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Originally published on March 10, 2022 on Agdirect.com.

Is now the time to replace your machinery?

The decision to trade equipment can be made for several reasons. Sometimes it’s advantageous to trade when machinery is out of warranty, other times trading may be necessary to keep current with technology or avoid costly breakdowns.

While each of these reasons are justifiable, supply chain disruptions, rising equipment prices and strong demand for used equipment have complicated producer’s replacement decisions and trade-in activity in recent months.

“Limited equipment availability has turned trading into a fine balancing act,” says Alex Bauer, an AgDirect territory manager in Nebraska. “Some producers are waiting on orders they placed last year and without a serial number it can be a challenge to line up financing.”

“On the used equipment side, prices are up across all brands and by the time of trade-in, a used machine might have an extra 300 to 500 hours on it,” he adds.

With so many variables at play, equipment trade-ins have become a moving target. Factor in rising interest rates and it’s no surprise why producers who typically follow a 1-to-3-year trade cycle may consider holding onto their machinery for another 12 to 24 months.

“What used to be a three-to-six-month process for lining up a new equipment purchase now can take up to 12 to 18 months making it tough to lock in rates,” says Bauer. “However, we’ve been in a relatively low-rate environment for some time, and even though rates have started to creep back up we are still seeing competitive fixed and variable options.”

Mapping the market, anticipating the time of trade

According to Bauer, demand for both new and used equipment is up and many producers have set their sights on upgrading tractors and harvest equipment.

“There’s a decent amount of used equipment out there, but with new it all depends on the order date,” he says. “One dealership in my territory has a line-up of new combines, but many of the units are waiting on final parts – from tires to computer chips.”

“The over-the-road truck and trailer market is experiencing the same delays as the major ag equipment manufacturers and anything that’s tech driven or has more components will be tougher to get your hands on.”

As a result, many producers have turned to the auction and private party sectors – both in-person and online – to find the best equipment bargains.

“Over the last two years we’ve seen a rise in financing volume for all types of sales, but auctions and private party purchases really came into play when producers couldn’t find the equipment they were looking for at their local dealership,” says Bauer. “More and more producers are going online to shop for equipment and compare pricing.”

Regardless of how or where machinery is acquired, Bauer advises producers to use their best judgement when replacing equipment and anticipating time of trade.

“In the current environment there are really two options: hold onto your equipment for another season or wait your turn knowing it may be worth more or less by the time of trade-in,” he shares. “No matter what you decide, AgDirect has tools and resources, like our online payment calculator, to help you make the best decision for your operation.”

“If you’re thinking about making a trade, you can check out the latest interest rates on our website and work with our territory managers or inside sales team to find the right financing options that fit your operation’s needs.”

Learn more about equipment financing today by contacting your local FCS Financial office.

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