While it’s no secret commodity prices influence producers’ machinery buying habits, there are a number of factors and questions to consider when it comes to knowing when to replace versus when to repair and retain.
“The decision to trade equipment can be made for several reasons,” says Nick Johnson, AgDirect territory manager in Oklahoma and Texas. “Sometimes it’s advantageous to trade when machinery is out of warranty, other times trading may be necessary to avoid costly breakdowns.”
“It also depends on what part of the country you’re in and what equipment is worth in your area,” he explains.
For example, cotton equipment in the South-Central region has increased in value over the past five years, allowing producers to trade more frequently. Meanwhile, wheat, corn and soybean producers have held onto their equipment longer.
Other factors influencing equipment trade-ins include new technology and the number of acres farmed.
“The number of hours being put on a machine in a year makes all the difference,” says Johnson. “When you’re considering a trade-in, it pays to think about your operation’s needs, your equipment usage and any future plans for expansion no matter what current commodity prices are.”
Although larger operations tend to update machinery lines more often, Johnson says technology plays an important role regardless of operation size.
“From seed to chemical, all producers are realizing the benefits new technology can afford, including increased cost savings and improved accuracy in the field.”
Maintaining machinery value
Because the costs of owning and operating equipment fluctuate, it can be difficult to keep a pulse on the economic life of machinery for trade-in purposes.
According to Johnson, it’s not uncommon for producers to overestimate what their equipment is worth. To increase the likelihood of attaining a higher trade-in value, he advises following basic machinery best practices.
“Proper maintenance is critical to the value of your machinery assets,” he says. “Along with storing equipment and keeping it out of the elements, it’s also important to take advantage of servicing during the winter months to ensure you’re staying ahead of any problems.”
“Neglecting routine maintenance or running equipment too hard can hurt you at trade-in time – sometimes by tens of thousands of dollars in severe cases,” he adds.
In today’s high dollar machinery market, the decision to trade versus buy and sell often depends on which method drives a better bargain.
“We’re seeing more auction and private party activity,” says Johnson. “Producers have become more educated on what deals are out there and they aren’t afraid to shop around.”
Still, he says one of the best ways to keep up with the latest trends in the equipment market is to develop a relationship with your local dealer.
“Every customer’s situation is different, so by communicating with your dealer up front they can have a better understanding of what you’re trying to accomplish, put different financing options in front of you and come up with a solution tailored specifically for you and your operation.”
Ask your equipment dealer about AgDirect financing the next time you’re ready to trade or make an equipment purchase. To learn more about AgDirect purchase, lease or refinancing options, locate your nearest AgDirect territory manager or contact the AgDirect financing team at 888-525-9805.