What's a new one cost?
What's a new one cost?
Those five little words are a big driver with the current frenzy in the used farm equipment market. Yesterday (April 16, 2008) I attended a nice farm retirement auction in central Wisconsin with a good line of equipment. I bet I heard folks asking "What's a new one cost?" at least seven or eight times.
On the auction yesterday was a JD 260 skid steer. It was a beauty, with only 755 hours on it. Purred like a kitten when the owner started it up. About an hour before it came up for bid, I was standing near the lunch wagon, talking with a local guy who came to the auction hoping for a "buy" on the skid steer.
I didn't have the heart to tell him I thought there was no chance of that happening.
He asked what I thought it was worth. I showed him the auction price data we've compiled on JD 260 skid steers. We zeroed in on a 2001 model JD 260 with only 345 hours that sold for $14,000 at an auction in northwest Wisconsin, which was about at the top of this guy's hoped-for price range.
But that auction was on December 6, 2006.
Used equipment values have surged higher since then, jumping twice, first in mid-November 2007 and then higher again in mid-February 2008. I was guessing the JD 260 skid steer for sale yesterday would go more in the $17,000 to $18,000 range.
It sold for $21,000 (Three attachments sold separately for $550, $750, $1,375).
The soon-to-be disappointed bidder mentioned he had just visited his local Case dealer and that a new skid steer priced out at $31,000. There's the 'What's a new one cost?' echo that helps drive auction bidding higher and higher these days.
Another good example from the auction yesterday was the shiny JD 3975 forage chopper that sold with two heads. As the auctioneer worked his way over to the chopper, here's what the crowd heard, 'OK, boys, here you go, a beautiful chopper, what's a new one cost? And you all know that even if you wanted a new one, you couldn't get it for months and months. That's just the reality right now. Let's get the bidding rolling.'
It sold for $35,000.
I got looking through our auction sale price data on JD 3975 forage choppers. I saw back on February 1, 2003, a 2002 model JD 3975 with a three-row narrow corn head, in like new condition sold for $31,250 on a sale in east-central Nebraska. I also saw a 2004 model 3975 sold for $14,000 (no heads) on April 5, 2007, on a sale in northwest Minnesota before used equipment went nuts late last year.
Looking into the future, will used equipment values continue to remain so strong? I really think they will. The number of farm auctions will continue to be lower than we're used to and inventory levels on dealer lots will remain tighter than we're used to. And the price of new equipment?
I wouldn't bet on it coming down any time soon.