best time to buy new equipment that we've ever experienced. If you buy something, you can depreciate virtually all of it against your income in the first year," he says. "On top of the Section 179 deduction that you can take this year on either new or used is another 50% reduction against your income if the machinery is new.

"I'd run a pencil over those figures this year, and I'm thinking I might be buying a few necessary long-term usage items even if I have to finance them."

And, if that latter point becomes a reality for you, talk to your dealer, adds another Machinery Talk member. They may be just as hungry to sell the machinery as you are to buy it right now.

"Dealers have special programs which you need to keep an eye out for, like special financing on late-model used combines," adds Iron 9681.

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