Yes New Farm Equpment needs a Restart button

[greybeard]

S/B only 1/2 as many farmers.

[farmaholic]

I too doubt some corporate BTOs flip iron frequently for just the right off. Spend a buck to save 13 cents? Hardly makes sense, unless their net income is higher than the 500k small business lowest tax bracket. There are usually enough fingers in the pie or other options to "manage" excess income than waste it buying new iron for tax purposes only.

Maybe they want to always be under warranty (escpecially combines). Maybe they "think" they need to flip because it only costs "X" dollars per acre but in the meantime aren't gaining any equity or losing equity in the iron. Leasing is next, pay to use it then after a couple years send it back and start the process over again. Vicious circle.
Good for those who can "afford" it.

Then there is the MUD color swaps. I will never get there, some are too blindly brand dedicated to even consider it and some have no loyalty at all.

Takes all kinds...

[agchat]

When I read posts like this I just sit and smile, for two reasons. One, I am on the way out, and nearly finished of all this ****ing bullshit. Two, guys like me have been saying this for years, farmers have created this mess themselves, but **** what does a small farmer like me know anyway. Remember when they stopped making pull type combines(which i never did like anyway) in the eighties. Asked the salesman why they stopped and he showed me his dealership records for the past four years and they had only sold one. His answer "the farmer made them stop they were not buying them." And so the snowball keeps rolling and getting bigger. Progress is good, but sometimes there may be a limit. Good luck to those you who continue or must continue this way of living.

[Richard5]

Jwab, you're still not getting basic tax

Whatver the deduction, the lease pmt, the additional expense, you only get your tax rate.

Using your example a 10,000 acre farm, if he finds additional "deductions" of $100,000 it only reduces tax by $13,000. That means you spent $100,000 to save $13,000

Not good financial planning at all especially if trading off something that would more than do the job (example 3-7 year old tractor)

For leasing, almost always you will get a higher expense rate in depreciation by buying instead of leasing unless the lease is drawn up with larger pmts. This strategy is then really hard on cash flow if the farm is struggling already.

Leasing has become very popular because is a 1 stop done deal. No trip to the bank, lawyer etc. And also, imo, some of these leasing companies never turn you down for the deal

[Richard5]

Once over 1/2 million I think the tax increases to 27%.

If you are a very large farm with lots of earnings and debt you don't have luxury of the first 500,000 at 13%, it might all be at 27%.

Even then, its almost a 4 to 1 ratio on the investment verses tax savings.

No doubt some may be dead against paying tax at those rates but its a slow bleeding wound that will never ever heal then

[Richard5]

Maybe it works from your view point but I still disagree

Even if the tax is 27%, what I am saying is upgrading tractors, swathers mostly but maybe even sprayers and combines will not make you anymore money if they are in good working order and reliable

If one is simply spending the $ to save tax you never win that battle

I will volunteer right now to anyone. Give me $100,000, I'll give you a receipt for services and gladly pay the tax at 13% or 27%

[Richard5]

I know Wiseguy

I was just trying to demonstrate it makes zero sense to flip very good, almost new equipment from a tax point

Its all about the show for some of these guys and eventually the show will be over

[Daylate]

If your farm is over $10 million net worth your at 27% regardless of what you make. This is the main reason for not adjusting assets like land that was purchased years ago. You can keep your farm under the 10 million limit for longer. And the jump from 13 to 27% isn't that cut and dry. If your paying dividends to sharholders and your paying in the higher 27% bracket in your corp, then that portion received to shareholders has less personal tax attached to it.
So ya, I don't really understand trading off 2 year old stuff for new equipment from a financial perspective except for making it a little more predictable for huge farms employees.

[poorboy]

Most of the really big farms trading in the 30 or more items at a time to get the max multi unit discount from Deere, Case have lots of reasons for trading.

Historically it has been better to put your money into trading than fixing. Your used machinery that is 1-2 years old has often been worth as much at trade in as it cost. I know that I can't trade in my 1-2 year old pickup or semi truck and get back what I paid for it, but that has been very common on newer farm machinery.

Labor also comes into play. Most mega farms hire a large number of operators for just seeding and harvest, so they don't have enough help or knowledge to fix old machinery or even to get it ready. When you buy 30 items the dealership gets everything ready for you each year and during the busy season the dealership has a tech at your place daily doing repairs. This way your older operators, overseas kids, etc don't have to get their hands dirty, so it makes it easy to find help.

Around me, the multi deals all seemed to happen last fall just like normal, so not sure how many dealers have backed away from trades.

Looking at airdrill and combine sales this spring, it does make one hope that the guy doing the multi deal starts to pay his fair share of the depreciation. It has been way to cheap for too long for those guys.

[farmaholic]

Would it be fair to say that it isn't the one or two year old stuff holding it's value on it's own as much as being propped up by the constant ramping up of prices of the new stuff that makes the gently used appear to be "holding its value"?

This may be coming to an end.

[bigzee]

I know one operation who leases 12 new combines every yr!! They don't have time to fix the one yr old ones. LOL. JD has them in a sweet program I'm guessing.
I like having warranty, but dealer combines are usually 125-150 higher than RB. If my new combines total $125k each in warranty maybe I should switch brands.

[biglentil]

Don't worry guys they will keep the shareholders happy by sticking it to us as the parts desk. Cnh stands for Can Not Hide.

[bigzee]

If you can't afford to buy new we will get you on the parts to fix the junk.