Editor’s Note: This article originally appeared as part of the Dealership of the Year coverage of Johnson Tractor in the July/August 2012 issue of Farm Equipment.
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Tired of losing customers to wholesale auctions and farm sales during the lean years of 1982-86, Leo Johnson, partner, Johnson Tractor in Janesville, Wis., found survival in a “If you can’t beat ‘em, join ‘em” approach. He was soon an active participant in anywhere used iron was being sold. “Buying and selling used equipment got us through,” he says.
The need to truly understand used equipment dynamics is a lesson learned he carries with him today. “Farmers are only going to pay so much on the retail side, so you have to be smart buyers,” says partner Eric Johnson.
“We learned that everything has a price,” says Leo. “While there’s no ceiling on the value of a nice piece, there’s also no floor on a poor item.”
Leo says much of his job is trying to identify the trade scenarios that allow the dealership to maximize value upon resale. Then, it’s working with the salesmen so they’ll see the value, or lack of value, in the equipment so we aren’t too conservative (losing sales) or too aggressive (overpaying). “If we do our job right of educating our salespeople, we don’t end up with salesmen trying to sell us on taking in the unit.”
Eric notes that over the years, everyone — salesman, customers, other dealers — have tried to promote matrices and formulas that state, for example, what, a Class 7 combine with 500 hours, should trade at every year. “But we’ve never embraced formulas,” says Eric, noting variety of customer uses, types of operation and terrains influence the condition of a unit.
Leo adds that “As you grow, that type of formula is desired even more. But we say let’s forget about formulas and dial down with each salesman and each deal. That’s another thing that’s tougher to do when you grow. Here we have 8 salesmen in 2.5 stores. Think about doing it with 40 guys and 10 stores — that’s a real challenge.”
In addition to paying attention to auction sales results (through AuctionTime and others), another important tool is the dealership’s own appraisal worksheet that is available via every terminal in the DIS computer system. It memorializes all trades the company attempts to establish a book value for, including the many lost deals. It allows staff to sort by model number and compare pricing of units over a period of time. While used equipment pricing is anything but a science, Leo believes the dealership does as good a job as any in placing quotes on used equipment.