A nasty storm blew in and it’s been about as bad as we could have imagined. The ag equipment industry is weathering the impact of trade deals that have delayed consequences, inflated equipment values, rising interest rates, softening commodity prices, and a general tightening of farmer sentiment.
This isn’t about the forecast we made back in May of 2023 about the storm that was brewing; it’s about what we do next. Fortunately, most farm operations entered this cycle with strong balance sheets, and many dealers were well-positioned too. But that doesn’t mean it isn’t painful. The struggle is real.
So the question becomes: how do we navigate the storm we’re in? Let’s start by acknowledging where things went sideways and then focus on course-correcting with urgency and discipline.
The Storm’s Ingredients
1. The Consequences of Deals with Delayed Trades
Many trade deals were done where the trade wouldn’t be possessed or delivered for 6 to 12 months. That might have worked in a bull market, but it’s painful now. The used equipment tide has gone out and it’s exposing how reliant we became on inflated trade values to keep the wheels turning.
2. Sustained High Interest Rates
Dealers are now facing sustained interest on their floor plans in the 6.5% to 7.5% range. No matter if it is an interest payment to your OEM with pool funds or to your local community bank, it’s real money that is a direct hit to margin every month inventory sits. To make matters worse, the low-cost financing tools we leaned on from 2013 to 2016 to weather that storm are gone—and there’s no sign of them returning anytime soon.
3. Slowing Used Equipment Turns
Trend-setting operators are pressing pause, and when they stop buying, their neighbors do too. Combine that with bloated used inventories, and the ripple effect is real. There’s more iron sitting on lots and it’s sitting far longer.
4. Falling Values
It was fun for some while it lasted, but a 15% drop in used values on a $400,000 machine is $60,000 per unit. That’s not something you quietly write down. Margin compression has choked off the oxygen needed to cover overhead and keep the lights on.
Even for dealers with strong absorption rates, the math is brutal and the solution isn’t wishful thinking. When the rebound comes, it won’t be a snapback. It’ll be a gradual climb to a new normal. And by then, the cost of time—the interest carrying costs, lot rot, and lost time and resources—will have outweighed whatever bounce we eventually see.
What Now? The Tools That Matter More Than Ever
We can’t control commodity prices or Federal Reserve policy but we can control how we approach the sales process. That means putting real tools in place to earn each deal, one at a time.
1. Sharpen Your Value Selling Skills
It’s time to sharpen the selling skills including a focus on return on investment, value comparisons, and outcomes—not just spec sheets and trade difference. No more hiding behind “that’s what corporate told me.” Customers need to hear what’s in it for them, and the sales team needs to be prepared to articulate that clearly and confidently.
2. Align Yourself with Finance Solutions That Work
If your sales team doesn’t have access to creative and flexible financing options or doesn’t know how to use them you’re going to miss opportunities. That includes:
- Options for competitive trades.
- Solutions for shortlines and out-of-territory buyers.
- Options for subprime credit.
- Having someone dedicated to supporting the sales team with financing strategy.
If you’re telling customers to “get their own financing,” you’re handing deals to someone else. Also consider taking the local ag banker out for lunch and get an understanding of their perspective and what they are telling their clients. They know and understand what you are up against. Your good faith and their insights might aid in getting that next deal across the finish line.
3. Qualify Demos by Establishing Customer ROI Expectations in Advance
Don’t underestimate the power of putting equipment in the dirt. It still matters but it has to be intentional.
- Is there someone who owns the demo process?
- Can you qualify a buyer before burning hours and fuel?
- Are your reps trained to convert a demo into a sale?
“Letting them run it for the weekend” isn’t a strategy. A well-executed demo with a pending offer in place is. And don’t skip the ROI discussion up front. That’s when buyers will often reveal what they’re really thinking, giving you the best chance to uncover and address hidden objections before the machine ever leaves the lot.
4. Reconditioning and Readiness
Used iron can’t sit dead in the back lot waiting for a tech. At minimum, machines need to be:
- Washed and detailed.
- Inspected with issues documented.
- Serviced with common wear items addressed.
Buyers have choices, and interest costs don’t wait for the shop to open up. Equipment needs to be ready for resale.
5. Warranty and Risk Mitigation
Don’t underestimate this. Buyers are jittery. They’re comparing your used unit to:
- The machine they already own and trust,
- A competitor’s unit that does come with warranty options,
- Or a newer machine with a warranty but priced beyond what they can afford right now.
Do you have a real solution to put their mind at ease?
- Extended warranties?
- Dealer-backed guarantees?
- Programs tailored for risk-averse buyers?
You don’t need to cover everything, but you do need to offer meaningful protection against the “what-if” scenarios that keep buyers from signing. And don’t kid yourself: most customers won’t come out and say, “I’d love to buy this, but I can’t risk a $60,000 failure.” They’ll just walk away or buy from the dealer who does offer that peace of mind.
Final Thoughts: The Storm Is Here – Let’s Persevere Through It Together
This moment echoes what we saw from 2013 to 2016—but with two critical differences:
- Used prices inflated much faster this time and fell even faster.
- Sustained high interest rates make every day of aging inventory more painful.
Reflect honestly on where the cracks are in your dealership’s sales foundation. This storm won’t blow over tomorrow. Those who prepare, adapt, and execute with discipline will eventually find themselves in a good spot and this might just be the moment they set themselves apart.
