While most used equipment sold at auction sells for less than the price that same equipment is listed for on a dealer’s lot, the price differential continues to decrease. Simon Wallan, vice-president of the Canadian Agricultural Division of Ritchie Bros. Auctioneers says there are a number of reasons for the high equipment prices being recorded at auction sales.
“Equipment prices at auction are as strong as or stronger than they have been for the last four or five years. Good used equipment is selling for a premium,” says Wallan.
Wallan explained part of this is due to the strong commodity prices farmers have enjoyed for the past few years. “Commodity prices are good so farmers have good cash flow. Farmers have the money to upgrade equipment.”
At the same time, new equipment has gone up substantially. As the price of new equipment goes up, Wallan says more and more farmers are looking at buying late model used equipment. As a result, used prices have followed new prices up. There have even been some instances where well-cared-for, old equipment, with low hours, have actually surpassed the price they originally sold for when new.
Another reason for higher auction prices is increased attendance at auctions. Long gone are the days when a farm auction only attracted local buyers and neighbours. As has happened in all industries, auction companies have consolidated and grown larger. This has resulted in larger sales which attract more sellers and more buyers. Instead of just selling the equipment of a single farm at one sale, today we are seeing multi-day consignment sales with millions of dollars of equipment on the block. On August 7, 2013, at the Ritchie Bros sale in Saskatoon, 135 late model combines were sold for a total of $15.5 million. When there is this much equipment on the block, a lot of buyers attend and bid prices up.
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According to Wallan, auction prices of large, late models tractors have appreciated the most. They have been the strongest seller for the last few years and he expects this trend to continue in 2014. He says there is still a great demand for good used tractors and this is reflected in the prices.
“Combine pricing is more variable,” claims Wallan. He says prices fluctuate considerably based on the hours on the machine, the history and maintenance of it, and the condition. He points out there are many more farmers who buy a new combine each year than they do tractors so there are more low hour late model combines available which moderates the demand and prices.
“Seeding equipment is the most volatile.” Wallan notes there are so many variables when it comes to seeding equipment. The tank size, width of the seeding tool, the type of opener, the technology all influence the amount a potential buyers are willing to bid.
When asked to forecast equipment prices at auction sales in 2014, Wallan replied, “I see prices staying at current levels or possibly increasing a little more.
“There used to be a pretty good correlation between what a piece of equipment sold for at an auction sale and suggested book value that a dealer would use to price that equipment on the lot. In the last four or five years that has gone out the window. We no longer rely on the published equipment pricing guide for knowing what equipment is worth but rather use our own historical sales values for pricing guidance. Besides, it is hard to compare auction prices with the ask price on a dealer lot because often equipment does not sell for the asking price. Trades are often involved at a dealer, and often there is some type of warranty included and maybe even dealer financing of the purchase. Whereas at an auction everything is sold as is, where is,” Wallan concluded.