An Overlooked Tool for Managing and Selling Used Equipment

Jul 11, 2024

Do low crop prices, higher interest rates, inflation and an uncertain political landscape have you looking for a JG Wentworth-like solution?

“I have valuable inventory, but I need cash now!”

What if there was a tool that could help sell your inventory faster and increase its value with no added cost to you? That would be good to have, right?

In 2017, Matt Miner from Quality Equipment wrote an excellent article for Farm Equipment titled “7 Tactics for Used Equipment Management.” It is a wonderful outline of the common wisdom for dealing with used inventory. However, it fails to mention a trick that is a game-changer. The trick is to use an extended service contract to enhance the value of a machine. This tactic works with a manufacturer’s extended coverage products or a third-party contract like Ag Guard. Let’s look at how:

Zero Upfront Cost: Unlike most merchandising tactics, an extended service contract has no cost until after the customer pays the dealer. This feature is important for managing stale inventory because you want to avoid more expenses.
Faster Sales: Research reveals that machines with coverage sell more than twice as fast. Customers perceive them as superior, even if they’re pricier than comparable machines. Consider adding coverage before resorting to wholesaleing or auctions.
Negotiation Leverage: Selling a machine with coverage gives you more margin for pricing negotiations. In a tough negotiation, you can offer to remove the coverage to lower the price and then haggle using the added margin. Dealers report instances when they got to a break-even amount on the machine and only profited on the extended service contract.
Strategic Marketing: Including coverage on a machine requires an inspection, which could lead to a repair expense. You may want to avoid these costs if you plan to wholesale the machine or send it to auction. In this case, instead of including an extended plan, get a provisional quote to ensure the machine qualifies for coverage pending an inspection. Then, market the machine as “Qualified for an Ag Guard extended service contract.” This tactic creates opportunities when the machine is sold. Once purchased, the new owner could pay you to inspect the machine, make any needed repairs and purchase coverage. At the very least, you have added some value to the machine simply by inserting a phrase in the marketing, and you have created an opportunity for more income after the sale.

In today’s competitive market, many salespeople will make the mistake of trying to win deals with lower pricing. Avoid a race to the bottom with lost profit margins that will never be recovered. A wise salesperson embraces value-driven sales. When customers perceive added value, they’re willing to pay more. In an inflationary market, adding value reduces the sticker shock. Look for tools like an extended service contract, where a customer’s perception of the benefit outweighs the additional cost.

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Video: Western Canadian Agriculture: Hard Times Made the World's Best Farmers

Western Canadian agriculture produced the most advanced farmers in the world not through abundance but through adversity. The crow rate fell. The wheat price went nowhere. The brown envelopes stopped.

When the subsidies disappeared, the bad farmers left and the good ones stayed. And the ones who stayed could not just grow wheat anymore. They started growing lentils and canola and peas and flax and faba beans. They built crop rotation. They got serious about agronomy because there was no government backstop. That process produced the Western Canadian agriculture Dennis Bulani describes in this clip: the most advanced, most educated farming culture in the world.

His contrast with Iowa corn and soybean farmers is sharp. At a DeKalb farmer meeting in Okoboji, Iowa, he asked what crop rotation they ran. Beans on corn stubble, corn on bean stubble. How do you fertilize? The co-op agronomist handles it. Have you considered other crops? No need. We make so much money on corn and soybeans. Western Canadian agriculture was never allowed that comfort. And now those Iowa farmers are watching soybean markets lock up with China and corn prices slide, and they do not have the agronomy knowledge or the research base to pivot. Western Canadian farmers adapted on a dime because they had done it before.

Dennis also makes the case that Western Canadian agriculture keeps adapting in real time. Low commodity prices over the past year have pushed growers to look seriously at precision spot-spray technology. He knows a neighbor who bought a sprayer with the seeing-eye system and sprayed only 80 out of 320 acres. As a chemical retailer Dennis acknowledges that will affect his sales. He supports it anyway, because if it advances Canadian agriculture and makes farmers money, that is a good outcome.

The lesson Dennis draws from the tale of two farms: continuous improvement is the only durable strategy. When canola was $22 a bushel some growers went to Arizona instead of the Crop Production Show. When the price came down those same growers came back to the research and the discipline. Products do not go on Rack Petroleum's shelves unless they pass a replicated trial first. That is what Western Canadian agriculture built through hard times: farmers who do the work whether the times demand it or not.

Dennis Bulani is CEO of Rack Petroleum and Ultimate Yield in Biggar, Saskatchewan. Dan Aberhart hosts GTF Productions, Western Canadian Agriculture's foremost live briefing platform and its foremost AI training platform for ag operators