I received the following question this week from a reader:
"The February 2019 Farm Journal has interesting coverage on Greg of Machinery Pete and data. Article says that rule of thumb from decades of data shows avg. auction price tends to run 72-76% of the average dealer advertised price on equipment in good condition ... Is this still a good rule of thumb for today?"
As a rule of thumb, I would say it is true. I think in the market we are in today percentages are little bit tighter and will continue to tighten up over the next 5-7 years. Where the thinning of the gap is the highest are on machines that are 7-10 years old. In many cases, machines are selling for similar numbers as advertised on the the Internet and on dealer lots.
I really think the next 5-7 years, the auction value and retail value will be simply separated by 10%-15%. What is going to drive this will simply be the number of buyers interested in used equipment. As farming operations get bigger and the number of “traditional used buyers” are taken out of the market, the ag equipment market will mirror the construction equipment market. Retail and auction values have a very small gap, merely separated by the services the dealer offers. What is financing, taking trades, and standing behind the the equipment sold worth to the end user? That will be the premium added above what auction value brings.
Thanks for the questions and for more topics like this checkout my podcast, Moving Iron Podcast. It can be found on iTunes, Google Play, Stitcher Radio, TuneIn Radio, SoundCloud, and by searching #AgEquipmentBusinessTalk. So until next time, let’s go move some iron!
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