Showing customers short-term payback with precision equipment helps Michigan dealer Precise & Concise Ag Solutions, broaden its customer base.
Return on investment is often the best sales tool precision farming dealers have to convince customers that technology is worth that investment.
But this strategy doesn’t guarantee a sale. Some customers are skeptical that payback may take longer than promised and reluctant to spend thousands of dollars without a safety net.
One option for dealers to instill confidence in their customers and open the door to long-term technology sales opportunities is leasing precision equipment.
“There’s definitely profit to be made leasing equipment,” says Mike Houghtaling, founder of Precise & Concise Ag Solutions, a single-store precision dealership in Saginaw, Mich. “We’ve found that we get an increased opportunity to sell technology products because customers use it for a set time period and can see the value.”
They’ve had the most success leasing planter row clutch systems, because customers see a return on investment within a year or two. Houghtaling says he works with customers to calculate the payback based on the number of acres and type of crops they farm.
The dealership leases the row clutch systems for about $2,500 per year, which includes installation and service.
Houghtaling has worked with customers who farm 500 acres of corn and saw a 5% savings in seed costs through a reduction in overlap, which came out to $2,000. They also had about a 50 bushel per acre increase in corn yields on about 5% of their acres, which even at $4 per bushel corn, is $200 per acre on 25 acres, and another $5,000.
“That’s an extra $7,000 those customers had to put toward another system or additional technology,” Houghtaling says. “We’ve had customers who were a bit skeptical, but when I’ve shown them a 1 year payback, they will generally bite.”
He recently leased a row clutch system to a customer who farms irregularly shaped fields. Houghtaling estimated a 5% savings in seed costs. The customer ultimately saw closer to a 12% savings, which led to additional precision sales.
“We gained the customer’s trust by getting our foot in the door and he ended up purchasing a $20,000 RTK system and added a yield monitor in his combine,” Houghtaling says.
He admits that leases can be tricky, but they’ve had success writing their own leases for precision products or serving as a loan officer through the local bank. One of the biggest obstacles to convincing customers to lease is the interest rates, Houghtaling says.
“In some cases, we’ve held the lease notes ourselves, and for some of our local banks, they aren’t quite sure what the product is, so they aren’t quite sure what kind of collateral that really represents,” Houghtaling says. “If we can hold the note for 7% interest and we’re buying money from our bank for 5%, we’re fine with that.
“Worst case scenario is we get the lease payment, a customer gives us the product back and we can sell it again locally, or put it back into the used market.”
The dealership does a fair amount of used precision equipment business and can resell leased technology to customers. Houghtaling also offers an 85% buyback program after 1 year on new precision products.
He recently had a customer purchase a $10,000 auto-guidance system and after a year, turned it into the dealership for an $8,500 credit toward an upgrade to a $25,000 system.
“The buyback program gives customers security to make that initial purchase and they know they’re not making the wrong decision when upgrading to the higher-end system,” Houghtaling says. “Then we’re able to take that entry level system and put it back into our marketplace. Now I’ve got an entry level system at a used price and that’s even more attractive to our smaller customers.”