While 2020 presented unique challenges for dealers and producers, the year also prompted opportunities and renewed optimism in the ag equipment market.
“If 2020 taught us anything it was that we can never guess what the market is going to do,” says Brian Schrock, an AgDirect® territory manger based in Missouri. “Despite the initial disruptions and shortages resulting from the COVID-19 pandemic, we saw strong buyer confidence and the volume of purchase and refinancing activity we experienced exceeded our expectations.”
Several factors including low interest rates, government payments and grain market rallies contributed to the surge in machinery spending.
“Record low interest rates drove a lot of the spending, especially with well-maintained used machinery as equipment manufacturers worked to ramp production back up to meet producers’ needs,” says Schrock. “The government payments that came into play also helped many producers pay down debt or make upgrades.”
Schrock adds that while the grain markets have started to stabilize, the rebound created an opportunity for producers to capture good pricing moving into 2021. He says all these factors could continue to build momentum for another banner year.
Looking at the year ahead, Schrock expects to see patterns of normal trade cycles with tractors leading the pack followed by high ticket items, like combines, planters and sprayers, and seasonal tillage and haying equipment.
In terms of where machinery purchases have been taking place, he says dealerships continue to carry the lion’s share of equipment sales, however the auction market has gained a lot of traction.
“Last year our auction financing volumes exploded,” says Schrock. “Typically the auction market picks up over the winter and into the first few months of the year, but now with online apps and bidding services producers can find deals on quality used equipment year-round.”
According to Schrock, refinancing and leasing activity will likely be strong areas of focus again in 2021.
“Interest rates are the lowest they’ve been in the last 10 years, so now is a great time to evaluate any existing loans and refinance with a better rate or extend payment terms,” he explains. “We also saw leasing take off in the last year which can be a great tool for managing cash flow and tax liability.”
Working with your dealer and equipment financing partner
Just as dealerships have adopted new practices and expanded their service options to accommodate pandemic related safety measures, ag equipment lenders have also worked to streamline and digitize the equipment financing process.
“Fortunately, our digital tools and online application process were already well established prior to the pandemic which allowed us to quickly provide the same level of service our partners and customers have come to expect,” says Schrock. “The utilization of our electronic signature platform has increased significantly and saved many customers a trip to the dealership. Using eSign, customers can digitally sign their documents from any location.”
With less used equipment on dealer lots and manufacturers still gearing back up, Schrock advises those planning to make an equipment purchase this year to be ready to act once they find what they are looking for.
“I’m excited for 2021 and optimistic interest rates will be favorable for purchases, leases and refinancing activity, but a lot of that will depend on the availability of new and used equipment,” he says.
“It’s a good idea to research the equipment you’re in the market for, calculate your costs and have your financing lined up before you buy. At AgDirect, we can help speed up transactions through our pre-purchase credit approval process.”
AgDirect offers competitive rates and terms for both new and used equipment purchases. Check rates, quote payments and compare options with our free AgDirect Mobile application, or learn more about AgDirect equipment financing by locating your nearest AgDirect territory manager or contacting the AgDirect financing team at 888-525-9805.