New Tractor Sales Are Declining

[jyoutz]

company deals/incentives, and i want a good down payment. plus i do not want to buy something new go out of town and have it stolen so I have a couple of months to wait.

Insurance is the answer to theft.

 

[rScotty]

I think it has to happen. You can’t combine high prices and high interest rates and expect people to buy.
The plandemic is over. Those sales were made. Now we are back to a non-pandemic mentality (for now-you never know what may happen next) and I don’t think we will see the “fear/panic” buying we saw in 19-21

I don't see a trend toward falling prices. I haven't seen them falling yet, and when the economy had high interest rates or downturns before I don't believe that prices fell on new equipment. If anything they went up.
This financial time doesn't seem different from any others. I doubt if waiting will work to anyone's advantage.

 

[scootr]

Insurance is the answer to theft.

 

[scootr]

I don't see a trend toward falling prices. I haven't seen them falling yet, and when the economy had high interest rates or downturns before I don't believe that prices fell on new equipment. If anything they went up.
This financial time doesn't seem different from any others. I doubt if waiting will work to anyone's advantage.

If the majority believe as you and they keep buying no matter the price - then you will be right. If the consumer looses their buying power the they will have NO CHOICE but to put off the major purchase and that will hurt the manufacturer to the point they will have to lower the prices to make sales once more.
It's economics 101

 

[2manyrocks]

In my experience, the trend is for prices on new equipment to ratchet upwards. Last year, my local Kubota dealers couldn't keep L2501s in stock and only one dealer agreed to honor the equine discount program. One dealer refused to honor the discount. It may be that sales and inventory will come into a better balance so that dealers will negotiate again, but it remains to be seen what the starting base price of new equipment will be.

40% of US home sales happen in the Spring. If home sales drop off or major price reductions happen, then that will be an indicator of where the economy goes from there.

I suggest paying close attention to this week's Fed meeting.

 

[nova3930]

If the majority believe as you and they keep buying no matter the price - then you will be right. If the consumer looses their buying power the they will have NO CHOICE but to put off the major purchase and that will hurt the manufacturer to the point they will have to lower the prices to make sales once more.
It's economics 101

inflation is a tricky devil since it generally raises prices across the board for both producer and consumer. yes there are generally some price cuts to a point but you can't sell things at a loss forever....fundamental tenet of economics is that the price of anything has to exceed the cost of production or the provider will eventually cease as a going concern....

Personally I suspect we're about to enter a phase similar to the 1970s with economic stagnation coupled with inflation because of the above factors....

 

[TN8Man]

What's worse for a seller. Lowering the price of their product to make sales or not making sales because their product is overpriced and they won't budge?

 

[nova3930]

What's worse for a seller. Lowering the price of their product to make sales or not making sales because their product is overpriced and they won't budge?

one has money tied up in inventory and one is churning money at a loss. to me the latter is worse because you're losing money faster....

 

[Hay Dude]

In my experience, the trend is for prices on new equipment to ratchet upwards. Last year, my local Kubota dealers couldn't keep L2501s in stock and only one dealer agreed to honor the equine discount program. One dealer refused to honor the discount. It may be that sales and inventory will come into a better balance so that dealers will negotiate again, but it remains to be seen what the starting base price of new equipment will be.

40% of US home sales happen in the Spring. If home sales drop off or major price reductions happen, then that will be an indicator of where the economy goes from there.

I suggest paying close attention to this week's Fed meeting.

Look at rising interest rates, hyper inflation on literally everything we buy for the last 2-3 years and it’s a recipe for reduced buying power for the average American.

I just saw that due to inflation alone, making $100,000 in 2019 translates to making $82,000 in 2023.

 

[2manyrocks]

A dealer might reduce their profit margin to make a sale of what they have in stock instead of continuing to incur carrying costs, but they aren't likely to buy inventory from a manufacturer to sell it at a loss.

It wasn't so long ago that a 3br 2 bath brick house could be purchased for what they are selling compact skid loaders these days.

 

[nova3930]

A dealer might reduce their profit margin to make a sale of what they have in stock instead of continuing to incur carrying costs, but they aren't likely to buy inventory from a manufacturer to sell it at a loss.

