Resale value as a function of purchase price

[art]

Resale of a tractor has many factors. The original cost. The condition. The age. What is the life time expectancy of the tractor. What is available for parts!!!! The last two are the largest concern. Many tractors if you are looking for initial price you might be better off shopping under the label of who made it! That company should be the lowest price of that unit as it has not handled as much and of coarse everyone wants to profit from their sales. Not all equipment is designed the same. Some will only give you 3,000 hours of good use and some would give you 10,000 hours. All compacts!!! That is also the difference of the original price normally. For a home owner your use will be about 100 hours a year max! Many tractors are built with that in mind today! Lawn mowers is 40 hours a year with a ten year life cycle for the starter or small units.

 

[Geotech]

"While resale was a small consideration on my car, tractor, etc"

Then why are you being so rude?

And yes, leading with "so invest in a mutual fund then" is you being rude.

What is your expectation with that statement? Me: You're right prof fate - never mind about buying a tractor. I'm just not cut out for it!

 

[TractorNH]

If you want a hobby where you might break even then consider collecting NFA registered machine guns. You can afford to shoot them on occasion and if you own them long enough the increase in value generally eliminates the cost of ammunition (depending of course on how often you use them). Their value increases since there's a defined and never increasing supply of legal to own options since they all had to be registered pre-'86 to be legal.

Of course the real question is, can you really put a price on fun? You only live once so get what makes you happy and enjoy it.

 

[mred2]

Geotech, I hope no one here is being rube. I think most here are trying to answer questions. And some may express themselves differently than others. There are many things that determine the purchase of most things, Use, Price, Budget, Parts, Dealer support, Weight, Options, Resale, and more. People will come up with a lot more and put them in every order. I think for a lot of them here, current budget is close to the top.

 

[plowhog]

- never mind about buying a tractor. I'm just not cut out for it!

Please consider that most new owners come here with questions about tractor operation, functions, what they could accomplish with it, etc.

There is nothing wrong with evaluating resale value, but your post probably hit a few people as odd as it seems this is your primary focus. You wouldn't make a first post on a dating site about what sort of pre-nuptial agreement your date might agree to, as that would be out of place. So maybe you are numbers focused, which is OK, it's just that the focus you chose to lead with is not what is normally encountered here.

 

[Geotech]

Thanks Plowhog. I get it. This was not my first post. I have posted several other questions about several other things. Seems not totally unreasonable to discuss resale value on this forum when the conversation about 'buy a tractor vs hire out the work' is not poo pooed upon. I don't see a difference in the logic.

Anyway, it wasn't even my intent to start a conversation of using resale value as a reason to buy one model vs another. Mostly wanted to know if other folks noticed what I was noticing and what the implications might be - i.e. maybe a bunch of folks would jump in and say that they bought a bigger used tractor than they initially planned on for this reason.

If you read the title, it states resale value as a function of purchase price, not purchase price as a function of resale value.

 

[Garandman]

We bought the L3200 new in 2014 because it seemed used Kubota B and L were selling for their new prices of 3-4 years prior.

 

[atsah]

I do take resale value into consideration for one reason, if I drop dead tomorrow, the Mrs can sell everything I own and everything I own I have purchased with the thought of her doing so.

If I lived alone It wouldn't be of concern to me..

 

[prof fate]

What exactly is your concern?
Losing money? Losing the least amount of money?

Then buy a $300 tractor. Can only lose 300 bucks.
Or buy a 15,000 one and maybe lose 10% - less than 100%, but it's $1500 not 300.

If the cost/resale is your prime concern, then it sounds TO ME like you're looking at it like an investment...which it isn't. Unless you get a used tractor for a steal (which is possible) it's a tool - it's VALUE lies not in teh resale but in teh WORK IT DOES.

A kubota with 200 hours is worth more than one with a 1000 - be that a year old or 20 years old. So the more you use it the more you devalue it - BUT - the point is the more WORK you get from it. So while it's cash asset value goes down, the RETURN ON INVESTMENT is on the WORK it does.

