Pictured Above: Used precision equipment can be a lucrative business, with some dealerships reporting 10-20% of their precision income stems from selling used precision guidance equipment. Targets for this market are farmers who either can’t or don’t want to spend the money on new systems.
As more new farm machinery rolls out of the factory with precision technology capability, and more farmers down the “adoption rate” ladder become comfortable with precision agriculture, a number of dealers across the country have developed significant new business dealing in used precision equipment they take in on trades.
Some report 10-20% of their precision business stems from selling used precision guidance equipment. These sales are to growers who either can’t or don’t want to spend the money on new systems, as well as to a growing number of producers who buy used to give their tillage tractors guidance capability.
Other dealers see the used precision equipment market as a tool to provide service through their shops, for increased billable shop time, and as another product with which to engage potential customers for both new and used equipment.
But success isn’t as simple as shelving used light-bars and guidance controllers beneath a “For Sale” sign. Dealers emphasize success in the used precision equipment business demands someone with a great deal of knowledge of specific systems and support circuitry.
In nearly all cases, dealers say those selling used electronic equipment need to remember the old caveat: “Bought right, is half sold.” In addition, as more new equipment comes equipped with brand-specific precision components, the suppliers of those systems are beginning to offer their own trade-in allowances, which potentially could dry up much of the “feedstock” for used equipment sellers.
The trade-in programs also tend to set a price on used equipment, a development which could significantly change the economics of selling the systems in trades other than in conjunction with an iron sale.
“Used equipment isn’t as big a part of our business as it was several years ago,” says Jason Pennycook, precision farming specialist with Johnson Tractor in Janesville, Wis., a three-store Case IH dealership that serves northern Illinois and southern Wisconsin. “Even a year ago, we’d get used tractors equipped with guidance systems and customers wouldn’t want the electronics.
“Now, as more farmers are accustomed to the technology, nine times out of 10 that used guidance system is going right back out the door when we sell the tractor,” he says.
Still, Pennycook says having used precision equipment for sale is important to his company’s business.
“Our main customer base for the used equipment is generally a newer customer looking to get into precision agriculture but not at a ‘new price,’” he says. “Other times they’re already running guidance on other equipment and want something to steer their 4WD tillage tractor or to expand the technology onto older equipment.”
The demand for precision equipment is no longer found only on the largest farms, Pennycook says. Johnson Tractor has customers running 500-600 acres who have seen the benefits and are adopting the technology, particularly as this year’s commodity market put corn back to $3.50, $4, or less.
“They’re saying, ‘Guidance and variable-rate application make sense’ and that makes investing in precision economically viable, even to the smaller operator,” Pennycook says.
All this is important to Johnson Tractor, he says, because it gives the dealerships another service for their customers, and it can help salespeople make deals on new equipment.
In Rochester, Ind., used equipment installation and sales accounts for about 20% of Ag Technologies $500,000 a year business, says Lanty “Spud” Armstrong, the precision specialist for the precision farming business associated with a 7-store group of New Holland dealers in the area. Ag Technologies does all things “precision” for the company’s ag, irrigation and sprayer business.
“We’ve been involved with precision ag since 2006 and started dealing in used equipment in 2010 after we learned what our customers were looking for,” Armstrong says. “We’ll trade in used precision equipment as long as it’s something I can resell.”
The knowledge of what will sell is as important as the knowledge of the specific equipment, he says. It’s often a challenge to stay engaged with customers enough to know their needs and to be able to match those needs with economical, used systems that will boost their productivity.
Many times, Armstrong can trade an older yield monitor from a customer’s combine to resell in a package for $3,000 or $4,000 instead of twice that much. In many cases, a new monitor might be worth more than the older combine someone is still using, so it helps both customers and gives me the opportunity for more sales to each down the road,” he says.
“You have to spend a lot of time with your customers,” Armstrong says. “A lot of guys have old light bars and there’s a big market for them with smaller farmers or those who work in town and can’t afford the latest new equipment.”
Even larger customers are now moving navigation equipment back and forth on equipment, Armstrong says, and they’re looking for modestly-priced used equipment to install on their machines.
“The good thing about used equipment is, if it works, there’s a market,” he says. “Just like in the iron business, we do better on used equipment than we do with new gear with a warranty.”
Armstrong says he and another employee watch the used equipment inventory closely, and if something hasn’t sold in a reasonable amount of time, they list it online and find a home for it.
“We generally don’t search online for used equipment for our customers,” he says, “because most of the profit has already been taken by whoever is selling it online. We’ll suggest our customers buy it outright themselves and then we sell them the cables and brackets.”
In addition, the used precision market has helped the New Holland dealerships associated with Ag Technologies to leverage new sales, by allowing them to take trade ins.
