Should you buy a new tractor?

[KelpieRed]

I’m a new farmer, been farming in my own right for 10 years now. Successfully grown a good business through contracting and growing our sheep flock. The time has come that I have paid my current tractor off. I have never like the idea of buying a new tractor as they depreciate so much! I have always bought second hand. Now with rates being quite high a new one is looking more attractive at 0% for 3 years. It will be a significant change going from 120 to 150hp, with guidance, front links and PTO and a 3 year warranty - all things I currently don’t have. Being a new farmer I don’t really have a policy as such. My current tractor is about to tick over 5000 hours and I do a minimum of 750 a year - so I think now is about the right time? What are others thoughts on this? I understand some might hold onto a machine that doesn’t owe them anything, but I’m of the view that you should keep re-investing equity and not allowing a machine to drop in value to the point where it will be very expensive to change?

 

[Salopian_Will]

I’m a new farmer, been farming in my own right for 10 years now. Successfully grown a good business through contracting and growing our sheep flock. The time has come that I have paid my current tractor off. I have never like the idea of buying a new tractor as they depreciate so much! I have always bought second hand. Now with rates being quite high a new one is looking more attractive at 0% for 3 years. It will be a significant change going from 120 to 150hp, with guidance, front links and PTO and a 3 year warranty - all things I currently don’t have. Being a new farmer I don’t really have a policy as such. My current tractor is about to tick over 5000 hours and I do a minimum of 750 a year - so I think now is about the right time? What are others thoughts on this? I understand some might hold onto a machine that doesn’t owe them anything, but I’m of the view that you should keep re-investing equity and not allowing a machine to drop in value to the point where it will be very expensive to change?

Your justifications are very reasoned and justified. Crack on, I say.

 

[RhysT]

Just a quick ad to this, digger contractor friend of mine has hit a quiet patch. He'd overspent on machines and a contract has not materialized. He's tried to sell a year old 115hp case back to the main dealers, they've offered him £20k less than he paid for it. It works out at £40 an hour depreciation over 500hrs!

 

[KelpieRed]

Just a quick ad to this, digger contractor friend of mine has hit a quiet patch. He'd overspent on machines and a contract has not materialized. He's tried to sell a year old 115hp case back to the main dealers, they've offered him £20k less than he paid for it. It works out at £40 an hour depreciation over 500hrs!

Agreed this is the worst nightmare, market goes south and end up with a big payment you can’t make. Sending back to the main dealer will never be cost effective though. I was doing some rough sums with the rep and thinking it will be about £14/hr depreciation over 5 years and 3800hrs. Thankfully we only have one other machine on a very small payment and a bounce back loan - our debt ratio is very low and the other machine only has 2 more years on it - as this one is only a mixer/tedder tractor I will hold onto this for the long term - and it doesn’t have DPF!

 

[PSQ]

I’m a new farmer, been farming in my own right for 10 years now.

New farmer?
After 10 years you’re eligible for promotion to the rank of ‘Survivor’.

 

[haybob]

Think I'd sit tight and get the second tractor paid off first. I can't see machinery going up much this next two years either. There's loads and pros and cons but if you're machinery is reliable, keep running it. All this new gear with complicated gadgets and high service costs is a rip off .

 

[Nearly]

Stick.

Another 12 to 18 months will be interesting times.
General election.
Ukraine and others fighting back.
Trump trying again.

Build a bunker.

 

[TelesnaAg]

I’m a new farmer, been farming in my own right for 10 years now. Successfully grown a good business through contracting and growing our sheep flock. The time has come that I have paid my current tractor off. I have never like the idea of buying a new tractor as they depreciate so much! I have always bought second hand. Now with rates being quite high a new one is looking more attractive at 0% for 3 years. It will be a significant change going from 120 to 150hp, with guidance, front links and PTO and a 3 year warranty - all things I currently don’t have. Being a new farmer I don’t really have a policy as such. My current tractor is about to tick over 5000 hours and I do a minimum of 750 a year - so I think now is about the right time? What are others thoughts on this? I understand some might hold onto a machine that doesn’t owe them anything, but I’m of the view that you should keep re-investing equity and not allowing a machine to drop in value to the point where it will be very expensive to change?

Fyi, cheap interest rates are included in purchase price, they buy down the interest rate and add that value to cost of tractor, there is no such thing as free interest unless you borrow from mum and dad.

I always use repayments as a guide as sometimes its better to go new versus late model 2nd hand if using finance, cash purchase or large deposit changes that.

Always get a new price so you can calculate 2nd hand value.

Ant...

