Regional tractor pricing

[ErikVann]

In the short time I have been really participating on this forum it has become apparent to me that there are significant differences in tractor pricing based upon ones geographic location. It seems that this is affects both new and used machines. I am curious to know if there is a particular reason for this. I am happy to hear a factual explanation or pure conjecture and opinion.

 

[MESSMAKER]

This is a guess, but I think supply would have something to do with it. I you are the only dealer for 75-100 miles you can get top dollar. Same with used. If you have 5 used tractors for sale, they will probably fetch more than if they were everywhere.

 

[MessickFarmEqu]

cost of doing business, sales volume, competitive environment, etc. There are lots of reasons.

 

[smstonypoint]

cost of doing business, sales volume, competitive environment, etc. There are lots of reasons.

Back in the day when I was teaching my undergraduate managerial economics course, I summarized the pricing of products/services with the three C's: Costs, Customers, Competition.


Steve

 

[Baby Grand]

To summarize:
If everthing costs more in area A than in area B, then everthing costs more in area A than in area B.

I used to work with a guy who left the Tulsa area after the oil business nearly collapsed, in the 1980's.
He got a "huge raise" to move to southwestern Connecticut, about a 50 minute drive (at 4 AM) from New York City.
He left a 4 bedroom house with a pool on a beautiful 2 acre lot in a really nice neighborhood and was shocked to find out that all he could afford was a 2 bedroom, beat, old dog of a house on a 1/4 acre lot in a sketchy neighborhood.

I think he cried when he got his first paycheck and realized that, thanks to his relocation, Connecticut State also got a huge raise. His wife ... well, let's just say she blamed him. Every day. She used to call him at work just to remind him that she did.

So I see similar when folks on TBN mention what they payed for their tractors. It can be a real eye opener.

 

[gwstang]

I'm wondering if transportation costs, distance from the port of arrival or where they are put together, can add more costs to different regions. If a tractor has to come from Georgia to be assembled and then carried to California to sell, wouldn't that add quite a bit to the costs of say a Kubota or such?

 

[smstonypoint]

I'm wondering if transportation costs, distance from the port of arrival or where they are put together, can add more costs to different regions. If a tractor has to come from Georgia to be assembled and then carried to California to sell, wouldn't that add quite a bit to the costs of say a Kubota or such?

I have no direct knowledge, so take my guess with a grain of salt.

It is my understanding that the destination/delivery charge that is added on the MSRPs of new car stickers does not vary with the distance from the distribution center,

I have never heard of a destination charge as an explicit add-on to tractor MSRPs, so I suspect that the destination charge is either an explicit or implicit item in the cost to the dealer. I suspect that destination charges do not vary by dealer location, so that a dealer in Georgia would have the same tractor cost as a dealer in California.

Steve

 

[ErikVann]

To summarize:
If everthing costs more in area A than in area B, then everthing costs more in area A than in area B.

I used to work with a guy who left the Tulsa area after the oil business nearly collapsed, in the 1980's.
He got a "huge raise" to move to southwestern Connecticut, about a 50 minute drive (at 4 AM) from New York City.
He left a 4 bedroom house with a pool on a beautiful 2 acre lot in a really nice neighborhood and was shocked to find out that all he could afford was a 2 bedroom, beat, old dog of a house on a 1/4 acre lot in a sketchy neighborhood.

I think he cried when he got his first paycheck and realized that, thanks to his relocation, Connecticut State also got a huge raise. His wife ... well, let's just say she blamed him. Every day. She used to call him at work just to remind him that she did.

So I see similar when folks on TBN mention what they payed for their tractors. It can be a real eye opener.

I understand what you are saying about cost of living and all but I don't think one can compare tractor to realestate markets which are highly variable based even from neighborhood to neighborhood.

It seems to me that tractors in the northeast tend to be higher priced than other areas of the country. While there isn't a tractor dealership on every corner they are not in short supply. Just a curiosity I guess.

 

[KiwiBro]

Perhaps the fear of commoditising tractors is the only reason they don't make 'em more reliable? I mean, if they were bullet-proof and extremely rarely broke down, they could sell the darn things direct online and ship 'em like commodities from regional distribution centres, bypassing agents/dealers, and just have a few tractor workshops dotted about the place. The only thing stopping me from buying a tractor from USA right now is the fact I may need warranty repairs.

 

[ErikVann]

Perhaps the fear of commoditising tractors is the only reason they don't make 'em more reliable? I mean, if they were bullet-proof and extremely rarely broke down, they could sell the darn things direct online and ship 'em like commodities from regional distribution centres, bypassing agents/dealers, and just have a few tractor workshops dotted about the place. The only thing stopping me from buying a tractor from USA right now is the fact I may need warranty repairs.

