It's a decision most farm operators have to make nearly every year: Should I spend the time and money to repair an older machine, or trade it for new steel?
Repair costs are difficult to estimate, Kansas State University (KSU) economists say. General repair data is available for different types of equipment, but any one machine can vary greatly from the averages.
“If you plot a graph of total accumulated repairs over a machine's life, the graph should resemble the mirror image of a depreciation curve,” says Randall Taylor, KSU farm power and machinery specialist. “That is, depreciation typically is high and repairs are low when a machine is new. But with age and use, depreciation slows down and repairs increase. But you can influence both depreciation and repair costs with timely service and management.”
Chuck Dunlop of Dunlop Farms, Inc., farms 3,500 acres as part of a family-owned operation in Linn and Bourbon counties in Kansas.
“It's hard to find a value for your old machine,” he says. “We start by finding out what dealers will allow in trade. You can spend a lot of time and money to repair an older machine without increasing its trade-in value very much, and the dollar difference in a trade is key.”
When a significant repair will more than pay its investment in time and cost, Dunlop usually opts for that route. For example, this winter the Dunlops are completely overhauling a well-worn combine corn head rather than buying a new one.
“We had problems with the equipment last fall,” says Chuck Dunlop. “It had seen a lot of service and was pretty well depreciated out. But by spending $4,000-5,000 on it, we're getting it in shape for a few more seasons and we're putting off buying a new one at $35,000 or more.”
Mel Gerber and Dean Loganbill grow corn, wheat, soybeans and sunflowers — all no-till — in Morgan County, MO. “I don't want to be tied to the same repair-or-replace strategy on every piece of equipment,” says Gerber. “Reliability is a big factor with us. All machines break down — even new ones — but new ones shouldn't break down as often. If you're working on a combine in the shop when it should be in the field, it's time to bite the bullet and trade for a more reliable machine.
“We do a good job of maintaining equipment, so I'm not too paranoid about age in a machine,” adds Gerber. “For example, our Kinze planter has run for 10 seasons now. It's fairly high annual maintenance, but it still does a dependable job.”
Dunlop says technology improvements often influence their decisions to trade for new equipment. “We look at how much management improvement we can buy with a new machine,” he notes.
Gerber agrees that the pace of technology increase looms big in his and Loganbill's decisions. For example, with fewer lube points and a longer maintenance interval, a new combine requires considerably less time each day to service.
“Over a harvest season, that amounts to a lot of time saved — and during a critical season,” he says. “If you're stretched to the limit, time becomes an important factor.”
Not all of the bells and whistles on new machines are cosmetic; some actually improve the quality of work done.
“Last year, we updated our Spra-Coupe with a global positioning system(GPS),” says Loganbill. “That makes training new sprayer operators much easier and reduces the risk of spraying the wrong field. We no longer need to refill foam markers and we can drive faster with the new rig. We've gained 40 acres/day with the Spra-Coupe.”
When the opportunity comes along, both Dunlop and Gerber take a long look at used equipment as an alternative to fixing up an old machine or buying a brand new one.
“We're in the market right now for an aluminum semi-trailer grain body in good condition. We only use trucks a few weeks out of the year, so a dependable used trailer will fill the bill,” says Dunlop.
“A year ago, we bought a used 9200-series John Deere 4WD tractor,” says Gerber. “It had been in Deere's lease program, had low hours and a good warranty — we thought it was worth the money.”
But as Gerber puts it, there's no one strategy that suits all situations. Repair-or-replace decisions need to be made on a case-by-case basis.
However, be realistic about the value and life expectancy of your old equipment.
A significant repair is a big investment and may increase the selling price of a machine little or not at all. On the other hand, a major repair may extend the value of the equipment to your operation for seasons to come.
So take the time to do some homework before deciding to invest in repairs or new steel.
Information to help producers make repair-or-replace machinery decisions is available from a variety of sources.
Machinery manufacturers regularly publish management guides and repair manuals. For example, John Deere posts detailed maintenance and repair information on the Web at www.deere.com/ag/servicesupport.
For growers who may want to compare machinery buying vs. leasing, Ray Massey, crops economist at the University of Missouri, has prepared an “Equipment Lease Analyzer” (co-authored with William Edwards at Iowa State University) that investigates lease and purchase options. The Analyzer is a PC spreadsheet program that requires Microsoft Excel, and can be downloaded at http://agebb.missouri.edu/download/equipment.exec.
Randall Taylor, the Kansas State University machinery systems specialist featured in the main article can be reached at 785-532-2931 or rktaylor@oznet.ksu.edu.
Extension specialists at several land grant universities offer good counsel on equipment costs, buying and selling, etc. Two of the best are Edwards at Iowa State University, 515-294-6161 or e-mail: wedwards@iastate.edu and Bill Lazarus at the University of Minnesota, 612-625-8150 or e-mail: wlazarus@dept.agecon.umn.edu.