Buying A New Tractor As A Hedge Against Inflation.

[jeff9366]

Depends.

Foreign exchange rates for the US$ are likely to effect tractor value in a 1-5 year time frame more than US CPI.

 

[npalen]

About 50 years ago I bought a slightly used mint 1965 Corvette 327 375 HP with factory fuel injection (mechanical type at that time) for $3200. I traded it later on a 1966 Ford Galaxy 500. The vette would today probably fetch $100K or more on the auction block. It's the same old story of "I should have kept that" but $3200 was a lot of money in 1966 especially to a 20 year old about to be married.
The $3200, if invested with accumulated interest would today be worth a great deal also. By the way, the marriage has lasted, and that's priceless.

 

[Gary Fowler]

(About 50 years ago)The $3200, if invested with accumulated interest would today be worth a great deal also. By the way, the marriage has lasted, and that's priceless.

For sure investments 50 years ago would have made lots of money by 2016 however, investments and interest today don't pay much and mostly in the last few years have been going downhill.
I think my LS tractor AND my Kubota is worth more today than I paid for it and I only have about 100/400 hours on them after over 5 years of ownership.
As a hedge against the collapse of the financial market, anything that can be used to be self-sufficient in a depression would be a good investment. You likely wont want to sell them in such an environment but may also need those guns and ammo to protect them.

 

[jeff9366]

For sure investments 50 years ago would have made lots of money by 2016 however, investments and interest today don't pay much and mostly in the last few years have been going downhill.

Cumulative stock market returns over the last fifty years, 1965-2015, have been good.

However, the greatest US bull stock market was 2009 - 2015. Having said that, I started selling stocks and placing the proceeds in a money market fund in 2013. Other than pecking in energy stocks, I am leaving my reserves in cash.

 

[GManBart]

As a hedge against inflation, a tractor would be a poor choice. They lose value the minute you take delivery of them...thousands less than you paid. Even if their value increases with inflation, it's not going to make up the thousands they initially lose. If you're not factoring in the cost of renting a machine when needed, the convenience factor, etc....just the straight "investment" potential, it's not really hard to figure.

People will say "I bought a tractor for $15,000, used it for ten years and sold it for $15,000, so it didn't cost me anything." That's not true. Because of inflation they lost money.

I used an inflation calculator and picked the year 2000 and the year 2010 to figure out what it would be for the $15,000 tractor I mention here. To be dead even, you'd have to sell the tractor for $19K in 2010. I don't see that happening very often. In the example above, the person selling the tractor for what they paid lost $4K on the deal. Granted, they had the use of the machine, but that's a different topic.

In short, buying a tractor isn't an "investment" it's an expense. Yes, commercial farmers are "investing" in their business when they buy equipment, but the equipment itself is not an investment, it's a business expense that they get a tax credit for. There's essentially no chance they will sell the equipment for more than they paid for it, corrected for inflation, down the road.

Other than retail sales, the only reliable way to make money on equipment would be if you bought something used that needed significant repairs you are capable of performing yourself, getting it all fixed up, and selling it.

 

[npalen]

I've always felt that buying good used and from an individual can be a double win because you're not taking the initial "new depreciation" and also not paying sales tax. The last new vehicle I bought was a 1965 Pontiac GTO and, yes, I traded it for the 1965 Corvette mentioned above.
I agree that folks don't normally take inflation into account when saying "I sold it for more than I paid for it". But that's okay, it's still a "feel good".

 

[GManBart]

I've always felt that buying good used and from an individual can be a double win because you're not taking the initial "new depreciation" and also not paying sales tax. The last new vehicle I bought was a 1965 Pontiac GTO and, yes, I traded it for the 1965 Corvette mentioned above.
I agree that folks don't normally take inflation into account when saying "I sold it for more than I paid for it". But that's okay, it's still a "feel good".

Nobody can question you taste when picking cars

 

[AxleHub]

There are several issues that as yet would be in question as an inflation hedge.

1. A tractor sitting deteriorates unless maintained. And that means rubber items and fuel lines and metal components and electrical of course.

2. Lets say you bought a new big ag tractor 3 years ago. Who would buy it today at a profit to you as demand is substantially lower in the last couple of years. And the warranty is done which is part of the desire for it. Or how about a new scut? Today demand is high because the baby boom generation is effecting it. But 10 years from now that generational demand changes.

3. Recent history is not a reliable measurement of future patterns. 40+ years ago energy independence was a U.S goal. And now we can be independent but "our allies in the middle east" are doing everything they can to strangle our entire energy sector and all the related s3ctors that get effected. My point is that what was true in tractor resale doesn't mean it is predictable behavior for the future.

The value of owning a tractor is what it can do for you and your family or business. If it is allowed to not be used but only preserved . . then its a museum piece . . not a daily joy.

 

[Industrial Toys]

We have had tractors, bought new for twenty or so years and sold them for more then we paid. Not taking the devaluation of the dollar into consideration. My thinking, is that these computer run tractors will be worthless in a short time compared to tractors of the past. As worthless as the windows XP running this computer today. Well, maybe scrap value.

 

[teg]

I have not read the other replies... My friend bought a tractor WAY before he needed it (he still doesn't really need it much). I thought he was nuts but the cost of that same tractor is way more expensive and he's already has it totally paid off.

IF he had a change of plans or had to sell it, the outcome would be different but so far it's working out for him. I don't think I could (or want to) pay for my tractor 10 years later... I keep an eye open for tractors like mine that are for sale and I think I could sell it for about the same price.

{edit} I went to an inflation calc. and the $15,500 I spent in 2005 is worth $19,265.04 now... I couldn't sell it for that much (not sure I would even sell it for that if someone offered me that - not worth giving it up).