Combines Too Bad Deere didn t update it s Resale Value

[Jollygreen]

Sorry, I missing your point, please update me.

 

[greenstrat]

just thinking out loud about the tremendous burden of so many combines sitting looking for a home. Dealers apparantly were pushed by deere into what looks like to me to be a kind of pyramid scheme to keep the workers busy on the assembly line and lucky dealers seem to be the one holding the unpaid for inventory of rollovers. I wonder how long before many deere dealers are pushed out and deere itself becomes the dealer. Then again, I could be wrong... GS

 

[Jollygreen]

I understand now your point. It is now cheaper per hour to rent a machine than buy one . That too will cause there to be unsold combines as these combines come back from being rented and there are no buyers.

 

[Unit_2]

Don't know how many custom harvester are here, but I have said for a long time that all those harvsters that trade combines that have only 300 to 500hrs on them are cutting there own throats. A deeler has a hard time selling them to a farmer but he can rent them out to a farmer and there goes the job that a harvester was planning on cutting. I've seen that happen many times. K.A.

 

[greenstrat]

Still looks like the dealer will have to bear the brunt of the hardship here. It's hard to change guys' buying habits when they have already gotten neck deep in the lease till your broke thing. After about three re's on the lease they have as much in one as if they owned it but they actually have nothing. One thing is for sure, if you want an older machine and aren't afraid of wrenches you are in the driver's seat. Kind of like what has happened to the heavy truck market. GS

 

[Chris]

Some of the lease deals aren't as bad as you'd think. I'm not saying that every one is a good deal, but you've got to take a really close look at all of the costs involved. If you want to stay in a newer machine, why buy it and be stuck with it if you can finance it cheaper through leasingIJ A lot of folks that think so much of owning equipment are costing themselves a lot of money. If you buy a brand-new machine, you really lose a lot of money, even if you keep it for an extended period of time. Keep it until it's paid off, and you'll find that you've got something that's worse than nothing; you'll have a machine that's worth a whole lot less than what it's worth. Buying older machinery and working on it yourself can lower your costs, but then again, you can find deals to lease that equipment cheaper than you can own it, too.

 

[greenstrat]

hi chris! I know that the lease is probably here to stay. I guess owning has it's disadvantages too.. but for the dealers it looks like the lease_roll biz has just killed their sales. I can still own an older but just as productive machine including all repairs for about half the lease payment on a new one. Could you tell me how it will help me to do thatIJ Interesting question though... GS

 

[Chris]

You're right that the current glut of used machines out there has made it difficult for anybody that has any equity in a machine, whether it's Deere Credit, a dealer, or a farmer that wants to update machinery. This helps the guy that wants to own an older machine and turn his own wrenches, but you don't have to farm too many acres before downtime on a machine costs you a lot of money, on top of the money you spend on repairs. I know that Machinerylink was offering 9610's for fall harvest at $18,000 a year, and they covered the repairs. I figure that for $18,000 a year, you could buy about an $85,000 machine with 20% down, financed for five years. At the end of the five years, you'll have a machine that you've tied up $108,000 in, and it'll only be worth around 30 to 40 thousand, tops. If you figure the remaining value at 40 grand, it will have cost you $13,600. This only leaves you $4,400 per year to perform all of your repairs on the machine, and to pay the taxes on it, and you have to perform the repairs. That's a pretty tight budget, considering how much parts are these days. The other thing to consider is that you didn't get a tax write off on the full cost of the combine every year. Their program doesn't work for everybody, but it sure looks better than shelling out all of that money just to own an overpriced chunk of steel.

 

[greenstrat]

Hi again Chris!! Interesting thoughts. One problem we are finding out about now is the 85K machine is not worth 40K in five years. I am looking at buying a machine for 35K and spending about 10K in the first year or so then about 5 every year after that to keep it running. Adds up a to something I might be able to pay cash for which means the interest will also be something I don't have to figgr on. Yes, I will have to be prepared to put up with some downtime on unexpected problems, but I do not farm the world so I can afford some of that. The money is so tight in this biz now that I have to boil it down to the lowest dollar. I still have an old machine that has depreciated down to the point that it really doesn't matter if I keep it an extra year for backup in case the next one blows. They usually never do, but I have heard the tech man tell me "I have never seen one do that before" enough to realize things do go BANG! in the night. Does look like this is a good time to pick up a decent machine at a sale. Saw a '92 SH9500 go for $29K last week. had 2400 separator hours on it. Hope you have a good day, it is a cold one here! GS

 

[Chris]

It's been cold here, too. It sounds like you've got a good plan in place, which puts you ahead of a lot of operators out there. One thing that I would caution you on when figuring expenses is that you always have to figure interest costs on your money, because of the opportunity cost. Every additional dollar you spend is either a dollar of debt that you can't pay off, or a dollar that could have been invested to draw interest somewhere. There are a lot of cash operators out there that have an over-inflated view of what their operation really makes because they don't take this into account.