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Dealing with Dealer Asking Prices

Machinery Insider 03/18/2014 @ 11:13am The Successful Farming/Agriculture.com Machinery Insider is your source for all the latest auction price data and analysis on the used farm machinery marketplace.

On a recent trip to a machinery sale to shoot segments for the Successful Farming Machinery Show, I noticed a curious thing driving by dealers’ lots. They were full of used equipment. Specifically, they were inhabited with far greater numbers of late-model machines than they have been over the past several years.

This population boom got me speculating about late-model machine values on dealers’ lots.

Sales of new equipment have been brisk, to say the least, the last several years. Thus, agriculture has been building a backlog of inventory with a good number of late-model, low-hour machines sitting in farmstead sheds and on dealers’ lots.

Lower revenue prospects this year would normally dampen enthusiam to buy new inspiring some farmers to seek lower-priced used machines. And this would have driven up the price of used equipment. But based on recent lower price trends for premium equipment selling at auction and all those shiny used machines on dealers’ lots, I suspect the purchase of all machinery – both new and used – is currently depressed.

If that’s the case, the opportunity exists to shop dealers’ lots and to look for deals. Dealers will want to liquidate used iron inventory this spring, particularly on primary tillage tractors. So now is a good time to exercise those dealer dickering skills that have been lying dormant these past several years.

To test the question of dealer inventory, I went to John Deere’s MachineFinder.com and searched for a late-model tractor that has been a hot seller the last three years, the John Deere 8335R. Up on my computer screen came page after page of 8335R listings, nearly 550 entries when I conducted this search in mid-February.

Next, I set about adding up those prices, breaking them down by regions of the country and by age of tractor for each model year.

Breaking down the numbers

When analyzing all these numbers, the one thing that jumps out is those prices in the Midwest.

Average dealer asking prices in this midsection region are higher than the rest of the country. And that’s not due to a lack of inventory, as has been the case the last several years.

The vast majority of the 8335Rs up for sale are sitting on Midwest dealers’ lots. In fact, there are nearly twice as many 8335Rs in the Midwest (361 at the time of my search) than all the other regions of the country combined. That is testament to the buying power of $7 corn in the past.

Low-hour leader

So why are asking prices higher in the Midwest if that area has more tractors?

The simple answer is that’s where the largest percentage of low-hour and fully equipped tractors reside.

Taking a spot check of the 2013 machines in this region, I discovered an average of 413 hours on their tachometers.

Compared with the rest of the country, the average for 2013 models was 719 hours.

This certainly makes sense, as farmers in the Midwest have been turning over tractors on a short-term basis the last several years to sidestep paying taxes while capitalizing on accelerated depreciation and rapid write-off opportunities of the tax law.

As mentioned before, Midwest machines often come fully loaded. The vast majority of these tractors are equipped with premium cabs, front and rear duals, high-intensity discharge lighting packages, Active Command Steering, five or six hydraulic outlets, and infinitely-variable transmissions. (See the story below left on IVT price averages.)

Farmers in the Midwest have certainly been buying their tractors fully decked out the past three years.

Now combine a lot of 1-year-old, low-hour, fully loaded tractors in one area, and average prices are bound to be higher.

Still, I suspect these values are on the soft side. Use the table above as a guide for averages if you’re shopping for a 8335R. If the dealer steadfastly keeps to a high asking price, quote some of the figures off that chart. You may get the tractor cheaper and, in the process, impress the dealer.

What about auction sale tractors?

You’ll find numbers on recent auction sales of 8335Rs in the Pocket Price Guide on the next page.

It’s not surprising that there are only three 2013 models that sold at auction. That is because 1-year-old tractors predominantly find their way to dealers’ lots as a result of trade-ins, where they are coveted for their quick resale potential or private treaty.

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