This week I had a chance to talk with Dirk Mitchell of Mitchell Equipment. Our conversation was about how to categorize used equipment during the trade evaluation process. The great thing about doing my podcast is that I get to listen to others and how they are solving problems. Like Dirk, I am still trying to find the best way to implement this practice. We both have a good idea of how we want it to look; it’s the implementation that is holding up moving forward. What does that look like? How big of a cultural shift will it create? All of these questions must be answered, and standard operating procedures have to be put in place to categorize used equipment.
The biggest hurdle to overcome is what is in each category. Not all machines are equal. Just because a row-crop tractor is 1 year old and has 500 hours, doesn’t make it a premium tractor. The machine’s working conditions, maintenance schedule and the amount of time spent in the shed are all factors in classification.
The age and amount of reconditioning each machines needs is the difference between a certified pre-owned approach or, an “A,” and a “B” machine. These machines go through the shop and get reconditioned as close to new as reasonably possible. In my opinion, an “A” is a premium machine traditionally sought out by used customers year in and year out. The owner trading the unit has a reputation for excellent machine maintenance, obsessive about cleaning, and rarely does the machine spend the night outside. Because the owner has gone above and beyond standard caretaking, reconditioning is as simple as warranty repairs and any scheduled maintenance. A machines are a tiny percentage of the used equipment population. B, C and D have fewer standards.
B machines require more to make them an A. This machine will need a complete comprehensive inspection completed outline primary, secondary and tertiary repairs. The amount of reconditioning outpaces the dealership’s ability to regain the associated costs. So, in turn, this machine will have only the primary and safety components repaired, which have a high chance of failure within the next number of defined hours. For me, this would be a regular season of use. The rest of the repairs are not accounted for, and the price of the machine will reflect the amount of secondary and tertiary repairs not completed.
C Machines are “as is” machines. Like B machines, a comprehensive inspection is completed outlining primary, secondary and tertiary repairs. The pricing reflects the “as is” status, and repairs sold on an a-la-carte basis. During the sales process, any reconditioning is added to the price or used as a point of negation. These machines should be the most profitable and give sales staffs infinite latitude to make a deal happen.
D machines are bought with the sole purpose to take to Auction or find a Wholesale Solution. In most cases, they are old enough the local market will not support a profitable and speedy resale or, the condition is less than desirable. During the sales process, any recondition, outside of safety, will prove hard to recover. These need to be sold and washed out of inventory as soon as possible.
So why is this important? Why go through the headache of implementing and redesigning the culture of used equipment in your company? The number of machines sold over the internet year after year is increasing. When the used buyer calls, with good pictures, videos and clear descriptions of the machine, the phone call will be more about buying strategy and less about discovery. At the dealership, this will speed up the selling process and rate of inventory turn. At the dealership level, this will require change. Not just with an online presence but with mindset and approach to selling equipment — online or otherwise.
Farm Equipment‘s Ask the Expert: Used Equipment series is brought to you by Iron Solutions.
At Iron Solutions, we provide used equipment valuations, market intelligence and a suite of integrated, cloud-based business systems custom-tailored for the equipment industry. Our proprietary model is built on actual dealer sales transaction data. Learn more…