Used green 8400s
Is used equipment worth more? Or is our money worth less?
I've heard the inflation/monetary devaluation point brought up over the years as I've written, spoken, or blogged about rising used farm equipment values.
Recently, I wrote an online blog post talking about rising values on used tillage equipment. I listed a number of recent examples, including an IHC 490 20-foot disk in just fair shape selling for $5,600 on a May 26 auction in northwest Ohio.
My post got this reply: “No, Machinery Pete, the equipment is not worth more. It's that dollars are becoming worth less each year. With runaway spending in our government, you can expect an increase in dollars to purchase tillage and everything else each year.”
I emailed the gentleman back, and we had a nice, friendly chat. I certainly understood his point. We found agreement in our shared hope that our leaders will begin to work together to tackle our nation's financial problems, for the sake of our kids and their children down the road.
There's no question that any given market – even the used farm equipment market – is affected not only by purely economic issues, but also by the heavy influence of political issues.
The following economic issues have worked in recent times to foster rising used equipment values:
• Strong farm income.
• Rising price of new equipment.
• Availability issues with fewer auctions and tighter production of new equipment.
But it's also true we've been living the last few years in a time of cheap money. Very cheap money.
Raise your hand if you remember what it was like to pay 19% when you bought a tractor back in 1980. There is just a little more incentive to buy machinery today with 0% or super-low interest rates, wouldn't you agree?
And let's not forget the effect the rising Section 179 tax deduction limits on business assets purchased (new or used) over the past decade.
Back in 2002, you could write off a maximum of $24,000 of that purchased asset against your farm income. By 2008, the deduction limit had risen to $250,000 on up to $500,000 in 2010 and 2011. All these various economic and political factors matter.
So here I am, the scorekeeper, tracking all this auction data on 70-plus categories of equipment from over 800 auctioneer contacts around North America. That's over 500,000 sale prices compiled over the past 23 years. My facts and figures show that used equipment values have been rising.
Record Prices for Deere 8420s
A record price was set on a John Deere 8420 tractor at a west-central Iowa sale on February 25, 2012. This 2005 model with 1,600 hours sold for $147,000. The third highest price occurred May 25 when a 2004 model with 2,675 hours sold for $141,000 in North Carolina.
Just look at the John Deere 8400 tractor prices featured above. All the tractors listed sold over the past 10 years for $75,000 or more. From 2002 to 2007, only five sold for that price. From 2008 through May 2012, just 15 tractors sold for $75,000 and up. Pay particular attention to the 1998 model with 2,200 hours that sold for $110,000 at an auction sale in northwest Ohio.