Resale value as a function of purchase price

[Geotech]

Some very interesting comments on bigger tractors and the construction backhoe. This is more along the lines of what I was curious about. So it seems that if you are willing to buy used, you can capture a lot of value by moving up-market. $40K for something in good shape that sells for $120K is a heck of a deal for the person that can use that equipment.....of course, I'm trying to be all in at about $25K with implements, so that probably places me out of the professional grade used market. I wonder why the pro equipment drops so much? I suppose these bigger machines are purchased more by businesses than by individuals. In which case a business would usually rather buy new instead of get held back on jobs with unforeseen used equipment failures. There's also the depreciation that helps offset taxes. I think the key is that there needs to be an individual who can take advantage of the equipment. I would not be able to make much use of a construction backhoe to justify the price of even a good deal on a used one.

 

[prof fate]

that and everything 'usable' seems to hit a floor. I'd love a skid steer - never seen one under 16k unless it's useless, 20k is more common, regardless of age or hours. Same for backhoes - they may get to $16 to 20k for a 30 year old one, but they never seem to go lower.

Very hard to find a used pickup for under $5-7k that isn't a rolling block of rusty swiss cheese or 250k miles on it.

Also, new vs used - what is the price difference that makes buying used worthwhile? For years I bought 2-3 year old cars with 25-30k miles on them - half the price of new. A bargain. Then the 08-11 time frame came and very few new cars sold making used cars rare - so it's cheaper to buy the new car (no miles, no interest) vs used (30-50k miles, 3-4 years old, 80% of the price)- when it's paid off in 5 years you have a decent car if you bought new and 5 years maybe of no payments and minimal repairs, vs a 9 or 10 year old car with 100k on it.

Not looking so much at resale value as I'll use my can and equipment till the end, but the cost of ownership during my use of it.

I had a compressor die..new to replace what died (no parts made for it any more) was nearly $800. New and acceptable would be $400. MAYBE a harbor freight item for $200..but I found used for $80 and sold what was left of mine for $60 - so $20 was way better than any other option. If it lasts a few years so much the better. I got 19 years out of the last one, bought 'don't ask where it came from' for $200 (499 new then).

And if you need a tractor, you need a tractor. A Utility Tractor can be like a crescent wrench, but if you need a 3/4 drive socket with a 4' breaker bar, you need that tool and a crescent wrench won't substitue too well. And vice versa - sure a JD310 hoe would be a bargain..but if it won't do what you need done it's a total waste of your money, or time, even if resale is good.

 

[rScotty]

Some very interesting comments on bigger tractors and the construction backhoe. This is more along the lines of what I was curious about. So it seems that if you are willing to buy used, you can capture a lot of value by moving up-market. $40K for something in good shape that sells for $120K is a heck of a deal for the person that can use that equipment.....of course, I'm trying to be all in at about $25K with implements, so that probably places me out of the professional grade used market. I wonder why the pro equipment drops so much? I suppose these bigger machines are purchased more by businesses than by individuals. In which case a business would usually rather buy new instead of get held back on jobs with unforeseen used equipment failures. There's also the depreciation that helps offset taxes. I think the key is that there needs to be an individual who can take advantage of the equipment. I would not be able to make much use of a construction backhoe to justify the price of even a good deal on a used one.

I think you've explained the pros and cons well. Even though used construction machines can be a very good deal in what you get for the dollar, they aren't much use just sitting there. We use our Kubota M59 all the time on our place and frankly, the JD310SG just sits there most of the year. Maybe it gets used once every month or two when we need the pure strength or reach. We originally bought it to help with flood repair - that was good- and necessary - and it took years of work, but is now completed. So why do we still have the JD310?? After all, it doesn't even have 3pt capability...

Well, we sorta kept the JD310 by accident. For years we had wondered about getting an older Ag tractor with a cab just for winter snow plowing, but since we already had the JD310 handy we gave it a try in the snow. After all, the JD310 comes with a cab, and as we've just been discussing...these old commercial machines doesn't cost much more than than putting a comparable cab onto an existing tractor. Boy, can that machine push snow! It slithers all over the place when plowing - and that can be alarming - but it simply doesn't care how much snow there is, just lower the bucket and drive forward in full 4x4 bulldozer mode with a heated cab and sound system.
No finesse required, just push down on the go pedal, steer with the brakes, and pray....

Would I buy it again just for plowing snow? No, probably not. It just isn't very handy for most things. But it's been an interesting investment.
rScotty

 

[Geotech]

Agree with everything you have to say here prof fate. My intent of the post was to reveal the cause behind used market trends which I think has been revealed here. Not so much to determine which new tractor to buy or how much to pay for it, but to evaluate the possibility of adding substantial value by buying used - when I don't normally like buying used. It appears that there is potential to add a huge amount of value for the right individual needing a particular machine, but your analogy for the crescent wrench vs 3/4 drive with breaker bar illustrates why that person probably won't be me.

 

[prof fate]

I'd like a mower that is like cars today - an appliance. It just works. Last fuew cars have got 100k with only brakes and oil changes, maybe $200 in other repairs.

Mowers...not so much.

A commercial mower is likely that item - but at $8-15k to cut grass it doesn't make economic sense - to tie up capital that way if nothing else. Used ones rarely (worth using used ones anyway) get below 4k. Not sure what 'mess' I may get for $4k.

In THEORY, i could use it for 10, 20, 30 years and never top 2000 hours of use on it, wear it out, etc. So it SHOULD be a lifetime purchase and hold it's value well..you know, for the kids to sell.

