How much will that tractor cost, the true price of ownership.

[Reddogs]

Ok, you bought the tractor with a FEL and you want to figure out what is the true cost of ownership. Lets take a small tractor like the John Deere 3025D and figure the total ownership costs for it, which was sold new for around $18k before the pandemic but now has gone up to $25k. You have to calculate the fixed costs such as depreciation, taxes, insurance, and tractor housing, so lets do a 10 year look, with tractor use of around 100 hours per year (since its a small tractor). So you determine the residual value or the salvage value you expect to receive by selling the equipment at the end of the equipment's useful life. For this example, we will assume that the residual value of the equipment is $10,000. Subtract the residual value $10,000 from the original cost $25,000 and you get 15,000, and divide that by 10 years and it depreciates $1500 a year. Now just add in your insurance, taxes and housing plus fuel and maintenance and you get your true cost of ownership. Is that about right?

 

[LS Tractor Owner]

The biggest value is the residual value.... that cannot be reliably predicted. There are some 10 y/o tractors that are selling for near new prices. Others not so much. There is no way to predict what it actually will price at.

Otherwise, yes, that's how to find the yearly cost of ownership.

 

[WM75Guy]

The biggest value is the residual value.... that cannot be reliably predicted. There are some 10 y/o tractors that are selling for near new prices. Others not so much. There is no way to predict what it actually will price at.

I probably will never sell my 2 tractors. My kids can figure that out after I am gone.

 

[seville009]

I probably will never sell my 2 tractors. My kids can figure that out after I am gone.

But in their minds, they will have no cost of ownership, so if they sell it for $1,000, they will feel that they "gained" $1,000.

That's why estate sales can sometimes yield great results for buyers.

 

[Eagle1]

Maybe but I won't care.....

 

[LS Tractor Owner]

I don't track "cost of usage" on anything. Cars, trucks, tractor, .....
I keep records and receipts for all maintenance/ repairs / misc. stuff, but don't use this info for anything but "having a record".

I can see a business totally using it to average a cost to pass on to a customer. Is this why you are asking?
If so, there are other factors that need to be added, like transport costs, operator cost, breakdown costs, insurance costs, etc....

 

[scaredychicken]

i need coffee first

I understand the hypothetical question, but there are so many variables.

the basics are nicely noted in the OP post, and it is well thought out. I don't think that a tractor's usefulness / residual / terminal / salvage value is typically considered after only 10 years ... 30-40 yrs perhaps

resale / trade-in value is another matter, especially in the case of re-purchases

part of the cost / value of ownership, is the usefulness itself - what has the tractor (and implements ?) allowed you to accomplish in those 10 years ? ... property maintenance, development, construction ...

then there are the write-offs / tax credits that one would get every year - assuming that there is a method to apply these credits (business, farming etc)

what I would consider in the the value of the tractor itself after 10 years (if I was buying a 10 year old tractor) - overall condition, maintenance, hours, tire tread etc

I just bought a 10 yr old Zero Turn riding mower, for $2000 Cdn. It's a Cub Cadet RZT-S50 that originally sold for about $2800 USD. It has 320 hrs on it. I know that I got a decent deal on it, the newer similar ones are about $7500. If I were to sell that same unit tomorrow, I'd be asking $4000 Cdn

 

[sea2summit]

The biggest value is the residual value.... that cannot be reliably predicted. There are some 10 y/o tractors that are selling for near new prices. Others not so much. There is no way to predict what it actually will price at.

Otherwise, yes, that's how to find the yearly cost of ownership.

I'd change that to 1 year old tractors...

But, OP I think you are thinking too much like an accountant looking at business taxes vs actual ownership. It's more like a used car in deprecation, drive it off the lot and loose ~30% of the value. Maintenance and use will drive how quickly everything else depreciates much more so than hours up until the ~2k ish hours mark.

Fuel is also not directly tied to hrs for cost of ownership. If you're doing loader work around the yard you're using .3-.6 GPH on a tractor that size(?) vs brush hogging or mowing using 1.5 GPH(?). So right there at $5.50 diesel you're cost of ownership can vary almost +/-$650 a year based on usage type for 100 hrs.

Likewise a lot of maintenance isn't tied to hrs so much as type of usage. Lots of loader work? Probably gonna tear up those front tires at some point in the 10 years.

Too many variables to just throw out a random cost of ownership number for 100 hrs a year of usage that's going to be close to reality.

 

[Reddogs]

The biggest value is the residual value.... that cannot be reliably predicted. There are some 10 y/o tractors that are selling for near new prices. Others not so much. There is no way to predict what it actually will price at.

Otherwise, yes, that's how to find the yearly cost of ownership.

Thats why you get a tractor like the John Deere, or similar that hold their value, with low depreciation and good residual value. In this case a 3025D with a FEL with 10 years/1000 hrs will sell for much more than $10,000, so you get greater value for your money than lets say a comparable Bad Boy or Branson tractor..

 

[Jchonline]

Bad Boy

Thats why you get a tractor like the John Deere, or similar that hold their value, with low depreciation and good residual value. In this case a 3025D with a FEL with 10 years/1000 hrs will sell for much more than $10,000, so you get greater value for your money than lets say a comparable Bad Boy or Branson tractor..

What you are not considering is inflation. If the price of a new tractor goes from $25000 to $35000 in 10 years, your residual value will also go up. So your estimate is just that....

Also what about a major repair not covered under warranty? In other words you are just wasting time trying to predict it. Get what you need now, get some work done and deal with the rest as it comes along.

Branson and Bad Boy are very different. Branson mfg their own machines. Bad Boy is a repaint shop just like Bobcat.