Editor’s Note: This article originally appeared on September 15, 2017.

If there is one thing that most farm equipment dealers can agree on, it’s that an excessive inventory of used equipment will put them out of business faster than any other single mistake that he can make.

John Miller, CEO of Valley Truck & Tractor, couldn’t agree more. He readily admits, though, that the challenge of trade-ins for his 9 store Northern California dealership isn’t necessarily of the magnitude that dealers in the row-crop regions of the country have faced the past few years.

“Like many dealers, before we take a trade-in, if it’s a good, sellable unit, we try to have a home for it. But if it’s a piece of junk with 20,000 hours on it, then it’s sent to a dismantler,” he says.

With the intensity and year-round nature of California agriculture, the latter is a normal scenario.

Another factor that plays a significant role in the trade-in process is California’s Carl Moyer program. Officially, it’s called the Carl Moyer Memorial Air Quality Standards Attainment Program. This is a state of California engine retrofit and replacement program implemented through the cooperative efforts of local air districts that provides grant funding to encourage the voluntary purchase of cleaner than required engines, equipment and emission reduction technologies in an effort to reduce air pollution.

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“A lot of tractors go straight to the scrapyard,” says Ron Keyser, Valley’s corporate sales manager. “This is one of the reasons we don’t get a large volume of trades.”

“But when a trade is involved, we have processes in place that pretty much removes the sales people from the decision making process,” Miller explains.

“If it’s a sellable trade, the salesperson takes pictures of the equipment and collects the pertinent data. They then send it to me and it’s distributed to a select group of sales people and we ask for their input on what they think the equipment could resell for,” Keyser says. “If it’s a tractor with 8,000 hours on it and it’s obvious it will need a lot of work, we wholesale it immediately.”

For valuation purposes, he says they utilize various sources including Iron Guides, Machine Finder Pro, Machinery Pete, etc.

Big Ag Trades

When the trade involves large equipment like a combine for high horsepower tractor, the process becomes a bigger project and the owners and other managers become involved.

“If we determine it’s a sellable trade, we’ll also send an experienced technician out to inspect it. We’ll also dyno test it,” says Keyser. “Some things will get by us, but overall we do a good job to minimize our exposure.”

Keyser adds that he’s been surprised in some cases how some dealers value trades based only on the salesperson’s estimates. “We know this because customers tell us what other dealers are offering them and it’s often times not very close to how we value it.”

Because management takes the responsibility for valuing a trade, the salesperson isn’t penalized if a mistake was made, Miller explains. “If there’s a deficiency and it wasn’t caught, it’s management’s fault and the salesperson isn’t penalized for our mistake.”

Another thing that makes Valley's market so unique when compared to dealerships in the central part of the country is that the trade volume is very low. “I would estimate that less than 10% of our sales involve a trade,” say Keyser.

“It seems in the Midwest everything involves a trade,” adds Miller, which creates another interesting scenario for the dealership. “Over the years there’s been a lot of equipment, especially combines, that come from the Midwest out here because customers are attracted to buying late model stuff.

“Maybe they don’t want to buy a brand new one and so they go back there and they find a late model unit that’s fairly cheap,” Miller explains. “Of course, we’d rather sell it ourselves, but quite frankly, as far as I’m concerned, as long as it’s green, I’m OK with it. Because you know what? As long as it’s green, we’ll make more money off of it than the dealer in the Midwest because now we get to sell the parts and the service on it. If it’s a red one, it does us no good because we’re not going to sell the parts and service on it.”

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