You need to change the criteria you're using to buy a tractor. Odds are a JD or Kubota will retain more value..or maybe just be easier to sell. My Kioti was $3500 ish less than a comparable Kubota...and I'm expecting that it's resale value (due to name brand recognition) will be less as well. But I also have $3500 still in my pocket. that too has a value to it.

And how you pay for your tractor should be factored in , if money is the main criteria. Lost interest or opportunity if its in savings, insurance/interest if you're borrowing.

"While resale was a small consideration on my car, tractor, etc"

Then why are you being so rude?

And yes, leading with "so invest in a mutual fund then" is you being rude.

What is your expectation with that statement? Me: You're right prof fate - never mind about buying a tractor. I'm just not cut out for it!

 

[prof fate]

My concern is she'll sell my guns for what I told her I paid for them...

I do take resale value into consideration for one reason, if I drop dead tomorrow, the Mrs can sell everything I own and everything I own I have purchased with the thought of her doing so.

If I lived alone It wouldn't be of concern to me..

 

[atsah]

My concern is she'll sell my guns for what I told her I paid for them...

LOL..

I have a note in my cabinet that I hope she finds while taking them out to be sold.. Sheeeeee... I competition shoot as well, there is some money in there that's for sure but I don't hold the price I pay for firearms from her, she thinks the more I have the better..

 

[Atchuuu]

With Kubota, however, it looks like the cheaper the new tractor price, the higher the resale value as a percentage of new purchase price. For example, a low hour (less than 500 hours) L25/33/3901 is usually within about 10 percent of new. However, when you jump up to the L4701 and MX series tractors, the asking price for these used machines has a broader range of deviation from the cost of new. Seems like you get bigger bang for your buck shopping used as the tractor gets bigger/more expensive. Anybody else notice this?

Yes, I noticed that locally when I was shopping too. I was ready to purchase new when I found exactly what I was looking for, plus a cab, in a used Kubota. Had it been new the cab would not have been in my budget and I would have ended up with less HP and weight.

In my case I knew people who knew the seller and I was able to drive it. Additionally it was being used on a job site when I viewed it. Finding a little larger, higher HP unit worked out perfectly. Didn't know it then but I know now that a smaller tractor would have been disappointing.

Resale value is a valid concern as well. What difference does it make if it is a boat, gun, tractor or a home? Who want's to spend more money then necessary? If you can use a tractor for x period of time and get more of your money back at resale, why wouldn't you. More importantly, why would any of you give OP a hard time for planning an exit strategy if the need arises? It's not like he insulted anyone or stated he was looking to earn a living flipping tractors.

 

[prof fate]

It sounds like interviewing divorce attorneys before you ask a girl to marry you.

Resale is in the back of the mind on some things - house for sure, camper probably know you won't get anything for it. Tractor? Hard to say - my garden tractors I run till they die and aren't worth the cost to repair. My first 'real' tractor was a kubota L175 that had 13 hours put on it in nearly 20 years...deck spindles wouldn't turn,but it did run and drive, had a flat tire that kept gonig flat...got it for 700..put 500 into it (fluids, belts, blades, ROPS) and sold it for $2700 6 months later. Bought in the fall, sold in the spring so seasons count, name brand counts, getting it dirt cheap counts.

I have no idea the resale value on the kioti- never gave it thought (did on the kubota - worse case I'd break even..and planned to move up). Don't plan to move up...probably keep this till I die..or if I do sell it when i'm too old and feeble to use it , it will be paid off - so the $12-14k I might get will be fun money, er, pay for the home the kids will put me in. So that would work out to $1000 a year in 'cost' over say, 8 years.

You can't rent something for that price for as much as I'll use it for that $1000/year.

And if resale is a big concern, then perhaps operating costs need to be factored in, etc.

