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Having a very hard time wrapping my head around machinery prices
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c_mayer
Posted 8/6/2022 07:49 (#9782863 - in reply to #9782115)
Subject: RE: Having a very hard time wrapping my head around machinery prices


If anyone thinks being the dealer and holding a lot full of inventory is easy, you should try it sometime.

When we sell a new combine, and take trades, we can be 2-4 years selling ALL of the trades to get down to a cash deal in a rough market. In a good market, we still figure 2 years. This year added 6-10 months to that because of the uncertainty of when the new machine would actually arrive, versus being able to sell the trade in before the new one got here. We saw what was coming and told ALL of our customers to keep what they had in the barn until we have the new one on the lot...some dealers didn't, and now are getting to find customers something to run this fall.

So, in this market with new prices going up 15-30% depending on manufacturer, used prices doing god knows what, and not having a real clue WHEN you can even start marketing the used machines, what value do you put on a combine? What's it going to be worth 2 to 3 years from now if the proverbial manure hits the fan? It's coming, always does, but no one knows when. It doesn't take many used combines to add up to a Million bucks, and it doesn't take too much loss per machine to eat up every bit of profit you thought you had, and then it's eating into your bottom line, and your ability to cash flow to keep your employees paid, your customers taken care of, and your dealership afloat during a downturn.

As I said in a different post, there are no guarantees from the government of a payment for a dealer, there is no "sales insurance" we can buy to cover a crop failure. We just have to be business minded managers who try to make their best, educated guess without a crystal ball to know when everyone will stop buying.

Now, I agree that price increases have been extreme. Been doing this for 22 years and have NEVER seen anything like this. Dad's been doing it 50 years now and says the same thing, though he's seen some things closer. At least interest isn't 20%...yet. Manufacturers are trying to do the same things I've talked about...what is steel going to cost in 8-12 months when they build the next combines and tillage tools? Tires and tracks? Plastic panels? There's no magic bullet, and we're all out here trying to make sure we are around for another 50 years. It never gets easier!

Now, I didn't post any of that to make anyone feels sorry for us. Quite the opposite. I want customers to understand what it takes from this side of the table and counter, so that they understand I'm here to make a buck, just like they are. We all have to work together, in the hard times more than the good times, to make sure that ALL of us survive. We, by that I mean "most" machinery dealers, are all trying to figure out what everyone is thinking, what prices are doing, and what we need to do the same as you all are trying to manage fuel, fertilizer, land cost, machinery, and crop prices.

Take it for what it is, an guy on a keyboard on the internet.
Chris
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