How to get a deal on used machinery

I have been tracking farm equipment price data from auction sales and implement dealers for nearly 20 years. No doubt about it, 2008 was the hottest used equipment market I've ever seen.

By hot, I'm talking high auction sale prices and rapidly rising values on all types of used equipment. An example? How about John Deere 2840 tractors. Deere made this 81-hp. model from 1977 to 1979, so they're 30 years old. In 2007, Deere 2840 tractors sold for an average of $7,171 at auction. That's down from $8,263 in 2003 and $8,729 in 1998. Depreciating values are what you'd expect on a tractor this age.

But in 2008, the average auction price bumped all the way up to $10,190, an increase of 42% in one year.

That's just one example, but its indicative of last year. However, if you are in the market to buy a used tractor, I see better buys this year.

Call it the bubble effect

We're living in bubble times. Markets get overheated, then cool off, sometimes rapidly. With home values sinking, 401(k) balances tanking, and the national debt soaring, purse strings are slamming shut. People are putting off purchases, especially larger ticket items. That means used farm equipment values are dropping.

The past two years have been good for sellers of all types of farm equipment, including acreage equipment. That means lots of pent-up buying demand was realized for new equipment. And used equipment sales were even stronger than new sales. That means it's time for a price correction.

There is already a softening on used garden tractors and used skid steers. I think in both cases it is simply an oversupply of used inventory on dealer lots. The construction and building meltdown of 2008 forced a lot of contractors to liquidate assets, including used skid steers.

Buying tips

If you are thinking of buying used equipment for your acreage, 2009 could be a golden opportunity. Here are a few quick tips:

• Buy in the summer. Auction sale prices tend to be softest in summer.

• Pay close attention to the inventory level on dealer lots. Motivation to bargain with buyers can be directly correlated to inventory level. Too much equipment means pressure to move stuff.

• Consider online auction sites like ebay.com or ironplanet.com. When gas prices are down, hauling costs are lower and online auctions increase.

• Know what similar items sold for. If used values fall 10% off of 2008 levels, why pay 10% more than you have to?

Learn more

Greg Peterson is publisher of the F.A.C.T's Report, a guide to auction prices on all types of farm equipment, as well as listings of equipment available on upcoming auctions and through dealers. His Web site is updated daily. A one-year subscription is $69.95.

Phone: 800/381-0423
Web: www.machinerypete.com