Depreciation between the tractor brands on trade or resale

[PeteN]

I think I know which brands hold their value in the compact tractor segment (thinking JD and the orange one) but what has been the experience with the other brands such as LS, Kioti and Branson. If it isn't the last tractor you are going to buy, are you saving money on the purchase and losing money on the trade?

 

[jeff9366]

LS and Kioti produce "private label" tractors for other tractor brands. They do private labels because they have been unable to fill a national distribution network with their primary brand. The private labels expand LS and Kioti unit volume although under other's brand.
(Private labels are a reality in many consumer products, not just tractors.)

Branson has not done private labels yet. However, TYM, Branson's owner, produces private label tractors for others.

As primary brands, LS, Kioti and Branson are regional brands relative to the Big Two national tractor brands, Kubota and Deere.

Speaking only as an observer, not an industry insider, LS, Kioti and Branson are established in California, a huge consumer market with a major port of entry in Long Beach and in the fast population growth states along the Gulf Coast. The NE, Hawaii and Alaska seem particularly difficult. Deere, with its great history in Iowa and diverse Big Ag product line dominates the prairie states. I rarely see Kubota, LS, Kioti or Branson tractors in Iowa or Nebraska, for example.

For Kubota and Deere having a comprehensive offering of "matched" tractor implements and attachments increases revenue stream per tractor sold for years. Not forfeiting the established customer who now wants a 100-horsepower tractor is another advantage.

LS, Kioti and Branson combined perhaps enjoy 10% of the compact tractor market, including private labels. LS, Kioti and Branson are handicapped by only having compact tractors in the USA product line. It takes a talented capitalist to keep the doors open at a regional brand during tough times in the compact tractor market, which can dry up during recessions like 2008-2009.


If it isn't the last tractor you are going to buy, are you saving money on the purchase and losing money on the trade?

You have to critically assess dealer stability while shopping minor brands. Korean tractor brands certainly represent high value but if your local dealer closes and the next closest dealer is 100 miles away, resale will suffer.

CREDIT: 'FELIXEDO'

"It has been touched on a couple of times, but not directly as a buying factor.

Every major make has a machine that will do the job(s) you want. Check out your nearby dealers, and go with one you have confidence in.

A great machine with no support nearby is a hassle to repair and maintain.

And a good machine can't make a lousy dealer into a good dealer."



((My view as a retired wine marketer and wine sales manager who dealt with private label vs national brands for 37 years.))

Others will differ.

 

[jeff9366]

If it isn't the last tractor you intend to buy, are you saving money on the purchase and losing money on the trade?

Buy Enough Tractor the first time.

Selling a used tractor is easy. Selling multiple light implements in order to buy heavier, wider implements for a new, heavier tractor requires a lot of time. Depreciation on implements is worse than depreciation on a tractor.

Who really makes what?

I'm in the market for a new tractor w/ loader because (surprise, surprise) when I bought my first tractor in 2010 I bought too small. It's a Kubota L2350DT and it has been a great performer but I am running it at the absolute max end of its capacity. I'm looking to spend somewhere in the...

www.tractorbynet.com

 

[ning]

It's difficult to claim that a higher depreciation results in money lost over the long term, unless the initial outlay is identical.

Let me illustrate with a concocted example.

Tractor A cost $30k, and over a period of 10 years, it will lose 40% of its value, so it will be worth $18,000.
Tractor B cost $25k, and over a period of 10 years, it will lose 50% of its value, so it will be worth $12,500.

At the end of the 10 years, you look at this and say "Tractor A is worth 5500 more than than tractor B, and only cost 5000 more, so I came out $500 ahead!"

However, if you had put that initial "extra" $5000 saved in a simple savings account that returns 1%, you'd actually have $5526 in that account after 10 years, or you would've been $26 ahead by getting tractor B. Obviously, if you were actually going to invest that $5k, you should be able to manage more than 1%.

Or, since you're on TBN, you would've been able to buy $5k more attachments for tractor B, which after 10 years are probably still worth a decent chunk and you would've been able to get a lot more work done.

 

[finn1]

I agree with Ning, although, over the last ten years, investment returns have been in the 10 to 20% range, so his 1% return number is totally unrealistic.

That means the fool that bought the premium tractor lost his shirt, while the cheapskate that bought the upstart made out like a bandit, all other things being equal.

Furthermore, the cheapskate that bought the upstart could have bought a lot more tractor with the same outlay. That more capable tractor would do a lot more worn over the ten year period.

Either way, buying something that’s not price competitive is a losing proposition.

