Buying used equipment
Subscribe to the Successful Farming Podcast:
Jodi:
Welcome to the Successful Farming podcast. I'm Jodi Henke. This podcast is brought to you by Grasshopper. Do more on mow day with a Grasshopper mower. Made for a smooth cut from the fields to your front lawn.
Jodi:
Buying used machinery and equipment is just as much effort as buying new, and probably even more, to make sure you're getting what you're signing on the dotted line for. Joining me today, is Dave Mowitz. He's the executive machinery and technology editor for Successful Farming.
Jodi:
And Dave, there are various ways that farmers are buying used, auctions, dealers, and so forth. So, where do you start?
Dave:
The sources of used equipment vary by its age, really. It's surprising. And generally, about 60 to 70% of all used equipment is found at dealerships. I think people are surprised by that. That 40% or less is at auction. And that has changed recently for reasons that I'll talk about a little later, and that has to do with COVID, believe it or not. But you find a lot of used equipment. Now, I have seen just scant industry figures about that. So here I'm just using a thumb in the air type of appraisal of how much equipment sells.
Dave:
If you're talking about late model equipment, used equipment, that predominantly is at dealerships. If you're talking about older equipment, that's predominantly at auction houses. So if you're looking for a 30-year-old tractor, you're going to probably buy it at auction. If you're looking for a five-year-old tractor, you're going to probably buy it at a dealership. So that helps define that, and you guys know that already. But anymore with the internet being the way it is, and that's how guys are looking for equipment. Now I can't get in the car like we were doing it 30 years ago, driving around and seeing what the local dealer has. Now, you search for equipment across the country, because the internet has provided that ability.
Dave:
Everybody lists online. The dealers actively list online, not only on their own site, but say, their manufacturer has used equipment site, they'll list there. And then they'll also take out listings on websites such as AuctionTime.com or bassline.com. You'll see a lot of equipment listed there and that's dealer, primarily all dealer equipment that they're putting up. So it all depends on where you're looking. It becomes a little ubiquitous after a little while when you're looking at used equipment, but it helps to know where your equipment's at. But the one thing that's overriding used equipment today is that farmers have the ability to be able to buy, not only in the next-door county, not only in next-door state, but across the country, and be able to find a piece of equipment that fits certain needs, purchase it, make arrangements for transport, even financing, all online. They don't have to be in-person to trade out equipment.
Jodi:
It's important for people to know exactly what they want when they start looking, and do they start with the dealer? Do they start with the internet? How does that work?
Dave:
I'd always start with the internet to find what you're looking for. Most guys know. If you're looking for a late model tractor, a very popular tractor for example, four-wheel drives and truck tractors, a lot of guys will be looking for those type of tractors that are anywhere from one year to five years old. They'll be on the internet looking for them. These are tractors that are not going to get a lot of hours put on them, and they don't necessarily need them new, but they are looking around at what's going on, or they're looking for a late model combine what have you. Other guys will look online, if they're looking at used equipment, to try something out. There's a story recently on Successful Farming Magazine about high-speed disks. These are the disks that fly across fields at eight to 12 miles an hour or faster.
Dave:
And there's not a lot of them available. In fact used, there's almost none available. New you can find them on dealership lots. Some guys will sit there and say, "You know, I've always wanted to try that out," which could do by asking your dealer to have a demo, or maybe a demonstrator unit brought out and you could use it, and that'd be one way to get a feel for it. Or if you decide, "Hey, I'm going to try it on so many acres, but look, I'm going to use it on all my soybean ground." For example, soybeans have less residue and you think that might lead a better job enforcing far across field. You'd be looking at a late model high-speed disk, but there's so very few of them on the marketplace. So in that case, you almost have to debate whether you want to buy new, because the price difference between a late model used piece of equipment, and new can be very narrow, or it could be quite broad.
Dave:
Which is what happened after about 2013, commodity prices of course collapsed. And there was all this equipment that had come in on trade during the go-go years, the $7 corn. And it was just sitting on dealer slots. And so their guys were able to cherry pick late model, low-hour equipment and get it with extended warranties for bargain prices. At the time, I remember writing a story saying, "You know, you could buy a combine today." This is 2015 and I predicted you could buy a combine in 2015, maybe one or two years old, have an extended warranty to cover it for three to four years, and then sell it for as much money as you paid for. Now, how is that possible? Well, we knew what was happening in the marketplaces. Very little new equipment was selling at the time, and all this used equipment was selling on dealers off the press. We knew eventually we'd run out of used equipment because there's not enough new equipment recharging the used inventories.
