Has the Auction Market Become the New Retail Buying Market or is Supply and Demand Driving Pricing at Retirement and On Farm Auctions?

It is not a shock to anyone when I say the last five year auction activity has greatly increased. At the end of 2014, Used Equipment Inventories where at all-time highs. The Auction Market became a dumping ground for all kinds of equipment. Late model, high hour, and everything in between. There was nothing sacred. The use of the auction market is still strong today with Dealership Liquidations, Farm Retirement Sales, and Farm Liquidation. With large amounts of equipment selling on the open market; has the buyer become more retail minded at the auction? In this article, I will give some examples supporting auction activity and Retail Pricing at Dealerships.

            When it comes to pricing Used Equipment everyone is wrong! You just hope you’re less wrong than the next guy. I don’t think anyone is predicting the market to the penny and the day something will sell.  That’s what makes it fun. The whole art and science approach. Some days I am scared to death when I value equipment and some days I feel like I have nailed the market. I do my fair share of price reductions, write-downs, and yes I have to use auctions. All of which I was certain I had priced correctly the first time.

With that being said, I also have equipment that is not moving or slow to move with retail pricing within a plus or minus 5%-10% range of auction values. At the end of the year I saw auction values within the expectable retail range on like equipment, especially combines, 4WDs, and Row Crop Tractors. I am still seeing the same auction values for the start of 2018. I watched an auction in Illinois in Mid-January, this was a retirement sale and it was good equipment. In this auction, a 2015 612c Corn Head, it had the necessary work done; chains, sprockets, ect. It sold for $49,000.

110 miles away sits 3, 2015 John Deere 612c Corn Heads. These heads are in good shape and have a retail advertised price of $44,900. The three heads on the dealer’s lot for $4100 less and no negotiations have taken place. I know the dealer and they are a first rate group. The heads are in good shape and should be ready to work. Why are they still there? What was it about the auction head the buyer was willing to pay $10,000 more for?

That is just one of many examples I could give with similar outcome. The auction results I am looking at are showing trends of 2015 and older model year equipment and selling as strong or stronger at auction compared to dealer sales data. I don’t think it is a supply demand thing as much as a preference of buying thing.  2015 MY and older the Retirement Auction market seems to be preferred to the dealer’s lot. Another example was of a 8400 2000 hours tractor that sold at a Retirement Sale for $100,000. I am speaking for myself but, I would be hard pressed to obtain a value this high. I not saying it couldn’t be done, just very hard to make happen. This is surprising considering all of the extras the dealer can offer. For example, low rate financing, extended warranties, and they will take trade ins. That’s not to say auctions won’t put your machine on the next auction either.

The other trend I have noticed is machines newer than 2015 are still showing a very strong retail value compared to the older machines.  For the most part these machines are not as abundant as older models and dealer used late model and low hour equipment inventories are shrinking. It is hard to find these machine at dealerships, much less auctions.

In closing, trends are all pointing to more on line purchasing. The incoming generation of decision makers have sent either half or all of their life buying and bidding purchases on line. It is very acceptable to buy a tractor or combine online sight unseen by taking the word of someone they spoke to, the description they read, and the pictures they look at. It seems these days, the interaction of the sale is done more through text and email then a face-to-face interaction. The scope of the customer is rapidly changing and the dealer will need to change as fast or faster to stay relevant to the customers wants and needs. If you would like to hear more conversations like this tune in to Moving Iron Podcast and read Moving Iron Blog. They can be found at MovingIronLLC.com. So until next time let’s go move some iron.