But say I live here another 15 years, that's $5k or so in two new $3k mowers (and sold for $500 each when replaced) - 300/year eq capital cost. Done this a few times so I'm sure of my figures.
I see new commercial units, $5500 or so, that would work for me. In 15 years..not that I've ever seen a 15yr old used one...what are they worth? 2k? We've established above that commercial equipment actually loses more of it's value than consumer items...so maybe less?

So 3500 for 15 yrs use is $235/year, guessing at the end value. Is maintenancce gonna be less? or more? The filters for kubota and kioti are a huge amount more than for my toro or a B&S engine, I bet belts are more too.

Is there a comfort, performance, ego factor to owning a commercial machine? Less down time perhaps?

I saw a nice kubota diesel zero turn last fall, only $13,900.

Agree with everything you have to say here prof fate. My intent of the post was to reveal the cause behind used market trends which I think has been revealed here. Not so much to determine which new tractor to buy or how much to pay for it, but to evaluate the possibility of adding substantial value by buying used - when I don't normally like buying used. It appears that there is potential to add a huge amount of value for the right individual needing a particular machine, but your analogy for the crescent wrench vs 3/4 drive with breaker bar illustrates why that person probably won't be me.

 

[ultrarunner]

Way back when I was looking to buy a dozer I was going to to with the Nortrack from Northern...

A retired operator told me for the same money I could buy a used CAT D3 and a much better machine... so I bought the D3

17 years later when the time came to sell... I got nearly what I paid for it and spent $1500 on maintenance and repairs total... less than a $100 a year.

The Nortrack has terrible resale here... and plenty of owners having to make parts and repairs.

 

[mred2]

I purchase an old Case backhoe a lot of years ago. I paid $8000, I think. Worked it hard part time putting in septic systems and clearing land. Used the hoe as a lift to put in large cross ties for corner fence posts. I had to replace all 4 tires over the years at a cost of about $2500. In the last 4 years I purchased a newer dozer and only started the BH twice a year. I sold it for $1200 (scrap metal price). Early 60's machines and parts are getting hard to find. No dealer in area. It saved me about $14,000 on just the septic systems. I purchased a backhoe attachment for my new tractor. It will not dig as much, but all I need for now.

On my dozer, it is a JD 450H, 2003. I paid $27,000 for it. I plan to use it for 5 to 6 years. I have spent about $2500 in repair/maintenance. I have been offered $30,000 to $35,000 for it several times. It is a John Deere.

 

[rScotty]

Is there a comfort, performance, ego factor to owning a commercial machine? Less down time perhaps?
I saw a nice kubota diesel zero turn last fall, only $13,900.

You gotta be careful, though. That's exactly what happened to my buddy and now he has a honest to goodness road grader living next to his carport garage. Used cost was way LESS than that zero turn Kubota Lawn mower you mention - and all it needed was an oil change, some belts, and new batteries. It doesn't cut grass so well, but with 4wd and full size 6-way power adjustable blade, that supercharged diesel sure can plow the snow from his driveway...

 

[bmoore]

I'd like a mower that is like cars today - an appliance. It just works. Last fuew cars have got 100k with only brakes and oil changes, maybe $200 in other repairs.

Mowers...not so much.

A commercial mower is likely that item - but at $8-15k to cut grass it doesn't make economic sense - to tie up capital that way if nothing else. Used ones rarely (worth using used ones anyway) get below 4k. Not sure what 'mess' I may get for $4k.

My JD X500 has been like an appliance... but it was a bit expensive for a mower. I paid a little over $5K for it 8 years ago (only add-ons were a brush guard and a little JD branded dump trailer), but IMHO it has been worth every penny. It has never been back to the dealer, and so far nothing has broken on it. I've replaced blades twice and deck belts once, other than that just oil changes and greasing the zerks. I have used it way beyond what it was intended, doing trail clearing and brush hogging with it (we're talking 6' high blackberry bushes - engage the rear locker and ram into them until it hangs up and stops, back up, repeat, over and over until a 2 acre field that should have been cleared with a real tractor and a real brush hog is completely cleared). And it has never missed a beat. Planning to buy a subcompact tractor now (as I should have done many years ago), but this little JD is a keeper.

 

[dragoneggs]

Always wonder though why anyone would trade in a tractor with 50 to 100 hours on it, unless it was a lemon or
the bank took it back. But then I bought an all manual Massey and within 100 hours knew it was just the wrong tractor for me.
So perhaps some plain old buyer's remorse and not the best purchasing decision to begin with.

Or life happens! Death, divorce, job loss... bigger property? That said, I don't see a lot of low hour tractors for sale around here.

To the OP... fair question. Personally, I didn't factor resale value when buying my tractor but that is my nature. I always purchase high priced items, car, tractor, expensive tool, toy, etc. whether used or new (was going add wife to the list, but first one didn't work out :ashamed::laughing with the thought that I would keep it for its lifetime, and past mine hopefully. I know that is unrealistic in some cases where things just get worn out or break beyond reasonable repair.

I figured I would put 1000 to 2000 hrs on my tractor over a lifetime easily unless life changed significantly (can't factor that in). When you divide purchase price by hours used, it becomes a moot point in my opinion.

If you can find a used tractor that is exactly what you want hopefully with low hours, at a significant price reduction, great. Good luck. I didn't give it much thought because when I figured out what exactly I wanted, the only choices that met my criteria were new.