 

[lloyd]

If you can give some figures of what they are valuing
your old tractor at and the discount offered on the new it
will be easier to advise .Like others have said it is a buyers market atm.

 

[Flat 10]

I'm fascinated that you can justify 150hp guidance front links etc and do 750hrs pa on a sheep farm. Otherwise your logic seems reasonable and if you aren't overstretching yourself then go ahead.

 

[Burrell Road Loco]

Fyi, cheap interest rates are included in purchase price, they buy down the interest rate and add that value to cost of tractor, there is no such thing as free interest unless you borrow from mum and dad.

I always use repayments as a guide as sometimes its better to go new versus late model 2nd hand if using finance, cash purchase or large deposit changes that.

Always get a new price so you can calculate 2nd hand value.

Ant...

I completely agree, sometimes the new purchase payments against used purchase costs are not that different, so it would be daft to buy used, even if you added another year onto the finance term. For example, consider the payments on a 2 year old machine against the new machine payments but spread over a longer time, and the values of both once paid off, you could end up in a better place buying new.
Take a long term view, and think where you will end up at the end. Consider things like can you always make the payment if you have a bad year, what is it worth at the end, and NEVER underestimate what a ‘reliable’ used machine costs to own. Even seemingly small items like a starter motor or a leaking radiator cost serious money, especially when you include downtime costs, which is what most people rarely consider.

 

[Burrell Road Loco]

I'm fascinated that you can justify 150hp guidance front links etc and do 750hrs pa on a sheep farm. Otherwise your logic seems reasonable and if you aren't overstretching yourself then go ahead.

Contracting

 

[lloyd]

I'm fascinated that you can justify 150hp guidance front links etc and do 750hrs pa on a sheep farm. Otherwise your logic seems reasonable and if you aren't overstretching yourself then go ahead.

He/she does contracting .

 

[bobk]

Stick.

Another 12 to 18 months will be interesting times.
General election.
Ukraine and others fighting back.
Trump trying again.

Build a bunker.

Is this the reason for a NZ move ? escape the fallout

 

[Flat 10]

oh ah. almost certainly worth it then

 

[Rich_ard]

Mostly I find in farming if you want it you have to buy it. Justifying it is more difficult. If you think the old ones going to cause expensive repairs it will most like do that, or something will happen that you wished you bought the new one.
Good for you to be thinking about a new one after 10 years sheep farming.

 

[le bon paysan]

Ok I'll be a wet blanket!
By the sound of it you are thinking of upgrading all your work processes, eg front mounted kit etc. If mowing for example front and back can you take on double the work load to help pay but remember can you catch up after a breakdown.
Also you need more work to pay off a bigger tractor, so doing more might not make you any richer.
The price of 'jobs' sometimes looks good but only just pays it's way.
Not wanting pee on your parade, but this is part of the other side of the coin.

 

[Nearly]

Is this the reason for a NZ move ? escape the fallout

I might have left it a little late.

 

[TelesnaAg]

I completely agree, sometimes the new purchase payments against used purchase costs are not that different, so it would be daft to buy used, even if you added another year onto the finance term. For example, consider the payments on a 2 year old machine against the new machine payments but spread over a longer time, and the values of both once paid off, you could end up in a better place buying new.
Take a long term view, and think where you will end up at the end. Consider things like can you always make the payment if you have a bad year, what is it worth at the end, and NEVER underestimate what a ‘reliable’ used machine costs to own. Even seemingly small items like a starter motor or a leaking radiator cost serious money, especially when you include downtime costs, which is what most people rarely consider.

Unfortunately parts pricing is horrendous, so cost of ownership favours new alot now, if the OEM's change there warehouse models we may see parts pricing reduce, something needs to give in this space.

Ant...

 

[TelesnaAg]

I’m a new farmer, been farming in my own right for 10 years now. Successfully grown a good business through contracting and growing our sheep flock. The time has come that I have paid my current tractor off. I have never like the idea of buying a new tractor as they depreciate so much! I have always bought second hand. Now with rates being quite high a new one is looking more attractive at 0% for 3 years. It will be a significant change going from 120 to 150hp, with guidance, front links and PTO and a 3 year warranty - all things I currently don’t have. Being a new farmer I don’t really have a policy as such. My current tractor is about to tick over 5000 hours and I do a minimum of 750 a year - so I think now is about the right time? What are others thoughts on this? I understand some might hold onto a machine that doesn’t owe them anything, but I’m of the view that you should keep re-investing equity and not allowing a machine to drop in value to the point where it will be very expensive to change?

At 750 hrs a year ditch the current and buy new imo, sone good options in that hp range without taking on to many gadgets in tractor i.e m series jd and mf 7s or 6s.

Ant...