New Tractor Sales Are Declining

[Muhammad]

Any more thoughts on tractor prices? Going off track here...

 

[jyoutz]

Any more thoughts on tractor prices? Going off track here...

I met a guy tonight who scored a smoking deal at an estate sale. A L3200in great condition with only 400 hours, and 9 implements for $15K total. Obviously the estate people had no clue about valuation.

 

[Muhammad]

I met a guy tonight who scored a smoking deal at an estate sale. A L3200in great condition with only 400 hours, and 9 implements for $15K total. Obviously the estate people had no clue about valuation.

And not many buyers showed up? Or those who did just didn't have the cash.

 

[jyoutz]

And not many buyers showed up? Or those who did just didn't have the cash.

I’m not sure. It really wasn’t an equipment auction. It was an estate sale and most people were there for other household items and furniture. The guy who bought it knew he stole it. Had his trailer there and loaded up before anyone realized that they had just given this away.

 

[two_bit_score]

The dealer always assumes the buyer has that tactic up their sleeve.
These people aren’t stupid.

Yep, they do more deals in a day than most customers do in 10 years.

 

[Sid Post]

TYM seems to have a pretty good tractor in the 65/75Hp range for a lot less than the normal options. I'm hoping to see one locally tomorrow if I make it to the dealer. For the money, one of those or one of the next smaller series at a similar Hp could replace my Kubota L4600. The cab would probably add a bit of cost to make it a bit spendy compared to a ROPS L-4600 but, getting older the AC in Summer and Heat in Winter should let me extend when I could do side jobs in retirement as age starts to take a bigger toll on me.

With TYM buying Branson/Kukje and combining both brands in the USA, dealer support and service should be getting better too!

This should provide a more affordable tractor in the SCUT/CUT class for many people not married to existing Orange, Red (or Blue), or Green tractors! It should also put pressure on the Big 3 in the USA to put out more affordable cab models too!

 

[Yander]

In reality considering the devaluing of currency today, any funds in any commercial bank is going backwards. You are actually paying a bank to hold your money today. It earns you nothing. It costs you instead.

Well if you're bringing inflation and devaluing of the dollar into it, you could say that a lot of investments.

 

[5030]

For certain. My 401 is looking grim.

 

[Sid Post]

For certain. My 401 is looking grim.

My 401K, while volatile, overall is up a lot with my stock picks. ~30 years of past experience including down markets has helped in that regard along with a high risk tolerance and realizing that high inflation was locking in a fixed loss with less risk or essentially no perceived risk with cash investments!

The high "tractor" inflation rate is moving my tractor replacements and upgrades forward a lot because the likelihood of me out-earning the rate of tractor price inflation is really low. I also get the benefit of using a 'better' tractor sooner. I would say it also saves me money with better fuel burn rates but, both the Kubotas I currently own are real fuel misers. That little B2601 for a mow and chore tractor is really a sweetheart that costs me very little.

 

[ddbackhoe]

In reality considering the devaluing of currency today, any funds in any commercial bank is going backwards. You are actually paying a bank to hold your money today. It earns you nothing. It costs you instead.

Another industry where if you dont watch them, they will fee your account to death.

 

[ddbackhoe]

IMHO I do believe that after tax time and the weeds
begin to grow tractor sales will rise. Usually people
wait until after tax time to purchase any big items.

willy

Because so many use their taxes as a savings account (wow, I got a $x,ooo.oo return). Now, I can buy that new lawnmower or go on vacation or….

 

[Torvy]

There probably are narrow number of situations where a dealer wants to move something and the customer gets close to invoice and 0% financing, but for the vast # of typical buyers, 0% interest means paying more invoice. OR you pay higher interest and get a lower price.


Next people will be saying the paid invoice, got 0% for 5 years and got retail trade in money for their trade-in.

Come on fellas, these aren’t multi-billion dollar corporations because they are philanthropists to their customers.

I think the problem with this line of thinking is mostly that it assumes the manufacturer and/or the finance company give a rat's backside about your individual deal. I've been there from the finance side and I 100% guarantee the finance company does not care. It is the aggregate that matters. They are selling 1000s of loans across a diverse customer base (spreading risk) For them, the advantage of selling some at zero percent means they can legally sell even more at higher rates. Since dealers and manufacturers get incentives (direct and indirect) from moving inventory and getting deals financed, they all win. Is it really 'free', no. Nothing is free. However, only ignorant dealers/manufacturers make the cash price equal to the lowest rate finance deal. My 'free' deal is being paid for by some schmuck who has poor credit or cannot negotiate. (Really a handful of them)

 

[Hay Dude]

Dealers wouldn’t stay in business long is they weren’t making money on their sales.

The “schmucks” who can’t negotiate do exist, but I don’t think a salesman’s says to himself, “I just fleeced Bob out of $5,000 on his tractor, so I’m going to give Tony a tractor at cost”.