Dave:
And so that's where we're at today. So this is where my guidance to farmers and ranchers are, is that go on the internet. You already know what kind of tractor you're looking for. You know the brand, model, more or less years that you want, how many hours you're looking at, how you want it to be equipped. And that makes a difference. But you want to get down to the hard work of figuring out what you want to pay for that. And I always caution guys, before you go talk with a dealer and start dickering with them, or before you go to auction and start bidding, know what your final price is. You've got to lock that in, and you can do that by doing what I do. Hit the internet, you go to websites and you see what equipment is selling for. And that'll allow you to actually put together a price list which is what I do in every issue of Successful Farming magazine.
Dave:
I'll pick a piece of equipment and I'll actually have a price list in there. And now I'll run averages and by year and hours and so on and so forth for the product, it's not that I'm some super intelligence swami of used equipment information. It's just that I spend a lot of time on the internet seeing what stuff is selling for, or asking prices. Both. That's one of the things that you need to be wary of when you are price searching and determining what your final bid is. Dealer asking prices are different than auction sale prices. And typically dealer asking prices are higher. They can be anywhere from 10 to 40% higher, usually about 10 to 40% higher. And that is the dealer took the equipment put them on trade, they probably reconditioned it, they may have an extended warranty they put on it, they went through the machine and made sure that it was structurally sound, mechanically sound.
Dave:
And they also stand behind that machine that they're selling on their used lot. That's not true in auction. You're buying as is, as it sits there. Now true, there's a fair amount of dealer equipment being sold at auction, but there's also a lot of farmer equipment that came in right off the farm went right to that auction. So you need to be leery of the price difference when you get into that. And then what you're getting into for price now that I'm mostly talking late model equipment here. And that's also the other proviso that I have. When you get into older equipment, 10, 15 years old or older than that, it's a different ball game entirely. Well, first of all, prices are across the board because the hours on let's say a tractor, can be across the board. You can have a 20 year old tractor sitting there with 3000 hours, 2500 hours. Boy, that is in good shape.
Dave:
And then one that has eight, 9000 hours really looks questionable and the price difference is going to be huge. So that's part of your price investigation. Is what you're looking for in age, what you're looking for in hours, how it's equipped. I'm right in the middle of doing research on Case IH combines, and do they have real wheel drive or not? And that makes a difference on price. Does it have cracks or not? Huge difference on price. So you're defining what you have there, and then you're sitting there looking at that range, and you're saying to yourself, "yeah, $135,000. I'll bid that. That would be my final bid on that tractor I'm going for."
Dave:
The neat thing about this is first of all, you can tell your banker, and your wife, "I'm going to buy a new tractor. I need a new tractor, I need the technology. I need a new combine. I just need this. And this is what they're worth." And if you walk into a banker and you have a printout sheet of all the prices you've gotten out of 20 or 30, say combines, that's pretty impressive. Your banker's going to say, "he's done his homework I'm backing them on that." And so you all feel better. You will when you go to negotiating price or bidding, and certainly your wife will, and the banker thinks you're pretty impressive.
Jodi:
Dave, when you think you found the machine that you've got to have, your banker says you can have, your wife says you can have, another person you should speak with is the seller, the person who last owned the machine and get the machine's history and maintenance records. How important is that?
Dave:
I can't stress it enough. Now true, on late model equipment with low hours, maybe not as important. A situation I was looking at going to an auction next week, and it's for our television show, Successful Farming show where we do a report called Steel Deals. And there's a 2020 combine selling. Well there, you pretty much are sure and at real low hours, you don't have to worry too much that it's worn and torn. That's pretty common sense. You get a combine that's eight, nine, 10, 20 years old, way different deal. And I particularly emphasize that whenever you're buying major ticket items, that's anything roughly described as something that has an engine and transmission because when it gets into the tillage equipment, it's not as important to do this. But when you get in the major items, call up the guy listing the equipment.
Dave:
Now certainly with a dealer, you're going to be able to go talk to the dealer about that. He knows the farmer that used the equipment before you can vouch for that person, but they can give you the name of the farmer, call them up and say, "what do you use a tractor for?" Why would that be important? You're thinking, well, what if it was a loader tractor? And it was used on a livestock farm? Man, way different deal than if it was a loader tractor used for light work around the farm because it'll affect... being used as a loader tractor affects its transmission and structure. You asked the guy for the service records, the previous owner. That gives you evidence that it was serviced on a regular basis. And it could be an own service records if he's doing his own oil changes, but it shows that it was well-cared for, and then you get in the second stage of things.
