Is resale value really all that important?

[Farmwithjunk]

Whether he is "well ahead instead of buying new" is speculative at best.

This ENTIRE THREAD is speculative at best. It's an interesting topic, no doubt, but calls for an across the board answer for what would be an individual, case by case decision.

Since it was made clear in the original post by Woodbeef that this pertains to "AG tractors", it would depend on (a) how the farm is structured as a business [inc. state/fed tax], (b) how well that farm operation is doing at any given time (c) the particular tractor in question (d) if the tractor is being traded in or sold outright (e) ect, ect, and so on.......

There is no clear cut, carved in stone answer.

In the modern world of leases, $150,000 tractors, and several million dollar per year operating loans, things are different than how I ran my small "pay as I go" operation. And there's still a few of us out there that follow the low overhead road.

Trying to include every possibility in with one set answer will make a rather muddy pool.

In all my years, I never bought a tractor because of its re-sale value if it was one I planned on keeping. I did look at the cost vs. worth at the time of purchase on a few used ones, not knowing how they'd be holding up 5, 10 or even 20 years down the line.

 

[3RRL]

Farm, you bring up a good point.
I did not buy my tractor for resale value but for what it does for me now. I'll deal with getting rid of it later or keep it forever like my other stuff. I've used the same philosophy when buying personal cars, homes and even machinery for my business. The only thing I bought for "resale value" was the investments I made for that purpose, stocks and bonds and my retirement funds. Other than that, I found by immediate use of anything I buy personal or business machinery to make money or use it to accomplish a task far outweighs resale value. I've never been one to purchase real estate such as my home with resale in mind. More importantly to satisfy the needs and lifestyle of my family and myself. Things like that have a way of working out.

My personal opinion of course....I feel those who purchase for resale never really get the same feeling that you can beat the **** out of your equipment, car, tractor or machinery because you're always worried about resale....almost like not really owning it 100%. By using what I bought to make a living, I was very successful and made way more in a much shorter time than as relying on it for resale purpose. I was able to purchase 10 fold many more new items that way. So to me, resale means diddly squat...do you understand what I'm getting at?

 

[Woodbeef]

I think you guys are missing the point. Yes,some Farmers lease these days or do a few year roll-overs but they are the exception. Take a look at the USDA's stats for average age of tractors on farms. Bet you'll be surprised to see how old it really is........

 

[LBrown59]

Resale value means nothing for us since none of our Kubotas are for sale.

They will be some day.

 

[BarryinMN]

3RRL well stated. I have a brother who is 42 and is still confused over the difference between an expense and an asset.

 

[frank_f15]

I think you guys are missing the point. Yes,some Farmers lease these days or do a few year roll-overs but they are the exception. Take a look at the USDA's stats for average age of tractors on farms. Bet you'll be surprised to see how old it really is........

Think you are correct. there are some rather large farms near me and some of their tractors appear to be quite old and well used, But they are in great working condition. Now bear i mind these are not corporations but just larger private farms that have been around for awhile.

 

[Turbys_1700]

Whether he is "well ahead instead of buying new" is speculative at best. First, the obvious, what else is about shot on the tractor? How much more will he have to spend each year to keep it going? How much time, important time, could he miss due to a failure on an old tractor? If he uses it for business, it is fully depreciated now and he gets zero tax deduction for the tractor, work likely has to be done slower to help preserve an old tractor (therefore wasting time) etc., etc., etc.

It's definitely not a clear line as to when to scrap something and when to keep pouring money into it. I guess a lot of it would be personal preference. Myself, I would consider it foolish to spend $3800 on the engine of 30 year old tractor that likely has a worn out transmission, worn out rear end, worn out wheel bearings, worn out steering components etc. Simply put, there are way too many variables to claim that he is "well ahead" by pouring money into an old tired tractor.

Couple of points...
The overhaul included relining of the brakes...
Transmission and pumps are excellent...
The person in question does not make his living farming...
Try to purchase a new 60 HP tractor with the capabilities of his re-built AC...
The cost differential is significant...
We've got older AC D-17's, an AC 8050, and a Ford 860...
All are in good working order...
When it comes time to rebuild...
They will get re-built...
We just don't junk old stuff...
We buy newer to compliment...
I know...
I'm a tractor junkie...

 

[Farmwithjunk]

I think you guys are missing the point. Yes,some Farmers lease these days or do a few year roll-overs but they are the exception. Take a look at the USDA's stats for average age of tractors on farms. Bet you'll be surprised to see how old it really is........

My "big tractor" is 27 years old.
#2 is going on 36 years old.

No..... I wouldn't be a bit suprised.

All the BTO's have new equipment. They make up but a small percentage of farms even though they do work big acreage numbers. The rest of the "small time operators" have to function on a small budget/low overhead. That means keeping older equipment online for a long, long time.


In this part of the world, no-till has taken over in crop farming. The tractors that were bigger "primary tillage tractors" here 30 years ago will pull a planter or drill just as well as a new one. You see more newer tractors on the cattle/hay operations than on the crop operations here.

Kentucky is the biggest beef cattle producer (in the U.S.) east of the Mississippi. There are quite a few of those cattle/hay farms.

This is why all the manufacturers are zeroing in on the compact tractor market. Big AG tractors don't sell in numbers that would keep the doors open at Deere/AGCO/Case-NH/ect.