A diesel truck around here has enourmous resale value, much more than a gas truck. BUT they cost more to buy...to maintain...fuel efficiency offset a bit of that maybe.

Like electric cars and hybrids - i'd love to have one. 50 or more mpg? Great. Friend leased a chevy volt..spent $50 on gas in TWO YEARS (could commute on elec alone). BUT..resale? up front cost is way more than the fuel savings.

 

[daugen]

Anyone who has crunched numbers or had a finance position in their working career would find the OP's question very interesting.
If you don't, I can see why you would consider it silly, but seems the reaction here is a bit overstated.
It's a good question, but not the only question, OP never said it was.

I have a question that is a variation on the same thing...I only need a 75hp utility tractor, but is it possible the overall cost of operation, which of course includes depreciation, might be less if I spent more going in and got the 100hp variation? They are just turning up the fuel pump usually.
Specifically looking at a Massey 4707 but wondering if local resale demand would be higher for a higher hp tractor.
I'm an ex sales manager, marketing manager, and retired financial planner. I love understanding where the best value is and you have to
crunch numbers to figure it out. But that doesn't mean I'm a bean counter that is only driven by numbers. If the seat isn't comfortable or the controls in the cab aren't ergonomic, who cares if it costs a hundred bucks less a year to run.

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.

 

[rScotty]

I am planning to buy a new tractor in a couple months. Been vacillating between Kubota and Kioti, but it's a tough decision. Kioti resale value is harder to evaluate since there are not as many used Kiotis on the market.

With Kubota, however, it looks like the cheaper the new tractor price, the higher the resale value as a percentage of new purchase price. For example, a low hour (less than 500 hours) L25/33/3901 is usually within about 10 percent of new. However, when you jump up to the L4701 and MX series tractors, the asking price for these used machines has a broader range of deviation from the cost of new. Seems like you get bigger bang for your buck shopping used as the tractor gets bigger/more expensive. Anybody else notice this?

Getting back to Geotech's original post, he said, "With Kubota, however, it looks like the cheaper the new tractor price, the higher the resale value as a percentage of new purchase price."

I think that's true, but isn't it true of almost everything? That the less expensive models have higher resale value as a percentage of new price?
It does seem to apply to more than just tractors. It's true of luxury vs standard model cars and trucks for sure. And you see it a lot in machine tools and woodworking tools. For instance, a basic table saw won't depreciate much at all, but the fancy model with all the bells and whistles will depreciate until its used price is close to the basic model.

So I'm thinking that Geotech's observation tells us more about used tools in general than just about used tractors. He's come up with a handy way to look at purchasing all kinds of new equipment.
It might even help with his Kubota vs Kioti decision.
At least I think it would if it is also true that for popular models the depreciation % is less for both basic and high end models than it would be for a less popular brand.

There's one oddball "kicker" I can think of. And that is that everyonce in a long while in the world of cars, trucks, tools, guns, and tractors there comes along a model that is so well done that it becomes a "classic". For Classics the normal rules are reversed. They go up in value instead of down, and it's the high end models that go up the most. But trying to figure out what will become a classic and what won't is sorta like figuring out how to buy a winning lottery ticket.....

This resale thing is interesting to think about even for someone who doesn't make it part of their own buying decision.
Or maybe I should say it's interesting to me even though buying new tools isn't something I tend to do.

That's because of us guys on the other end of the market. We're the one's who prefer to buy used good used equipment & avoid most of the depreciation from the start.
For guys like me, we are mostly influenced by condition.... and after that if it has all the features that we want.
And for myself, I buy with the expectation that I will keep it forever.

Thinks for the thoughts,
rScotty

 

[Geotech]

I agree with both daugen and rScotty.