Dave:
Now you're getting serious about this. You're at an auction, particularly in auction. You want to get this information ahead of the sale, go and look at the equipment. And again, this is defined as anything with an engine and a transmission. Well, take a pause here. You should look at all equipment that you're going to be buying either at a dealership or at auction, even if it's tillage equipment. Pretty simple, you'd think, but there you'd be amazed by tillage equipment that's been used a lot or that has had a fair amount of wear like high-speed discs, their discs wear fast. And if you're looking at tillage equipment that may be a really nice looking thing, great paint is always shaded, but if the discs are worn, the shovels are worn, if the finishing equipment is worn, you can get into a pretty big repair ticket buying replacements for that.
Dave:
So you want to look at everything nearby, but anything with a tranni and an engine you want to get on that machine, start it up, look at what kind of smoke it's producing for example, dark, black as opposed to blue, as opposed to a gray smoke could all be an indication of something wrong with the engine. I'm always surprised guys, I'll see this at auction, they'll get on at a tractor that has 8000 hours on it or around that. They'll start it up, they'll sit in the cab and rev it up down, rev it up and down then that's it. You're kidding me guy. Get out of the tractor cab and walk around and listen to the engine on both sides of the tractor, because the noises that can make, then engage the transmission and have somebody stand outside for you. And listen, when it's operating, you want to listen for noises that are producing it. That could indicate a very serious problem.
Dave:
I always so highly encouraged people that if you're getting into a big ticket item, you may want to engage a mechanic to go look at that machinery and see what you're getting into as well. Hire him to go see the machine, drive the machine, get his professional opinion. This is particularly true if you're buying online, and you're not going to be there in person. Now, a lot of auction houses, they'll not only give you the information. By the way, the sign of a good auction house is, they want you to know everything about a machine, both the good and the bad reputable outlets will do that. They don't like to get a reputation of selling shoddy equipment. You know what you're getting into, they'll tell you what you're getting into, what they know as much as possible. They'll give you the owner's name and they'll also make arrangements to get a mechanic out there or somebody to inspect the machine, or you can even hire them to do it. But if it is an auction, go to the auctioneer, call them up and get the information.
Dave:
So that's it for ag equipment. Now, as much as it's important to inspect machinery and get it's background information for ag equipment, it's even more so when you get into semi-trucks and construction equipment.
Jodi:
Dave, construction equipment is a whole new ball game when you're buying used equipment. And what are some of the things you should be looking for and why are they a little different from agricultural equipment?
Dave:
Well it's... It wasn't run by a farmer. It's always assumed that farmer owned equipment is bringing a price. At this auction I'm going to next week, there's a Volvo semi- truck up for sale bought by a farmer new, and owned by a farmer all the way through. It will bring, I bet 20% more just on that fact alone because farmers trust other farmers are taking good care of their equipment. But you don't know how that truck was used unless you really investigated the juice. And you found out the previous owner that's listing it either from the dealer, or from the auction house because wasn't used for short hauls... for long hauls on the road, or was it used for short halls in a city? In a city it's going to have much more abuse on the system. A lot of starting and stopping, a lot of drag on the engine.
Dave:
Not only that, the owner of that truck was certainly oftentimes not the guy running the truck, if it's a fleet of trucks, for example. And this is true also of construction equipment as well. Oftentimes they hire people running them and they may not be taking care of that truck as they would their own. So you got to be aware of what you're getting into there. And this is why you need to get the VIN on that truck, and really look into the truck itself. Again, call the owner, get the service records, go online and do some research about the truck itself. We're pretty married to our collars when it comes to farm equipment. Trucks? Maybe not so much. So you're just looking at any semi that fits a certain category size for you. And there's a difference between manufacturers and the engines they're using in their trucks and the histories they have had with that.
Dave:
So go online and see what you can get from discussion groups about opinions of professional drivers, about trucks that they've run, the brand trucks that they run, which are better and which are worse, a good example that Peterbilt is the gold standard, that you pay a gold standard price for Peterbilt because they are built tough as nails. I'm not so sure. That's always necessarily justified but it certainly brings a higher price where there's other trucks that are just out there for short lives. They'll put a million miles in, maybe 800,000 miles in and now they get pretty long overdue. Their engine is not far away from undergoing a major overhaul. Construction equipment, it's even more important because now you got that stuff is on a construction site and it's being abused, possibly. It's doing a lot of hauling. It's just not being used like on a farm, it’s this sporadic use on equipment.
