There have been signs that dealers are starting to feel better about their improving used equipment inventories over the past few months.
But the one dark cloud that still seems to be hanging over the industry is the impact that the high volume of equipment leases could have on the used machinery situation. One dealer commented, “Customers have grown accustomed to leasing programs and it will take some time for customers to choose buying over leasing.”
But, so far, leased equipment hasn’t produced a material impact on dealers’ efforts to reduce inventories, according to dealers surveyed for the April 2017 Dealer Sentiments & Business Conditions Update report.
In his Quarterly Used Values Index report for the first quarter 2017, Greg Peterson (“Machinery Pete”), noted little impact as the result of lease returns. Regarding the used equipment situation, Peterson said, “So far we’re not seeing used values affected materially by the wave of tractors coming off lease back into the used market.”
He added that during his travels in the last several months he’s “definitely noticed growing lines of off-lease tractors sitting on [dealer] lots. But it’s somewhat strange, the dealer isn’t, so to speak, ‘on the hook’ for all of them, and this of course affects how they are thought about, how they are marketed, how aggressively they are pushed.”
In fact, he said, he’s seeing growing volumes of used tractors being leased by dealers. “This plays well into the current profit-challenged environment for farmers. Finance companies are having success selling off-lease units back to dealers who are positioned to be aggressive buyers.”
Peterson added, “So far I’m still not seeing a wave of off-lease units washing up for sale at auction.”
“I couldn’t believe the very, very strong auction sale prices I saw roll in from all points in North America, on a wide range of used equipment, but most notably on very large, very late model items. That’s just exactly the segment of the used farm equipment market that has been under so much pressure going back to spring 2013 when commodity prices fell from their lofty perches,” he said.