Is the Price Right? Getting it Wrong Can Cost You. - Iron Solutions

Is the Price Right? Getting it Wrong Can Cost You.

By Mark Moore Posted in Farm Equipment Value Guides | Resources

January 31, 2022

Assessing the value of used equipment and establishing a price that is competitive is perhaps one of the most challenging aspects of managing used agricultural equipment. There are many factors that come into play beyond the basic condition of equipment, including current market trends, market forecasts, and seasonal trends. Sprinkle in margin, reconditioning costs, and the cost to keep equipment in inventory and it can be a complex process.

“We have our own systems we’ve developed, using previous sales history, auction values, and inventory available in the market, says Brian Verkuehlen, division manager of sales, RDO Equipment Co. “We’ll look at saturation. For example, if there are 4,000 combines in the market and only 3,000 sold every year, that affects our pricing because we know it’s over-saturated.” Matthew Fleet, used equipment manager, James River Equipment, uses the dealership’s own sales history as a key tool for setting used equipment prices. “Over the years, we have built in tools that look at demand, price trends and time on the lot to help us determine a fair price.” “We also will use outside vendors to research prices, which comes in handy when we are working with competitive equipment,” Fleet says. “If we have a Case combine in inventory, we need to look outside to get a good feel for prices. With our John Deere combines, we have loads of internal data available. And we have developed tools to aggregate that data. Our tools help build trends lines and deprecation guidelines.”

 
RDO uses a one-price approach  when setting used equipment prices. “Because of how many people search online prior to a buy, we’ve decided that, rather than leave room for negotiation, we’d rather be at the lowest price right off the bat to attract more potential buyers. We don’t negotiate when we sell a used piece, we list at the best price we can offer,” Verkuehlen says.
 

At James River, Fleet’s job is to continually assess inventory and establish a competitive price. “I will set a retail price the day we take the equipment into inventory, and the rest is in the hands of the salesman and store manager,” he says. “I set the retail price. After that margin, interest, reconditioning price will determine how much room there is for price negotiation.”

  And perhaps the most important factor when it comes to used equipment pricing is the initial inspection of equipment. Verkuehlen says reconditioning can price a unit out of the market, “so it’s important to find that sweet spot of making the machine field ready without over-conditioning.”

Fleet adds if pre-inspection does not catch something that needs to be fixed before hitting the used equipment lot, it can increase reconditioning costs and eat into margins.

“Sometimes that just happens, because it’s difficult to do a complete inspection without a full teardown of the equipment in the shop, and that does not occur until we take ownership,” he says. Closely related to reconditioning is ensuring the equipment is in sellable condition on the lot and requiring minimal work to be field ready. “That’s especially true during times like at harvest,” Verkuehlen says. “We can’t have all our used combines on the lot requiring a lot of work just prior to harvest.”
  This piece is an excerpt from the Used Equipment Guide. Download the full guide including this article here.      
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