It wasn't so long ago that a 3br 2 bath brick house could be purchased for what they are selling compact skid loaders these days.

I got curious about new trucks last week. I got the 2015 Ram Cummins for $42k out the door back when. Price to play for a diesel HD truck is $75k now. I remember cheaper houses 20 years back. Even worse all the blue book sites were telling my truck was only worth like $22k. I said %&^$ that noise I'll do some more upgrades to the Ram instead of making a house payment on a vehicle.... Cost of one payment and I've got heated/cooled leather seats with extra gel pads to boot....

 

[TN8Man]

one has money tied up in inventory and one is churning money at a loss. to me the latter is worse because you're losing money faster....

But what good is inventory if your not selling it. You will be out of business faster if your not selling product.

 

[scootr]

Look at rising interest rates, hyper inflation on literally everything we buy for the last 2-3 years and it’s a recipe for reduced buying power for the average American.

I just saw that due to inflation alone, making $100,000 in 2019 translates to making $82,000 in 2023.

I read that too. A 20% reduction in buying power is no joke. For most of us it is the difference between buying that optional purchase or waiting... and you wait until your buying power goes up by one means or another.

 

[Hay Dude]

I read that too. A 20% reduction in buying power is no joke. For most of us it is the difference between buying that optional purchase or waiting... and you wait until your buying power goes up by one means or another.

Now combine a 20% loss in buying power with 8% interest rates.

 

[Gale Hawkins]

But what good is inventory if your not selling it. You will be out of business faster if your not selling product.

Elon Musk recently stated he would continue to cut prices if required to keep his factories busy as long as Tesla doesn't sell at a net loss. I was considering a Toyota RAV4 Prime but with the price change it's more expensive than a Tesla Model. Y long range dual motor with a trailer hitch. Same goes for Jeep Wagoneer. He has predicted all lights will be back on green by mid 2025 and he wants to be fully ramped and pumping. Both are different vehicles from the Tesla model. Y. but neither are the other two considered hard working farm trucks.

 

[nova3930]

But what good is inventory if your not selling it. You will be out of business faster if your not selling product.

Look at it this way, you can cut prices so long as you're not losing money cutting prices. Otherwise its the old "we lose money on every sale but make it up in volume" fallacy

Mathematically here's the score selling at a loss either

A. You have your overhead cost
B. You have overhead cost + cost of churning inventory at a loss

The latter moves you under faster....

 

[nova3930]

Elon Musk recently stated he would continue to cut prices if required to keep his factories busy as long as Tesla doesn't sell at a net loss. I was considering a Toyota RAV4 Prime but with the price change it's more expensive than a Tesla Model. Y long range dual motor with a trailer hitch. Same goes for Jeep Wagoneer. He has predicted all lights will be back on green by mid 2025 and he wants to be fully stopped and pumping. Both are different vehicles from the Tesla model. Y. but neither are the other two considered hard working farm trucks.

And he has quite a bit of room to cut before there's a net loss from what I've seen of Tesla margins. Cutting margins is cutting fat till you get to break even, then it's cutting meat and bone...

 

[scootr]

Now combine a 20% loss in buying power with 8% interest rates.

Now wish you hadn't bought that tractor dealership in 2018.

 

[Rdrcr]

If the majority believe as you and they keep buying no matter the price - then you will be right. If the consumer looses their buying power the they will have NO CHOICE but to put off the major purchase and that will hurt the manufacturer to the point they will have to lower the prices to make sales once more.
It's economics 101

I believe the MSRP/List prices will remain high but, the manufactures will increase the incentives (cash discounts and/or low interest rates) on equipment.

Mike

 

[TN8Man]

Look at it this way, you can cut prices so long as you're not losing money cutting prices. Otherwise its the old "we lose money on every sale but make it up in volume" fallacy

Mathematically here's the score selling at a loss either

A. You have your overhead cost
B. You have overhead cost + cost of churning inventory at a loss

The latter moves you under faster....

I'm not in the sale business but to me Option A would move you under faster if you have no income.

If a seller buys the inventory from the manufacturer up front and sells with a markup for profit then they are at the mercy of the market for that inventory.