As a farmer in the United States, you count on dealers to take your old tractor in trade on a replacement. You often search for the store that will allow the most. However, one dealer may have too much invested in used inventory, and he may allow less for your trade than a dealer that needs used tractors. You can be pretty certain that it can be traded in, though.

This is not always true in other parts of the world. Some owners may not be able to trade in their old equipment, and some may not want to.

During my years as farm equipment export manager for IH Export Co., I had the opportunity to travel in 52 countries. I witnessed large differences in trade-in practices throughout the world.

There are dealer organizations is some countries that function the same as U.S. dealers. Good examples are Canada, Australia and New Zealand. Their trade-in practices, parts and service policies, and technical help are similar to here in the states.

Fewer trades are taken by European dealers and distributors. Farms are smaller and the old equipment is often retained by the owners, as they add acreage. On average a European farmer keeps his equipment longer.

Jan Arvidsson is a good friend and collector in Sweden. He explains that when his dad was a farm equipment distributor in the 1970s and 1980s, they took in trades but shipped them by rail to North Sweden where farms were smaller. They rarely sold the trades locally. Now, the trades tie up larger amounts of cash which makes it harder to do business.

It’s very different in the countries of the old USSR. Jay Suchland worked with me during the IH Export Co. days. Since 1984, he worked with these countries as a representative of CaseIH. Now retired, he described a full year that he lived in Uzbekistan. Purchases in that part of the world were made by governments, not individuals. No trades occurred. The replaced tractors and equipment were retained and stripped for parts. (So much for government efficiency).

CaseIH sets up leasing companies there so they can retain ownership till the equipment is fully paid for. As stated above no trades are involved.

In many remote countries spare parts are always a problem. Owners and dealers have often developed skills in making their own parts. Much earlier, back in the 1960s, in Russian territories dealers didn’t even carry parts. Instead, they sold customers extra tractors that could be stripped for parts. One of the reasons for that practice was the fact that no system existed to identify and supply parts based on needs history.

Suchland also added that in Israel, Greece and Lebanon (among other countries in that region) parts shortages were the incentive to keep old equipment instead of trading it, in order to strip parts. Obviously when new equipment was updated with new models, it was hard to get suitable parts off old models.

 

Valuing a trade-in

My first 18 years were spent on a dairy farm. During high school I went with my older brother to dealerships when he traded tractors. After four years in college and 13 years with International Harvester I purchased an IH dealership. I realized very quickly that valuing trade-ins was the difference between success and failure.

While on the farm it was hard to understand why dealers allowed different amounts for our trade-in tractor, when they gave us quotes. We wanted to buy close to home but sometimes our local dealer didn’t offer as much for our trade-in as another dealer.

After I bought my IH dealership I learned very quickly that taking a trade-in tractor was in reality buying that tractor. Our profit (or loss) on the new tractor deal would depend on what we got for the used trade-in.

In order to provide a warranty when selling the trade, it needed to be inspected, repaired or reconditioned as needed, and cleaned. Then it had to be advertised and kept clean on the used lot. A late-model trade would typically create another trade-in, with the same need to evaluate it.

An additional risk to the dealer is holding period. If it stays on the lot for an extended period, the carrying charge keeps growing. It is typically outdoors so paint weathering can occur.

So, let’s go back to deciding what a dealer should allow for the trade. Car dealers have it easy – they look at a “Blue Book” which gives used car wholesale values. Farm equipment dealers don’t have that. Only in recent years do auction results get widely published on the internet. Before that a dealer had to appraise each trade based on their experience.

I write this to help you, the consumer, understand why dealers vary in their trade allowances.

Paul Wallem was raised on a dairy farm. He spent 13 years with corporate IH on domestic and foreign assignments. He resigned to own and operate two IH dealerships. He is the author of THE BREAKUP OF IH and SUCCESSES AND INDUSTRY FIRSTS OF IH. His email address is pwallem@aol.com.