Dealers Not Accepting Some Brands on Trade

[two_bit_score]

Same thing happened to AGCO tractors. They were virtually identical to Massey & Challenger, too.

I put AGCO on my watch list:

 

[Iowa Hillbilly]

A *** changed Bad Boy...lol

Somebody saws off the drawbar.

 

[Iowa Hillbilly]

The difficulty for dealers taking machines as trade-ins has relatively little to do with brand affiliation and everything to do with the change in interest rates over the last 18 months. Everything on the dealers' lots is financed either by bank loans to the dealer or by the manufacturers themselves.

The local and regional banks do the vast majority of lending to equipment dealerships. Those banks have been put under tremendous pressure to hold on to liquidity due to the rise in interest rates. The banks' loan portfolios are heavily tied up in long term loans made over the last 15 years at very low rates.

Those low rate loans from years past are now underwater even if the loans are 'performing' (ie the borrower keeps making payments). As a consequence the banks can't accept any more risk from the dealers.

The dealers themselves have seen their cost of financing inventory rise ~5-10 fold, and what was previously a minor issue is a much larger concern. Their cost of holding used inventory is also likely quite a bit higher for used equipment than it is for new equipment.

The manufacturers are in maybe worse shape. I haven't looked in a few years, but last I checked big green had in excess of 30 billion dollars in equipment finance on their books. All that financing was almost certainly lower than the interest costs on new bond issues. That means big green is now subsidizing the borrowing costs of their previous sales.

I expect any kind of trade in will get hard be accepted over the next year or two. The bright side is there will be some screaming deals for those with cold hard cash to come in and scoop up. Caveat emptor.

 

[hiddentacocatneddih]

You have a tractor, if you kept it nice, that would re-sell for more than you paid for it if you bought it 30 yrs ago.

Is that because of inflation or because its value went up.

In 30 years itll be 60 years old

 

[Hay Dude]

The difficulty for dealers taking machines as trade-ins has relatively little to do with brand affiliation and everything to do with the change in interest rates over the last 18 months. Everything on the dealers' lots is financed either by bank loans to the dealer or by the manufacturers themselves.

The local and regional banks do the vast majority of lending to equipment dealerships. Those banks have been put under tremendous pressure to hold on to liquidity due to the rise in interest rates. The banks' loan portfolios are heavily tied up in long term loans made over the last 15 years at very low rates.

Those low rate loans from years past are now underwater even if the loans are 'performing' (ie the borrower keeps making payments). As a consequence the banks can't accept any more risk from the dealers.

The dealers themselves have seen their cost of financing inventory rise ~5-10 fold, and what was previously a minor issue is a much larger concern. Their cost of holding used inventory is also likely quite a bit higher for used equipment than it is for new equipment.

The manufacturers are in maybe worse shape. I haven't looked in a few years, but last I checked big green had in excess of 30 billion dollars in equipment finance on their books. All that financing was almost certainly lower than the interest costs on new bond issues. That means big green is now subsidizing the borrowing costs of their previous sales.

I expect any kind of trade in will get hard be accepted over the next year or two. The bright side is there will be some screaming deals for those with cold hard cash to come in and scoop up. Caveat emptor.

Yeah, let me know when those “screaming deals” hit.
I see used tractor prices and they’re still about as high as ever.

 

[rScotty]

I equate new car salesmen (and women) to door to door vacuum cleaner sales people, IOW, not much. When we are looking at a new vehicle, we shop on Sunday so no idiots to bother us. We decide what we want and go back on Monday and skip all the BS and buy it. Of course being Fords family, we always get the employee price and no BS.

Wait a minute. You work at farming, machining, AND at a Kubota dealership part time....and now at Ford as well?

 

[rScotty]

SNIP...

The manufacturers are in maybe worse shape. I haven't looked in a few years, but last I checked big green had in excess of 30 billion dollars in equipment finance on their books. All that financing was almost certainly lower than the interest costs on new bond issues. That means big green is now subsidizing the borrowing costs of their previous sales.

I expect any kind of trade in will get hard be accepted over the next year or two. The bright side is there will be some screaming deals for those with cold hard cash to come in and scoop up. Caveat emptor.

The bit about how even a well-serviced loan from previous financing can become a burden when compared to newer bond issues is very perceptive and unappreciated.....or maybe that's just my own bias because I agree with that way of looking at it.

As for "screaming deals for cold hard cash" happening in the next year or two, that also makes sense. But more than a few old fashioned rural farmers will probably join me in being pleasantly surprised if it actually happens that way.

rScotty

 

[2manyrocks]

One of the dealers I was talking with said he was willing to make me a better deal on one of his new TYMs because he was starting to have to pay interest on it.

US debt rating was downgraded from AAA to AA+ this week.

Student loan repayments are coming due in October.

It makes a difference when borrowing money actually starts to cost something.

 

[arrow]

Is that because of inflation or because its value went up.

In 30 years itll be 60 years old

No, I mean right now. That model was produced from 87-97.
Value is dependent on what the market bares.
New tractors go up in price, they bring along the older ones as well.

 

[DaBear3428]

Somebody saws off the drawbar.

that would be a push bar lol