Dave:
On a construction site, that's skid-steer loader, backhoe or excavator is being used every day except weekends. In winter, and in summer. In pretty tough conditions too. And it's expected to work and they'll just wear out a machine and then sell it and go on and get a new one. So you want to definitely do a physical inspection of the wear parts on construction equipment as well as, of course, the truck itself or semi-truck. By the way, this also extends the truck flatbed trailers, as well as hopper bottom trailers. I've had guys tell me they bought a hopper bottom at auction, they really never looked it over and they got it back and they found cracks in the frame, and cracks in the dump well, on areas like that. So you really need to spend some time looking at that machine before going into it. But there's so much information online now that greatly helps you.
Jodi:
Can you give our listeners some ideas of good, respected websites that they can go to, to look up prices and get the information that they need?
Dave:
Well for dealer asking prices, machinefinder.com. That's a dealer website, it's extensive. Really the most extensive. But Case IH also has a used equipment listing site, as does New Holland, but machinefinder.com is second to none. On auction houses, I've a lot of dealer listings. You can go to AuctionTime.com or TractorHouse.com or the same area. Fastline is good, they also list auction prices on occasion in there too. Remember the difference between dealer asking price and auction price. And then a great site started by a young man at Iowa state, Kyle McMahon, I think he's in the sixth year of operations. It's called tractorzoom.com. Auction houses will use tractorzoom.com for listings of upcoming auctions. And he created this site that you can go on and type in the machine you're looking for, it'll show you where they're selling, at auction. But not only that, he took it a step further and created another website under that umbrella called ironcomps.com.
Dave:
And that is all the repository. Everything that's sold from the dealers that use tractorzoom.com. By the way, I think they're approaching 40 or 50 auction houses. This is the largest auction house listing in the country today. And it has auction houses from Pennsylvania to California listing on him. It's a huge success story Kyle's put together, but Iron Comps is cool because you can go in there and say John Deere 4440 and you could put shore tractor and you type that in and you have to pay for this information by the way. But it'll give you all the auction prices and all the information and give you some detailed analysis of what's going on there. So love that site. That's a great one. And then there's just any number of online auction houses to go to, not for pricing information, but certainly one that's been a huge success story is bigiron.com.
Dave:
The Stock brothers out of Columbus, Nebraska actually St. Edward, Nebraska back in 2008, all these guys that would normally have retired, decided to continue farming because crop prices are great. And the Stock brothers found themselves running out of options. So they experimented with an online auction where you could buy and sell online. And today it's become a huge success. They'll sell 1200 to 1800 pieces of equipment every week. And the cool thing about it is if you're going to sell equipment, older equipment, from your farm, you can do that, and you don't have to take it to a new place. You can sell it right from your farm set. You list the equipment that are represented then come out, and take pictures, put details, put it up. It'll sell at a time to auction and you get a check in the mail. The guy who bought it shows up one day and he loads it up. So this has become a huge entity of online buying and selling virtually. Especially when COVID shut everything down last March, all auctions went virtual.
Dave:
We still have now a mixture, some live auctions, but they're almost all virtual. And the vast majority of used equipment sold at auction is going to be selling virtually from here on out.
Jodi:
Do you think live auctions are on their way out?
Dave:
Well, Scott Stafford and Dan Sullivan, two of the larger auction houses that you'll find in the country. I think very highly of both of those men. Both say the same thing, when it comes to life events, a retirement sale, or the state sale, they'll probably hold those live. And back to the sale we're going to at Fort Dodge, it's a retirement sale. The guy wants to see his equipment sell so that'd be a live sale. But certainly consignment sales have gone almost entirely virtual unless it's smaller items, you see sales out east which is a community auction house, and they'll still have the live auction. And they're returning now that we're getting a little safer with COVID, hopefully everybody will get vaccinated in this summer, I'll see them returning. But the fact is almost every auction will be virtual from here on out.
Dave:
So it became so effortless and it's so secure now, that's the other cool thing about virtual auction. When I first started covering online auctions 25 years ago, the eBay style auction, there was a question about, are you sure you know what you're getting into buying something online? It's not the case anymore. Reputable auction houses. You're pretty darn solid with what you have. Go to BigIron sometime, they'll have 20, 30, 40 pictures of a tractor, for example, and all the details there. And again, you can contact the auctioneer and get information or contacting the owner his information is there, and then you can bid from the comfort of your office or in a tractor camp planting corn in the spring. So that's the other cool thing about it is, you're not limited by taking the day off and going to an auction or driving 107 miles. You can be buying a tractor across the country and be able to do it with some assurity.
Jodi:
That's excellent. Excellent advice, Dave. Thank you. Thanks Dave Mowitz for being my guest, to Grasshopper for sponsoring this podcast, and thank you for listening. For A Successful Farming, I'm Jodi Henke.