In 2017, Iron Solutions published a piece entitled “Are Auction Results a Good Source for Ag Equipment Values.” Four years later, in 2021, we decided to revisit and update this analysis. We wanted to answer two questions: Are the conclusions made previously still true today? And are the conclusions seen in the prior article about combine values also true for the category of small row crop tractors?
Back in 2016, the ag market was in a downturn and dealers were facing a glut of used inventory. This led to an increase in popularity of ag equipment auctions. Looking back, this may have been the jump-start of a consistent upward trend of ag auction activity and especially that of online auctions. Factors contributing to this increase include the maturity of online auction technology, improved internet coverage, and the limitations of public gatherings imposed by the COVID-19 pandemic.
Mark Stock, president and co-owner of BigIron, as published by AgDirect in 2021, addressed online auction activity with, “Although online equipment sales were already commonplace prior to the COVID-19 pandemic, 2020 was a year for the record books.”
Despite the increase in auction sales, however, auctions still account for only a percentage of the total sales of used agricultural equipment. Most of the transaction volume still occurs within the agricultural equipment dealers where (unlike auction data) the actual sold price data is not publicly available.
Another meaningful difference between these two time periods is the improvement in commodity prices starting in 2020 and continuing in 2021.
One thing that hasn’t changed between 2016 and 2021: Ag equipment dealers are still looking to discern if the values provided by auction results are an accurate reflection of true market prices.
This article examines the relationship of auction values to overall market prices for the category of small row crop tractors.
The types of auctions for agricultural equipment have become more varied, ranging from the distressed sale to planned inventory reduction events regularly held by local dealers. Multiple factors can impact the results of an auction sale, from the quality of the pre-event advertising to the weather on the day of the event. Thoughtful dealers are looking for assurance that the values that auctions provide reflect market prices.
Iron Solutions® examined their database to help answer this concern.
Iron Solutions holds the largest agricultural equipment database of dealer sold and auction transactions in the North American market. Records span 30 years with over 16,000 models of equipment, totaling over $80 billion in dealer-reported retail sold reports.
Cameron Hurnard, Iron Solutions’ Director of Software Development and Data Services, compared auction results versus dealer-reported retail sales transactions for two popular recent model-year small row crop tractors, a 2014 John Deere 6125M and a 2014 Case IH Maxxum 125. He looked at sales reports for those two models from January 1, 2019 to December 31, 2020, and also studied sales for all small row crop tractors during that time period. In total, there were 798 transactions in the dataset.
Cameron built a scatter-chart to illustrate the data gathered from the auction transactions alone. The chart is shown below and includes sales for the two models listed above. The transactions were sourced from various auction results sites and Iron Solutions’ IronGuides database. Note that the machines plotted here can have different options and therefore may not be directly comparable.
He then looked at the dealer-reported retail transactions. To give an ‘apples-to-apples’ comparison, these results reflect sales prices after the reported sold price has been adjusted to allow for differences from the base unit. (The base unit is defined as a common configuration for a piece of equipment in a given region.)
The steps that Iron Solutions goes through for every sold report submitted by a dealer, to assure comparability between transactions, is shown in this diagram.
A scatter plot of those retail transactions was then created and is shown here:
Many more retail sales transactions are available due to the fact that auctions account for only a fraction of the sales of agricultural equipment during the year.
Shown below is a view of both retail and auction results together. Here it is easier to compare the sales volume and the averages from auction and retail for 2014 small row crop tractors.
The next step is to compare your high, low and average selling prices for the equipment. These results are charted below in Charts 1 and 2 for two specific tractors. The format makes it easy to see the differences between the two data sets.
When you compare the retail versus auction results, you find sales prices from dealer retail transactions are significantly higher. To better illustrate this point, we selected two particular tractor models in the small row crop category, a Case IH Maxxum 125 and a John Deere 6125. The average dealer retail price for the Case Maxxum 125 is 15% higher than the same model sold at auction. The Deere 6125’s average dealer retail price was 38% over the average auction value.
Overall, for all small row crop tractors sold in 2019 and 2020 in the database, the auction results showed only one transaction over $100,000 while the dealer channel saw 24% of its transactions over $100,000 in the small row crop tractor category overall. Dealers who rely only on auction data may be too conservative in their expectations on pricing.
Chart 1
Chart 2
Why do auction results alone give an unpredictable estimate of value? The most common reasons are:
- Auction values make an inaccurate representation of the range of pricing taking place in the market.
- Accurate option detail can be unavailable.
- Condition evaluation can be subjective.
- Auction data alone may fail to provide sufficient data points for a particular make, model and year.
- The auction environment itself can be erratic, varying based on the type of auction, location and other factors, impacting the final value assigned to the piece of equipment.
Dealer sold reports are the best valuation source. They represent a price determined at arms-length between a willing buyer and a willing seller.
Iron Solutions’ careful review of each dealer retail transaction assures the data points are comparable. Finally, a database of dealer retail transactions assures that there are sufficient data points to make a reasonable conclusion as to the value of the machine. Contact Iron Solutions today for more information on our data and the tools we provide to help customers turn trusted data into profitable decisions.