I try to make money off every customer of mine, but try to be fair. That’s why I have been successfully self employed for 30 years.

 

[Hay Dude]

Drove by the local Kubota shop yesterday. Their lot was full of shiny orange stuff, wonder how many will be left come October.

Probably a few. With leasing coming on strong, I think we have entered a new phase of the way equipment is purchased/financed. Leasing has been around for 40 years, but it’s now becoming the preferred way to buy.

1. Lower payments
2. Manufacturer warranty for life of lease/dealer maintenance
3. New tractor every 2-4 years.
4. No unfixable technology to worry about

 

[TN8Man]

Probably a few. With leasing coming on strong, I think we have entered a new phase of the way equipment is purchased/financed. Leasing has been around for 40 years, but it’s now becoming the preferred way to buy.

1. Lower payments
2. Manufacturer warranty for life of lease/dealer maintenance
3. New tractor every 2-4 years.
4. No unfixable technology to worry about

I would never lease anything. It's nothing more than a long term rental contract. At least when you buy you have a asset when its paid off.

In my neck of the woods people buy and sell used tractors (and other items) for short term use then sell it and possibly make more than what they originally paid.

 

[Torvy]

Dealers wouldn’t stay in business long is they weren’t making money on their sales.

The “schmucks” who can’t negotiate do exist, but I don’t think a salesman’s says to himself, “I just fleeced Bob out of $5,000 on his tractor, so I’m going to give Tony a tractor at cost”.

I try to make money off every customer of mine, but try to be fair. That’s why I have been successfully self employed for 30 years.

That is my point. You are looking at this from the perspective of a small business owner (or an individual salesperson). Individual customers truly matter and that's a good thing. Big businesses, like manufacturers and finance companies look at a much broader perspective.

It is hard to make a direct comparison because you are providing a service that takes time and spending that time does not create more time for you to spend elsewhere. For a finance company, making a zero percent loan to an excellent credit customer literally makes more money available to lend to lower credit customers at higher risk, but potentially greater profit. Essentially, the lower the aggregate risk, the more money regulators will allow a bank to extend.

Say you have 3 customers that all want a $100k tractor: customer A has excellent credit and could pay cash; customer B has average credit and cannot pay cash; customer C has worse credit and cannot pay cash. Based on aggregate risk, if A pays cash you can only lend to B or C, but not both. If you can get A to finance, you can lend to both. Offering 0% may be the only way to get a high credit savvy buyer to finance. From the perspective of the dealership, they sold 3 tractors instead of 2. The lender made 3 loans at an average of, say, 10% rather than 1 loan at 15%. 300k worth of loans at 10% a year means 30k of revenue versus 100k of loans at 15% a year only being 15k of revenue. (simplified for illustrative purposes). The customers all got tractors. In a sense, everyone wins. Sure, 2 of them pay more interest than A, but B probably doesn't get a tractor if A pays cash. (Maybe C, but usually the middle gets squeezed). Of course, from the manufacturer and finance company perspective, multiply this by hundreds or thousands per day.

 

[Hay Dude]

I would never lease anything. It's nothing more than a long term rental contract. At least when you buy you have a asset when its paid off.

In my neck of the woods people buy and sell used tractors (and other items) for short term use then sell it and possibly make more than what they originally paid.

Thats what I do, too. But you are looking at it from a “small timer” perspective. We are both small timers. The BTO’s are where all the sales come from. I’m talking 150HP-500HP, large square balers, $400,000 planters, etc. Those guys lease equipment like you wouldn’t believe.

They can no longer afford to buy and more importantly maintain this new ultra high tech equipment.


About 4 years ago, Kubota ran a MASSIVE leasing program on M6 and M7 tractors. They are all now “coming home”. If you look at the Tractor House on line, you’ll see 15 or so of them all being offered for sale by PNC Bank. They were the financier or them. I am considering one, but still a bit above my pay grade.

 

[Torvy]

Thats what I do, too. But you are looking at it from a “small timer” perspective. We are both small timers. The BTO’s are where all the sales come from. I’m talking 150HP-500HP, large square balers, $400,000 planters, etc. Those guys lease equipment like you wouldn’t believe.

Truth. For bigger businesses, leases provide advantages. For most of us, they are not a sound choice.

 

[Hay Dude]

Truth. For bigger businesses, leases provide advantages. For most of us, they are not a sound choice.

Back in 2010, I leased my M-126X when I decided to enlarge my operation. It was a great fit for me. I paid it off after the lease was over and out-right purchased it. It ended up not being a very good tractor, but the lease kept the payments low enough for me to make it all happen.

Leases can work for small timers, too. It just depends on your situation. I’d doubt I would ever do it again, but you never know. One of my local competitors leases Fendts and swears by it.

 

[ovrszd]

So what do you call relevant?

What you spend.