Buying New vs Used Farm Equipment
Article By: Cathy Asher, Relationship Manager for SFB
As commodity prices continue to stress profit margins for producers, thorough analysis of equipment purchases is a must. This means producers should ask a lot more questions, both of themselves and of the dealers with whom they work to purchase new or used machinery. Factors to consider prior to a purchase:
Reliability
In most cases, new equipment is more reliable than used equipment. Consider the cost of breakdowns not only in regards to cost of parts and labor, but also the cost of down time and the potential results to quality of the harvest.
Latest Technology
For those who value the high-tech equipment, buying new will allow for continual upgrades to the latest technology. This could mean trading more frequently. If you are financing your purchase, you may be trading prior to the completion of the financing contract. Considerations should be made to adjust the terms if possible to avoid negative trade equity.
Cost
Used equipment on the other hand typically comes with a lower cost and many times one can still find models with low hours and often times with high-end functionality.
Length of Use
Used equipment is often times a more economical choice for the seasonally-needed pieces. Determine whether an item can be owned for less than the cost of renting or leasing on a short-term basis. If you choose to own, consider whether the equipment could be rented/leased to another producer to help cover the cost of ownership.
Ownership
Consider depreciation, insurance and repairs. Determining the cost of ownership can be difficult. This article from the Iowa State University Extension offers good insight to estimating the cost of ownership.
