Old tractors, high prices
Used farm equipment values have been going up, and I have numbers to prove that statement.
I dug into my auction results database of sale prices at www.machinerypete.com, and I uncovered auction sale price data on John Deere Models 4455, 4450, 4440, and 4430 tractors over the past 15 years.
I wanted to isolate sale price data on tractors that were 20 years old at the time they sold at auction. I believed values on nice 20-year-old tractors had really escalated, and my numbers proved they certainly had gone up. In fact, the data showed prices had tripled in value.
Check out the table of auction sale prices at left. Pay special attention to the Year column, which shows the model year of the tractor sold. Also note the Date column, which shows the month and year that particular tractor sold at auction. Each tractor listed was 20 years sold.
Now shift your focus to the Price column. Look at the two bottom entries of the table. Note the auction sale prices listed for nice 1976 John Deere Model 4430s that sold back in 1996.
One of those tractors with 3,768 hours in good condition went for $18,450 on a sale in south-central Minnesota.
The other, a 1976 Model 4430, was in excellent condition with 3,600 hours. It sold for $19,000 on a sale in north-central Iowa.
That's a shade under $20,000 to get your hands on a very nice 20-year-old John Deere 4430 back 15 years ago.
Now look at the very top of the table. Notice the 1991 John Deere Model 4455 two-wheel-drive tractor with 4,183 hours rated in excellent condition that sold in March 2011 on a sale in southwest Iowa. It sold for $60,250. That is the new record-high sale price I've seen on a two-wheel-drive Deere 4455 tractor.
That price is also just over triple the value of what nice 20-year-old Deere 4430s were selling for 15 years ago.
The interesting thing about auction sale prices is they simply reflect a mix of current market conditions and how buyers are feeling. So when I point out that $60,250 is the new record-high sale price on John Deere Model 4455 two-wheel-drive tractors, I'm not saying the buyer paid too much. That person was bidding against other motivated buyers, and $60,250 is what it went for.
So why have values on nice 20-year-old tractors tripled in 15 years?
There are a great many factors, chief among them the continued rising cost of new tractors.
As I travel the country, I can't tell you how many different auctioneers have utter the phrase when the bidding slows, “Boys, what's a new one cost?”
Attractive older tractors
I've also seen similar appreciation in used values on other tractor makes.
For example, on a farm auction in east-central Wisconsin in March 2008, a 1988 Case IH Model 7120 front-wheel-drive tractor in excellent condition with 3,200 hours sold for $57,000. That was a new record-high auction price on 150-hp. 7120s.
Imagine, a 20-year-old tractor selling for $57,000. Compare that to the 20-year-old 1982 International Harvest Model 5088 tractor (136 hp.) with 2,759 hours in good condition that sold on a southwest Illinois auction back in February 2002 for $18,500.
Once again, that illustrates how values have tripled on very nice 20-year-old models.
We all know any market can go up or down. As a farmer, you're used to thinking of the commodity, the stock, and the real estate markets as fluctuating markets. The same holds true for the tractor market, as the same principles are at work.
What the future holds
Will used tractor values continue a steady climb? Yes, particularly if a couple conditions remain the same.
Farm income has to stay high, and equipment manufacturers must continue to tightly control production with gradually increasing prices on new tractors models.
Most likely you won't have to worry too much about the rising price part of that last condition. The move to Tier IV diesel engines (which cost more due to the addition of emission-control technology) should take care of that.
Greg Peterson is publisher of www.machinerypete.com, which tracks auction prices on all types of farm equipment, plus free dealer and upcoming auction listings. A one-year online subscription is $69.95. A one-week subscription is $10. Read more in his weekly column at www.agriculture.com/machinery.