“Customers paid a lot of money for those systems and they want to think they’re getting at least some value for them when they trade them in,” Armstrong says. “Some dealers won’t trade electronics and that frustrates customers, so if a trade is there it makes you look good as a supplier.”
Despite the changes in the precision farming business, Armstrong says he sees a strong future for the used market. Although, he says there may be some drop in the interest in hardware because of major precision system manufacturer’s new trade-in programs.
The knowledge of what will sell is as important as the knowledge of the specific equipment, says Lanty Armstrong, with Ag Technologies. It’s often a challenge to stay engaged with customers enough to know their needs and match those needs with economical, used systems that will boost their productivity.
“Still, 10-15% of our dealers’ new sales will have trade-in equipment coming in,” he says. “We’re not flooded with used stuff, and don’t want to be, but it’s no different than ag equipment sales.”
The only time Armstrong says he’s gotten burned is when taking new equipment out of a tractor and selling it on the shelf. “It has to be priced so close to new, it makes it difficult to sell,” he says. “Usually we have to sell that through a tractor or combine deal to get it moved.”
Josh Barnaby has about 2 years of experience in the used precision equipment business as part of his job as Integrated Solutions salesman for O’Malley Equipment in Independence, Kan., a two-store John Deere dealership.
“We started a couple of years ago trading some used equipment and got quite a bit of inventory,” he says. “We had to put the brakes on because we didn’t want to end up with a pile of stuff we couldn’t sell. As we began to sell that inventory we became more familiar with the business and the market and started using Machine Finder for online sales across the country.”
A lot of O’Malley’s used business is “third system” — customers who just want guidance — and some are buying their first system used because it is cheaper, Barnaby says. About 99% of the precision equipment the dealership sells is John Deere.
“We do sell Outback lightbars, but we try to stick with the John Deere systems on the tractors we sell because we know how they work and what it takes to make them compatible with different models,” he says. “I think there’s a strong market for used equipment out there, but as the business evolves it will be primarily dealers trading in used equipment that comes on the line of tractors they sell.”
Barnaby also expects there will be more trading for equipment already on used tractors and combines, rather than outright sales of systems taken off equipment. The primary benefits of the used precision enterprise for his dealerships is it gets the technology into another tier of adopter’s hands.
“I’m seeing guys with their first used system come back for more used equipment or a totally new system,” he says. “It gives customers a taste of what precision ag is all about and it has generated a number of new AMS equipment sales for us.
“I think it’s a valuable part of our business. Through trade ins, we can show a customer who has just spent a lot of money for a totally new system there is still value in it come trade-in time. That helps keep us competitive.”
Knowing the Equipment
While no longer trading in used precision equipment, Dan Severson with Benco Products Inc., in Tea, S.D., says selling used equipment helped his dealership develop the expertise and customer base to become a Raven distributor as part of its custom sprayer and precision farming manufacturing business.
“Before we were a Raven dealer, we were buying and selling used equipment (at retail) and serving our customers in that way,” Severson says. “We built up a huge customer base through service, so when we were able to transition to new equipment sales it helped us tremendously.
“We’re not at all sorry we were in the used business,” he adds, noting the only precision trade-ins he takes now are Raven equipment.
Looking back, Severson says the biggest challenge in selling used precision equipment is being able to service the products he sold. “It used to be that a lot of this precision hardware was similar, or even made by the same company,” he says. That’s not the case anymore.
“When I sold a piece of equipment it took a lot of time consulting manuals to learn the product, then it may be 6 months before I saw that product or a similar one again,” he says. “We never charged for service on the telephone, so that amounted to a lot of time and money we spent on support.”
Severson says there are still possibilities for niche markets trading in used precision equipment, but adds it will require a staff with a very deep knowledge of a number of products, the overall precision industry and where it’s headed, as well as the local customer base.
Building a Customer Base
In Dysart, Iowa, Pete Youngblut runs a single-store precision farming business working with machines of all colors. He deals mainly with Ag Leader, Trimble and NORAC.
Used equipment accounts for about 10% of Youngblut Ag’s total business, but he says one of his primary considerations with used technology is using it as a window for future sales, especially if there’s potential for a fast turnaround.
“I’m interested in getting customers upgraded to the newest, most capable equipment possible, so if I can locate a piece of used equipment that someone wants to sell to resell to someone who needs it, I’m ready to give the seller a good deal,” he says. “I don’t need to make a killing in the used market, I just want to serve my customers’ needs.”
The biggest challenge for Youngblut is moving used equipment in a timely fashion and holding his margin. “Making that original deal is the important point in making it all work because “Bought right, is half sold,” according to Youngblut.