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Machinery price tide is high

GREG PETERSON 04/05/2013 @ 10:16am Greg Peterson writes "Machinery Pete" column for Successful Farming magazine and appears on the Machinery Show on RFD-TV, talking about trends in the used equipment market

Auction prices are going up on good-condition used tractors early in 2013.

I’ve seen a steady chorus of rising values on good used tractors since the first week of January. That’s not a surprise, given all the factors at work: not many auctions around, strong farm income, and the escalating price of new tractors along with manufacturers’ ever-tightening production schedules.

One more factor is the fiscal-cliff agreement our friends in Washington D.C. made on January 2, 2013. Part of the agreement pushed the Section 179 IRS tax code immediate write-off limit for any business asset (new or used) purchased in 2013 back up to $500,000, where it had been in 2010 and 2011. (The writeoff limit had dropped to $139,000 in 2012.)

Gas on the fire

That certainly has put gas on the machinery-purchasing fire.

The evening of January 2, 2013, here’s what I wrote on my website blog: “We’ve been pedal-to-the-metal with used tractor values the past five years. Now I think we’ve just tied a heavy brick to the foot that’s on the pedal.”

I suspected there would be rising used tractor values early in 2013, and I was right.

A very good example of this trend is the 1981 John Deere 4440 tractor with 4,552 hours that sold for $47,500 on a January 19, 2013, auction in northeast Iowa. That’s the third highest auction price I’ve ever seen on a 4440. Plus, the tractor’s duals sold separately for another $3,500.

$114,000 for a 20-year-old tractor!

The best example of rising used tractor values early in 2013 is the 1992 John Deere 4960 tractor with 3,045 hours that sold for $114,000 on a January 24, 2013, farm auction in west-central Ohio. That sale was conducted by Schrader Real Estate & Auction.

That final bid clipped the former record-high auction sale price on a Deere 4960 by a mere $27,000.

Less than two weeks later, on a February 6, 2013, online auction in northern Illinois by auctioneer Mike Espe of Elburn, Illinois, a 1994 Deere 4960 with only 2,140 one-owner hours sold.

I’m often asked how online prices compare to traditional auctions. This sale would provide a good test case. My guess prior to the sale was that this tractor would not crack $100,000. Boy, was I wrong.

One hour before the 7 p.m. online bidding ended, the price was $91,500. Then it climbed to $100,000 as the end time approached and extended-time bidding ensued. The bidding went up to $102,000, then $104,000, then $106,000, and then $108,000. The final bid was $110,000.

The Bottom line

It doesn’t have to be green to bring good money. As it turns out, age and color don’t matter. If the tractor is in real good condition, it’s simply worth more.

Here’s one last example. Another new record sale price came on a February 15 farm sale in Iowa when a 1992 Case IH 7140 with 2,740 one-owner hours went for $69,500.

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