Not sure what take away from that but thanks for sharing. I just posted on you 50 shades of grey thread so not going to repeat myself here.

 

[Baby Grand]

I understand what you are saying about cost of living and all but I don't think one can compare tractor to realestate markets which are highly variable based even from neighborhood to neighborhood.

It seems to me that tractors in the northeast tend to be higher priced than other areas of the country. While there isn't a tractor dealership on every corner they are not in short supply. Just a curiosity I guess.

But I do think the local real estate market is a pretty good indicator of the cost of doing business in an area. It indicates the cost to own/rent the physical dealership and the cost to hire capable employees. The dealer and his salesmen and mechanics have to make enough to live locally and their prices will reflect this. These costs, as well as local taxes & fees ultimately get "gifted" to the local tractor buyer.

 

[Baby Grand]

Perhaps the fear of commoditising tractors is the only reason they don't make 'em more reliable? I mean, if they were bullet-proof and extremely rarely broke down, they could sell the darn things direct online and ship 'em like commodities from regional distribution centres, bypassing agents/dealers, and just have a few tractor workshops dotted about the place. The only thing stopping me from buying a tractor from USA right now is the fact I may need warranty repairs.

Your assumption that commoditization guarantees reliability doesn't match what I've experienced.


They sit there in committees day after day,
And they each put in a color and it comes out gray.
And we all have heard the saying, which is true as well as witty,
That a camel is a horse that was designed by a committee. - Allan Sherman

 

[davesl708]

Supply and demand rule the day. The more people who want tractors in a given area will attract more dealers. The more dealers, the more competition the lower the prices.

Demand for tractors in north Alaska are much lower than here in the Midwest farmland. Supply in the Midwest is greater due to demand and prices will be lower than north Alaska.

 

[Rford]

I've been looking for a Massey 135/150/230 tractor for a while and looking on Craigslist. I live in Kansas and see that the same Masseys in the deep south sell for up to a couple thousand less than the ones nearer to me. Of course to buy one and ship it here would even things out, but if I lived in Alabama I'd be in cotton....

 

[Fawken]

IMHO, they're ALL over-priced. I would love an LS G3033, but darned if I'll take a second mortgage out to get one. The mark-up is unbelievable and I know I'll catch **** for saying so because so many dealers and salesmen post here. I think things got out of hand in the early 80's when so many yupees started moving to hobby farm/ranches near big cities. When I got my little machine in 1983 a good size Ford was a 1900 and with a loader and box blade you were looking at around $8500, if memory serves. That was about 1/2 the cost of a good, base model, 1/2 ton pick-up with air and AM/FM. So, you would think a 25-35 horse tractor should still be about half as much as a new 1/2 ton truck. Not the case. Maybe if the Chinese get their act together they'll be some actual competition and prices will plummet.

 

[MinnesotaEric]

In the short time I have been really participating on this forum it has become apparent to me that there are significant differences in tractor pricing based upon ones geographic location. It seems that this is affects both new and used machines. I am curious to know if there is a particular reason for this. I am happy to hear a factual explanation or pure conjecture and opinion.

Conjecture: Population density drives up costs on all levels. As a result goods and services cost more in centers of higher population density.

 

[Citydude]

Conjecture: Population density drives up costs on all levels. As a result goods and services cost more in centers of higher population density.

I agree and will add that average annual income for a given area will play a part in costs.

Sent from my iPad using TractorByNet

 

[AxleHub]

Pricing of a longer term asset in small tractors is lower today than 10 years ago in real terms.

Financing cost - far lower
Mean time to Failure rates - lower
Performance or comfort levels - higher

But the cost to sell in Tennessee is much lower compared to Wisconsin as an example. Heating costs, labor rates, shipping costs, property taxes, fees and services . . all lower.

And the demand/need for tractor product is higher per 100 people in WI than TN. So WI pricing is higher than TN.

And thank goodness for state governments variation.

 

[KevT]

Conjecture: Population density drives up costs on all levels. As a result goods and services cost more in centers of higher population density.

Amen. Even within this state the prices are amazing. 20% more the closer you live to Tampa or Orlando vs Live Oak or Chiefland

 

[MessickFarmEqu]

The mark-up is unbelievable and I know I'll catch **** for saying so because so many dealers and salesmen post here. .

I hope your not talking about dealer markup! Reality is that on many deals your paying more in taxes than we're making in profit. Now at the vendor level, particularly on parts.. the increase has been dramatic. While some have outpaced others, every companies equipment has gotten a lot more expensive. You can chalk that up to many things, regulatory changes with Tier 4 have been huge, Steel costs are several times higher than they where 10-15 years ago.