Over the course of the past few years, several factors have combined to push up sticker prices on new equipment. And the recent dramatic fall in the value of the Canadian dollar versus the U.S. Greenback has been one of the biggest influences. Not surprisingly there has been a significant cooling off of new equipment sales all across Canada. “In the last two years you’ve seen price increases from Tier 3 to Tier 4 and then Tier 4 Final (engine emissions regulations),” says Jim Wood, vice president, agriculture, at the Rocky Mountain Equipment (RME) dealer network. “And then you have the dollar swing by 10 or 15 cents. So you’ve seen new equipment go considerably higher, probably up to 20 per cent.”
And that means the dynamics in the ag equipment market have changed. The rise in new machine costs has dragged late-model used equipment values a little higher too, but there is a lot to choose from at the moment. The high rate of new equipment sales over the previous five years resulted in farmers trading in a lot of low-hour machines, creating a good selection to pick from. And their prices are still much lower than new models. So it may make sense for buyers to take a second look at a used machine before eating the cost of a new one, especially with many dealers now focused on moving their used inventory.
“I think it (lower new machine sales numbers) is the new normal,” says Wood. “If you look at it from our side, we’re trying to sell a little less new, because our used is just that much more attractive.”
He thinks a farmer who wants to update machines that have seen their third or fourth birthday may want to consider replacing them with one-year old models rather than looking at something brand new. There are also certified pre-owned warranty programs from all the major brands to help make that an even more attractive option. “It’s considerably cheaper for him to buy a one-year-old machine than a new one,” Wood says. “What we’re seeing is there continues to be a lot of used equipment. And I think a lot of customers are just saying they can’t justify the additional cost (of new), even the guys that flip every year.”
And most machinery built in the past couple of years shares similar technology with what is currently available in new models, with the possible exception of engine emissions features. The value offered by late-model, used equipment when compared to new may remain a good option for a while.
“You know, right where [the new equipment market] is today, I can’t see it changing unless someone brings on some new technology,” says Wood. “Because, let’s face it, a combine from five years ago will still go out and do what a new combine will today.”
“There has to be a reason to trade,” he continues. “Some of it is taxation. But if you see a manufacturer come out with something that is value added, I think you’ll see a lot of customers see the value. But I really don’t see a lot of new technology coming in the next two or three years that’s going to make that much difference from a harvesting perspective.”
And if you’re in the market for a swather, you may find a real steal in the used market due to reduced demand. “Now you have canola varieties that can be straight cut,” says Wood.
“So you’re going to see the windrower market drop off.”