 

[Woodbeef]

Couple of points...
The overhaul included relining of the brakes...
Transmission and pumps are excellent...
The person in question does not make his living farming...
Try to purchase a new 60 HP tractor with the capabilities of his re-built AC...
The cost differential is significant...
We've got older AC D-17's, an AC 8050, and a Ford 860...
All are in good working order...
When it comes time to rebuild...
They will get re-built...
We just don't junk old stuff...
We buy newer to compliment...
I know...
I'm a tractor junkie...

Just because a tractor is new,does not always mean it has the attributes to fully replace an older one...........Progress does sometimes move backwards in tractor developement.

 

[SkyPup]

They will be some day.

Not in my lifetime, my son and grandson both are getting them for free.....

 

[N80]

When I bought my tractor, resale was a huge factor. My tractor is basically a luxury for me. If things get tight, and they will one of these days, I want to get as much money out of it as possible. But, mine is not an Ag tractor, nor do I farm anything but pine trees.

My B-I-L who owns a farm next to my property (300 cows, several thousand acres) has so many tractors that I'm never sure of the total. Newest one is about 1980, oldest about 1945 ( a Ferguson that he just started using again for pulling a little rake). He has at least four large JD's and two large and older Cases that he pulls 14 foot rotary cutters with. He's pretty much JD all the way. Needless to say, resale value has never been a factor. When one of them dies, he rebuilds it. Himself. The guy down the road has 3 nice NH's with cabs, a JD and a Ford. But for the most part it is JD country.

However, we were discussing the fact that since his kids are growing up and moving away he is losing a lot of his farm help. He feels like he will have less time to work on his tractors and that he needs to maximize his work time. He is also getting older and spending hours (days) on an old tractor cutting or baling hay with no cab is taking its toll. So he's thinking about buying something new or nearly new. He tells me that the local buzz among cow farmers is Kubota. His cousin down the road recently got one of the larger Kubota Ags. So the imports are making in-roads into the thinking of even die hard Deere folks.

 

[Egon]

Resale may/may not be important. It depends entirely on your situation.

I beleive there is a post here where a fellow wishes to sell his Mahindra but is not getting the respnse he wants.

 

[BXRICK]

Maybe this has been said before but...

IANAE (I am not an economist), but it seems to me that's it's not resale value that's of interest, but the difference between what you paid and what you can sell it for some period of time later that matters.

If I pay $100 for Brand X, and $150 for Brand Y, if I can later sell Brand X for $60 and Brand Y for $110, they both have a value of $40. Paying more for Brand Y did nothing for me in terms of resale. Brand Y may have had other characteristics that made it a better buy, but resale wasn't one of them.

Which translates in tractor terms to paying more for a "big three" tractor vs. an off-brand that is cheaper. Is the higher resale value a result of the previous owner passing along the premium that he paid from the big three manufacturer, or is it a result of the tractor actually being of higher quality?

Quality, and how much something is worth is largely a matter of opinion.

Sometimes one sees this referred to as how much value an asset looses as a % per year. This eliminates the absolute dollars from the comparison.

Certainly there are other factors, such as the cost of money, business depreciation, etc that might come into play.

 

[Trahere]

When I bought my tractor I intentionally bought it for re-sale! I knew I would need it for two days and would then re-sale it! Seventh post and beginning to show some promise at it!!!


A tractor is as good as the ground it rolls on!

 

[IH3444]

Neighbor just traded in his new B3030 hydro, for a L3130 GST. The same Kubota dealer he bought from took his B3030 in trade, and allowed him $2K more than he paid last year for it. However the deal went down, the Kubota dealer didn't hesitate taking the B3030 in trade, and offered him more than he paid for it. How's that for retaining value. Them there is the much older story of another friend who bought a new JD 18 years ago for $4400, traded it in, and was allowed $7700 towards the purchase of a new tractor. Something to be said for the top 3 brands holding value. Have heard the same about quality Stihl chainsaws being traded, and holding their value over time.

 

[Woodbeef]

Neighbor just traded in his new B3030 hydro, for a L3130 GST. The same Kubota dealer he bought from took his B3030 in trade, and allowed him $2K more than he paid last year for it. However the deal went down, the Kubota dealer didn't hesitate taking the B3030 in trade, and offered him more than he paid for it. How's that for retaining value. Them there is the much older story of another friend who bought a new JD 18 years ago for $4400, traded it in, and was allowed $7700 towards the purchase of a new tractor. Something to be said for the top 3 brands holding value. Have heard the same about quality Stihl chainsaws being traded, and holding their value over time.

Were the deals priced as cash deals before a trade-in was considered? Or were they trade-in priced from the begining? Were the tractors purchased at full list? If so then the trades were overvalued and covered by the discount off of list not going to the purchaser. It can give the false impression of the trade holding value over time........

 

[Turbys_1700]

I just purchased a NH 1720 with 245 one owner hours on it for 7K and my old Yanmar...I valued the Yanny at 2K so that's 9K for the NH...The big three has excellent resell value...It's all demand driven...Most folk around here want either Kubota's, Deere, or New Holland...Anything else is just off-brand although I do consider Massey certainly as a major...Their are just more Kubota's purchased in the smaller units with NH and Deere having greater sales in the larger AG tractors...But...Kubota is making gains in the larger AG maket here...