The summer of 2014 marked the beginning of a downward trend for used equipment prices, particularly for late model equipment and large machinery. Now, after a four-year spiral, costs have bottomed out. Dealers are asking for similar prices for the same equipment as they did last year. This puts equipment and machinery at 60-65% of their value compared to 2014. While farmers looking to buy equipment may rejoice at the low prices, not everything is good news.
The Good and the Bad of Low Used Equipment Prices
The halt in plummeting prices ends the growing gap between the values of owned equipment versus new equipment. This is great for farmers looking to buy used large or late model machines as prices remain at an all-time low. Because prices have bottomed out, the used machines are likely to retain their value as well. Dealers are even providing low-interest financing options, so the time to buy used machinery is now.
However, there are drawbacks to low equipment values. Decreased equipment values tank farmers’ relative borrowing power at the bank as lenders may disagree over the true value of their farming operations. Farmers can help mitigate this issue by researching what their equipment is worth. Finding recent sales on auction sites of similar equipment can give farmers an idea of what their machinery value is.
Controlling Equipment Costs
Even though costs are at a historic low, machinery expenses across the board are rising. This is in large part because farmers are upgrading their equipment with the latest technology. Farmers need to assess their equipment needs to prevent costs from exceeding their means.
This is not always a simple task. Farmers have many questions including whether they should trade their large machines now or hold off, should they downgrade their equipment, or should they work for longer during the day. As the premier agribusiness insurance provider, Cline Wood can help farmers answer these questions and more. To learn more about managing farming expenses, contact us today.
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.agribusiness blog, agribusiness cost control, agribusiness coverage, agribusiness risk