Re: Running costs of combines
I agree list prices mean nothing at all. For example we have just been quoted for a new JD 8530 tractor. Its list price is £125,446 ($215,767) but the price after the discount is £81,539 ($140,248). Why the dealers cant just say in the first place its £81,539 is beyond me.
However I am still having a bit of trouble understanding how you do your combines. I think and please correct me if I am wrong, is that you are effectively buying a machine but being given a guranteed buy back price after 1 or 2 seasons, which is effectively a 'hire' in the UK.
Combine hire in the UK generally goes on acres to cut. So a 2000 acre farmer would pay about £25,000 ($43,000) to hire tha machine for 1 year. This works out at $21.5/acre or (12.50/acre) which is good value.
However if we bought a combine and then sold it after a year or two then the depreciation would make it an expensive hire. e.g. A lexion 580TT in the UK would sell for about $292,400 after discount. In the first year it would loose 25% of its value taking the value down to $219,300 after I season, which means it cost $73,000 which over 2000 acres is $36.5/acre to keep it for 1 season.
In the UK if farmers buy combines, well machinery in general now, they keep it for 5 years because its to expensive to change early than that.
If I have understood correctly your effectively getting a combine for $24,000 per year?
Or are you paying an extra $24,000 to trade up? e.g. let me use round figures for simplicity: You pay $200,000 for a new combine, run it for 1 season then pay another $24,000 to trade up to a newer machine.
Do you not take the money you have lost on the first combine into account?
In year 1, I bought the combine at a negotiated price and term. Part way through year 1 or season 1, the same dealer offered to trade me out for a new one because he had a customer wanting a 1-year old machine with similar hours to what I put on a year. Therefore, the dealer guranteed me a trade-in value, adjusted the financing and I had a new combine the next season. After about 3-years of doing this, the intial payment washed out and guaranteed trade-in values have continued each year and I receive a new combine every season. Now, this doesn't happen to every customer (depends on the dealer), the key is that you need to get inital cost to a point where it justifies the annual roll. Otherwise, you basically are doing nothing but paying on interest with the original principle price looming out there somehwere that will eventually need paid. Most of these types of transactions are brought on by the dealers who are strong in remarketing 1-year old equipment.