Agriculture equipment dealers continue to take losses on used equipment amid sluggish sales, prompting them to emphasize aftermarket products and service.
Despite improved farmer sentiment, dealers reported a 12.4% year-over-year decline in used agriculture equipment sales during the 90 days ending May 31, according to IronAdvisor Insights. The report comprised responses from dealers representing 135 locations.
The decline reflects a prolonged trend in the farm equipment sector, driven by low commodity prices, tariff uncertainty and other macroeconomic challenges.
As sales remain muted, dealers are working to generate more aftermarket revenue to “stop the bleeding,” IronAdvisor Director of Research Jarrett Harris told Equipment Finance News. Focusing more on retail sales rather than liquidating via auction is one way to achieve this, even if that means taking a loss, he said.
“At the end of the day… I should do retail because I’ll get the parts and service business,” he said.
We are hearing a fair amount of commentary regarding investment in parts and service. … There is a sense that this market has to sort of reestablish itself, and in that meantime, you’re probably going to have to do a lot more fix and repair.”
Downside of OEM incentives
While aggressive OEM incentives have helped dealers sell new equipment, they’ve made it harder to sell higher-priced late-model used units, Derek Weaver, sales manager at Leola, Pa.-based Agriteer, told EFN.
OEMs “keep discounting and discounting and discounting,” he said. “Late-model, low-hour used equipment is hurting right now because there are some good deals we’ve had from manufacturers on new.”
OEM incentives and production cuts are allowing dealers to focus more on right-sizing their fleets, but 80% of dealers still reported excess inventory at the end of May, according to the IronAdvisor report.
However, production cuts have at least capped growth of dealer inventories, which is a step in the right direction, Harris said.
“It’s still excessive, but it’s not excessive and getting larger,” he said. “It’s excessive and holding or getting a little bit smaller. So, [inventory] is slightly more manageable.”
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