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Buy a Tractor Today that Gains Value
There is a great opportunity this winter that hasn’t come along in two decades and won’t likely occur again for another 10 years – if that.
The used market is providing the ability to buy a late-model, low-hour, and large-horsepower (250-plus hp.) front-wheel-drive (FWD) tractor today that has the potential of being worth at least as much as you paid for it (if not more) in a couple years from now.
If that sound preposterous, just recall the combine glut of the mid-1990s. In 1995, the used market was overloaded with lease-and-roll combines. “You could buy a combine that summer, run it for a year, and sell it for as much as you paid for it,” recalls Mark Stock of Big Iron Auction. “In essence, those farmers who bought then got free use of a combine for a year.”
The situation today with late-model, high-horsepower FWDs is even more pronounced than in 1995. Creating this phenomenon are the following factors.
- This particular range of tractors is being sold at greatly discounted prices as dealers work to reduce huge inventories of used tractors.
- Sales of new tractors in 2015 were dismal, and 2016 won’t likely be any better. This trend reduces the supply of used tractors in the future, which will drive up values.
- Many of the high-horsepower tractors sold up to 2014 represent the last such machines equipped with pre-Tier 4 diesels. In the case of John Deere tractors, this would represent the pre-DEF (diesel exhaust fluid) models. These particular tractors will be highly sought after by farmers prone to buying 5- to 8-year-old tractors in the future when they start looking for replacements for their older machines.
That same trend is certainly in play with pre-2007 semitrucks (the year over-the-road trucks had to meet Tier 4 standards). They sell for 20% to 25% more today.
Sweetenening what is already a great deal in the making is the fact that many dealers are also offering no- or low-interest financing on late-model large tractors in order to move huge inventories of machines. For example, many of the dealers listing large-horsepower tractors on John Deere’s MachineFinder.com were promoting 0% interest load for three years or .09% for up to five years. If financing isn’t an option, some dealers are now offering to lease late-model machinery.
Extended warranties are extra value
If those incentives don’t clinch the deal, then consider that almost all late-model large tractors on the market today are being sold with extended warranties. The certified used programs being offered by all manufacturers tack on an extra year of power train coverage on tractors that have been inspected and maintained by participating dealers.
Add it all up, and the opportunity exists for you to buy:
- 2014 tractors that have low hours of use.
- Tractors with power trains fully covered for up to three years.
- Tractors that are financed with zero interest up to three years.
- Tractors that could be sold for their purchase value two to three years down the road.
I was alerted to this situation after interviewing a panel of equipment resellers for my analysis of used equipment values that appeared in the December 2015 issue of Successful Farming magazine (“Steel Deals,” pages 28-32). Time and again, these marketers mentioned that the best deal in 2016 would be large tractors. “There are tons of FWDs on the market right now,” notes Scott Steffes. “The industry needs to get them sold to improve purchases of new tractors in the future. That’s why dealers are offering such good deals now.”
Huge fleet of popular tractors for sale
The other observation these resellers made concerned the surprising number of low-hour FWDs available. “There were large numbers of these tractors rolled over by farmers after one year’s use from 2012 to 2014,” says Ritchie Brothers’ Rick Vacha. “When commodity prices started to slump in 2014, farmers stopped rolling over tractors, and the existing stocks of used tractors began to accumulate in dealers’ lots.”
Take the focus of this issue’s Pocket Price Guide, the John Deere 8310R, as an example. The listing is restricted to only the lowest-hour 2014 model year tractors available. Take a look at all the tractors with fewer than 300 hours.
The 8310R was the most popular model of John Deere’s FWD series, the 8300R tractor line. Dealer listings of these tractors on MachineFinder.com at press time included 468 model 8310Rs, 371 model 8335Rs, and 403 model 8360Rs for sale. That’s 1,242 model 8300Rs up for grabs.
Now consider this fact: One out of every six used John Deere row-crop tractors listed on MachineFinder.com – regardless of age or model – is an 8300R series machine. That’s a whole lot of late-model machines clogging up dealer and auction lots.
Hours, features still affect prices
While the abundant inventory of large FWDs is depressing general values, the resellers consistently point out that well-equipped, low-hour tractors will still fetch premium prices relative to the general market.
That is certainly reflected in the dealer asking prices listed in the Pocket Price Guide. Tractors equipped with features such as infinitely variable transmissions, front suspension systems, and duals all around generally carry higher asking prices.
By Dave Mowitz