Forecasting Machinery Purchases and Financing Activity in 2023
Originally published on AgDirect.com on 1/23/23.
Many of the same opportunities and challenges that impacted equipment buying trends in 2022 are expected to continue to have some bearing on machinery spending and financing activity in 2023.
Supply chain issues, increased competition, interest rates, technology advancements and economic uncertainty are again top of mind for both dealers and their customers.
“In certain product areas, dealers are faced with putting equipment on allocation for buyers looking to purchase new equipment,” says Lucas Scheibe, an AgDirect territory manger in North Dakota. “That’s made the used equipment market that much more competitive.”
“The process for sourcing equipment has also become more unconventional. Dealers are actively going after equipment at auctions, trading with other dealers or even buying machinery through listings on Facebook Marketplace,” he explains.
“At the same time, we’re now in the third year of post-pandemic sales patterns and dealers have done a really good job of managing expectations and helping buyers get their orders placed early.”
Auction and Private Party Sales Ramping Up
Across other equipment buying avenues, auction and private party sales have increased. In 2022, AgDirect reported the highest month ever in auction and private party financing activity reaching over $22 million.
Scheibe says the auction and private party space has continued to grow over the past five years with buying and financing activity ramping up in the last 18 to 24 months due to the changing nature of how equipment is purchased and sold.
“The way technology has advanced with apps and online financing, buyers aren’t afraid to buy equipment sight unseen,” he says. “That’s where AgDirect can really add a lot of value in speeding up credit decisions and making the financing faster and easier than ever before.”
“Buyers have the flexibility to work with us by applying at their dealership, online or through the mobile app,” Scheibe adds. “We can meet your financing needs no matter how you choose to buy equipment.”
Looking Ahead
Looking at the year ahead, interest rates and supply chain corrections will set the pace of borrowing and may bring some buyers back to the marketplace if the Federal Reserve eases rate hikes.
“There are pockets of the country, particularly the upper Midwest, where producers have experienced phenomenal crop years plus competitive commodity prices and favorable government payments,” says Scheibe. “Some of those producers haven’t had to lean on financing for their equipment needs, while others have taken a back seat on machinery spending until the market starts to normalize.”
Depending on how a producer’s business is structured, leasing options such as an AgDirect PRO (purchase or renew option) may be a good lease to own strategy. With a PRO, lessees may trade in at any time, or, at the end of the lease, they may purchase the equipment for the residual amount stated upfront or renew the lease.
Purchases leasebacks are another cost-effective financing option for those who have already paid cash or entered into a loan agreement on equipment acquired in the current calendar year. With a purchase leaseback, AgDirect will write a lease and reimburse the cash originally paid for the equipment or pay off the current loan and apply it as equity toward the new lease.
“As the cost of equipment continues to rise, leasing remains a good avenue for freeing up working capital and increasing tax deductions,” says Scheibe. “It’s also a good way to establish a fixed-cost over the leasing period to help with managing cash flow.”
For buyers considering loan or lease options in 2023, Scheibe advises producers to lean on their trusted resources, such as a local dealer or lender, so they can be prepared and have a plan in place in the event increased buying activity tightens equipment availability further. Additionally, before entering a lease, a buyer should consult with their tax professional for advice on leasing options and tax issues.
“Our AgDirect territory managers can offer unique insights based on the geographies they serve, and our inside sales team is always available by phone or email to answer any questions,” says Scheibe. “Our goal is to help producers be successful with their equipment investments, whether that’s keeping them up to date on the rate environment or speeding up the transaction process.”
AgDirect offers competitive rates and terms for both new and used equipment purchases. Apply online, check rates, quote payments and compare options with our free AgDirect Mobile application, or learn more about AgDirect equipment financing by locating your nearest AgDirect territory manager or local FCS Financial office.