 

[jigs_n_fixtures]

I rarely buy anything new. If your selective in what you buy used, you rarely come out behind. I bought my tractor used off a buddy, who has degree in Diesel and heavy Equipment Mechanics, and was a Tank maintenance instructor for the Army. He was **** about taking care of things. He moved out of state, and bought a house in a subdivision. So, had no need for a tractor. He gave me a good deal on it, the implements, and the trailer he had to haul it on.

I’m looking at buying a truck in about a year. I’m probably going to start bidding on Forest Service surplus trucks, of the Forests that are close by. I’ll look for 1-tons with utility boxes. The half and 3/4 ton short box pickups, get run all over by seasonal kids, that abuse them. The 2-tons are run by the road crew, and get beat up just becasue they go work on the worst of the roads, and have to drive on those roads. The 1-ton with utility boxes, are generally run by the Maintenance Techs, (who turn into the mechanics during the winter), and they take care of their trucks. Plus they go all over the Forest so much of their driving is on paved roadways. The F350 I drive will be up for auction in three years, and I may wait to bid on it.

 

[ning]

I agree with Ning, although, over the last ten years, investment returns have been in the 10 to 20% range, so his 1% return number is totally unrealistic.

I first ran the numbers with a very conservative 4%, but then realized that even at a 1% rate of return you're still ahead in that scenario with the cheaper tractor. Obviously, anything over 1% is a win there (for that scenario, at 4% the $5k had grown to $7454; at 5%, it's $8235; all calculated with simple monthly compounding).

There's more to the decision of higher residual vs lower, of course - the reason for higher residual may be due to fewer problems with one make than another, or possibly because one is better known that the other. If it's because of fewer problems, you're of course hoping that you get lucky with your choice (past reliability isn't a guarantee of future performance); I personally believe that the 2nd tier tractors are sufficiently high quality that this point is moot (and in my case, so far so good); and as far as which are better known, there's no doubt that this changes over time - look at how much more popular Mahindra tractors are nationwide than they were 20 years ago - even if no quality changes have occurred, the fact that the tractor isn't a fringe unit is going to be worth more going forward and today's quoted residual isn't necessarily accurate 10 years from now when you're selling.

I'm sure for some the choice will also have to do with how they're perceived for buying that color. They used to say "nobody ever got fired for buying IBM" (no longer I'm sure) but it probably holds true for JD, and if you care about what your neighbors think you may think twice about buying a brand unknown to them. Personally, I couldn't give a rat's @$$ about their perception, but there's no doubt some on this board have something emotional or psychological invested in "their" brand; if it makes them feel better to buy that color, they should do it.

 

[Hay Dude]

Bought a loaded used Kubota M135x with Kubota loader for $41k in 2017. I’m seeing plenty of less equipped units asking 50k.
Great time to be a used equipment seller…

 

[Slowpoke Slim]

The only other tractor I got a firm price quote on was The Green One. No other dealer (other than my Branson dealer) would even acknowledge that I walked in their door. I'm not exaggerating. Was completely ignored. That includes about every brand you can mention here, with the exception of the Mahindra, I don't think there was a dealer for them at the time in my area.

The Green One, after specc'ing everything out that I wanted (and getting all the optional doo-dadds put on it for even more $) came out to $55K. Not a misprint. $55K. And that was with no attachments. I would have bought it if they had one in stock, because honestly, I didn't know any better. Lucky (?) for me, they didn't have one, and made no effort at all to have one brought from one of their other chain store locations (there was one sitting on their dealer lot, 200 miles away in SD). The only option they gave me was to buy the one 200 miles away, sight unseen, and they would deliver it up to Bismarck in a week, and they would add all of my options ($). OR, order one from scratch and have it delivered in a few (I forget if he even told me how long the wait was) weeks.

When I stopped by the Branson dealer, it was a "cold call", meaning he didn't know I was coming, we'd never spoken or met before. He not only had the models in stock I was looking for, he spent the time to point out the different features and wait on me. Tossed me the keys to one and said "take it for a spin", there was a small field next door for a playground. It had what I was looking for, and every. single. thing. I. wanted. was a standard feature. Cab, heat & A/C, radio, cruise control, linked pedals, 3 range hydro, 2 rear remotes, SSQA, rear diff lock, front and rear work lights on cab, front and rear wipers with washers, 2 side mirrors, doors and grab handles on both sides of the cab.

The tractor was $26.9K. Not kidding. I bought a few attachments with it, and my out the door price was $31K.

Saving $28K dollars on a purchase is not a number to be taken lightly. Resale value? What about up front purchase value?

I didn't buy the tractor to "flip" it in a few years, so "resale value" means nothing to me. But saving that amount of money up front was a no brainer for me.

 

[dodge man]

I would say Kubota and JD hold there value better. That said I’m not a big believer in buying something because it holds its value. Get the tractor you want and like a use it.