Buckle Up: The Used Equipment Market Might Be Changing

May 24, 2024

red tractors on dealer lot with stock market overlay

A lot of ag dealers are currently feeling the hurt as skyrocketing prices, low demand, and a flooded market of equipment are making it harder-and-harder to find buyers. But this could be the beginning of the end. According to some, we might be heading towards a new normal for the ag used equipment market. But when is it coming and will it be reminiscent of a market we once knew?

The Current State of the Market

The current state of the ag used equipment market leaves much to be desired as lots are as full now as they were pre-COVID, but nobody’s buying. One of the main reasons for that is the current price hike that the equipment market is experiencing, along with the general economy.

According to an article he wrote for Successful Farming, Casey Seymour says that “equipment has seen a 40% to 60% price increase over the last six years, and in the same period, interest rates have increased a staggering 188%.” But that doesn’t even include the cost that dealers are facing to hold that equipment on their lot. For dealers, the average cost per year, per machine is $28,000 to $35,000.

For us here at Iron Solutions, none of that is surprising. Based on the trends we’ve seen in our Used-Equipment Trends data, there doesn’t seem to be a single equipment type that’s not in trouble at this point. Dealers have, and are continuing to wholesale and auction equipment at a higher rate than they have in years because no one is ready to buy.

But why is that?

Jon Wommack, Iron Solutions’ Managing Guide Editor, had this to say, “In my opinion, a farmer is probably going to spend money on increasing their volume or being able to reduce their risk in the market. Both of these currently matter more to a farmer than new equipment, unless they have a problem child in the fleet.”

Are We Heading for a New Normal?

So, lot rot is costing dealers money every day, and farmers just aren’t prioritizing new equipment purchases. Is there any light at the end of the tunnel?

Well, Casey Seymour predicts that a new normal is right around the corner and will hopefully present itself some time in 2025. He’s also predicting the market might look something like what we saw from 2017 to 2020.

Here are the four things he says to be on the lookout for to determine what the new normal will be like:

Auction prices remain relatively stable, with fluctuations staying below 2% over a span of four months. It’s crucial to closely monitor auctions during the peak period from August to December.
Retail prices and auction values hover around 15% to 20% of each other.
The quantity of machines in each hour band varies and avoids overcrowding at either extreme.
Yearly inventories experience slight fluctuations, typically within the range of 2% to 3%.

Casey also says that “What interest rates do over the next 18 to 24 months also will impact how soon the new normal shows its face”.

He notes that once the new normal comes, used-equipment buyers will have two choices: buy late-model, low-hour equipment that have the same build codes from when machines were new, or upgrade their fleets through performance upgrade kits (PUKs) or retrofit.

Signing contract and buying agricultural machines and farming equipment.

If that’s the case, it’s important for dealers to know how they can better prepare for this new normal and, more importantly, steps they can take now to profit off of their full lots before taking a loss at an auction house.

How Can Dealers Prepare?

Here are some ways dealers can better prepare for the new normal the used equipment market might be facing:

1. Lean on Iron Guides

With Iron Guides, you have access to precise equipment valuations at all times. That means you can stay up-to-date on exactly how much the equipment on your lot is worth and know when it’s time to push for a sale, or send it to auction.

That way, if the lot rot is setting in, you won’t lose a penny more than you have to. And when a sale does come in, you can avoid selling your used equipment for less than its worth.

Don’t have a subscription to Iron Guides? Take a look at everything it can do for you, so you’re ready to face whatever happens with the used equipment market.

2. Uncover Buyer Insights

If you’re not ready to give up and send your equipment to auction, don’t worry! There are still ways you can find the right buyers before your tractors, combines, or machinery lose too much of their value.

There are data products you can use to learn everything about your current prospects, and help you find new buyers you might not have known about previously. For example, with Fusable’s data product EDA, you can see what pieces of equipment the farmers or buyers in your AOR currently own or lease. From there, you can see what pieces in your inventory might interest them.

But data tools can be way more powerful than that.

You can take your search and analysis even further by seeing which prospects tend to buy used and the likelihood of them making a purchase on a new piece of equipment within the year.

If you’re hoping to get that used equipment off your lot before it goes to auction, data is the perfect first step to finding the right buyer.

3. Communicate with Buyers Early

Did you know that 42% of ag equipment buyers tend to plan their purchases 6-12 months in advance?

Well, now you do. So, it’s time to get proactive!

At the end of his article, Casey Seymour advises farmers to wait until fall before they make any of their significant purchases. If that’s what buyers are planning to do, then now’s the time to start communicating with them.

Take a look at your past customers and see which ones might be in the market to replace some of their old equipment. Call them up and see what their plans are. Let them know that your dealership is still able and ready to help them find the perfect replacement for whatever they need.

But why stop there?

It’s good to communicate with your buyers on as many channels as possible. Don’t just call them, but create marketing campaigns that are sure to reach your audience and inform them of the equipment you have available. That can include email marketing campaigns, social media messaging, and paid advertising campaigns. But when you run a paid campaign,you need to ensure that all your marketing efforts are reaching the right people.

Fusable not only offers helpful valuation products, like Iron Guides, we also offer data that creates targeted advertising campaigns. You tell us who you want to target, and we use our data to create an audience list that’s sure to get your advertisements in front of the right buyers.

Fall is less than 6 months away. Now is the time to talk with buyers, tell them about what equipment you have to offer, and plan for a new normal that’s coming to the used equipment market. With Fusable, you can ensure you have the right data to get in some last minute sales, value your equipment accordingly, and communicate with your buyers effectively before the lot rot sets in.

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