I work as an engineering manager today, but worked in trades before I went to college. My experience with tools is that trade tools tend to be much more expensive than the homeowner variants and also tend to hold their value better, since you use them to make money. For example, a set of Klein screwdrivers will set you back double what a set of Craftsmen screwdrivers will. After 10 years, you can sell the Klein set for some money. You may have a hard time giving away the Craftsmen set at a garage sale. And quite frankly, it is much more pleasurable working day in and day out with Klein tools compared to most other brands.

I know very little about tractors. I kind of assumed that the bigger, more expensive models such as the L4701 and MX series might be more akin to trade tools where as the L01 series more akin to homeowner stuff. For that reason, I was entertaining the thought of buying a more "serious" machine and was surprised to find a steeper discount on used vs new on the bigger machines. I think I am discovering that my assumption that these bigger models are "trade tool" grade might be incorrect. Perhaps they are just fancy "homeowner" equipment and the "real" tractors don't start until you get into ag-business stuff.

 

[aczlan]

I know very little about tractors. I kind of assumed that the bigger, more expensive models such as the L4701 and MX series might be more akin to trade tools where as the L01 series more akin to homeowner stuff. For that reason, I was entertaining the thought of buying a more "serious" machine and was surprised to find a steeper discount on used vs new on the bigger machines. I think I am discovering that my assumption that these bigger models are "trade tool" grade might be incorrect. Perhaps they are just fancy "homeowner" equipment and the "real" tractors don't start until you get into ag-business stuff.

IMO, once you get to 50HP-60HP, prices don't start going back up much until you get over 100HP or 120HP and most of it is due to demand from the "hobby farm" segment of the market. A lot of people could justify going up from a 30HP tractor to a 40HP tractor, or even a 50HP one, but once you get much past 50HP or 60HP you need a DRW pickup and a gooseneck trailer to move it and that limits your market significantly.

Aaron Z

 

[prof fate]

Percentage isn't 'the' thing to measure IMO.

If you buy a 24k kubota and it's worth 80% of that is 4 years, it cost you $4800 to own it.

If you buy a kioti or RK say, for 20k, and in 4 years it's worth 80% - same percentage - it cost you $4k to own it.

20% less. A significant sum.

Even if the kubota is worth 85% in 4 years, it cost you $3600 - less costly than the kioti or RK on the face of it, but if you financed it you may have spent more on the finance charges on the higher priced unit at purchase.

Another factor is how quickly you sell something - a kubota or deere will sell faster than other brands due to recognition of the brand, consumer confidence. Is a belarus or iseki a better buy, retain value better? I don't know, but I bet if you're selling one you're explaining the brand a lot more than a kubota or deere seller would be. But then that's likely why K and D can get a premium price on their stuff - name/brand recognition and trust.

 

[ning]

But trying to figure out what will become a classic and what won't is sorta like figuring out how to buy a winning lottery ticket.....

I buy the "collector's edition" of my things, that way you KNOW they'll be collectible!!!1!One!

 

[daugen]

I buy the "collector's edition" of my things, that way you KNOW they'll be collectible!!!1!One!

:thumbsup:
I gotta remember that wisdom...

but once you get much past 50HP or 60HP you need a DRW pickup and a gooseneck trailer to move it and that limits your market significantly.
very good point. And why if I still lived in a suburban setting, I'd never leave a 4 series. But I live among medium ag farmers running 50 to 200hp tractors usually with maybe ten percent larger than that.

Let's just say I never expect to need dual rears on my tractor...but I do want a stronger loader, and a glass roof so I can see my man hoist being raised up, and and a variety of new things now available.
And if I buy the collector's edition, I know they will all be included, including some extra decals for my hood.
And perhaps some embossed pleather for my arm rest.
I really need my tractor seat to tell me I'm a swell guy.

ROI, valued in a variety of ways. Including how that tool enabled you to do new and better things.
None of us want to waste our hard earned money.
Usually the cheapest one and the most expensive one fall outside the bell curve of value.
And we all have a budget

did the OP get an answer? Almost like I'd like Messicks to chime in.