40.0 50.0
40.0 50.0 60.0 70.0 80.0
Inventory
Inventory reduction continues to lag behind a reduc- tion in sales primarily due to increased inventory in 2014. Dealers were unable to cancel new equipment orders placed in 2013 and trade-ins came from equip- ment sold in the last quarter of 2013. The reduction of used inventory in 2015 and 2016 mirror the drop in used equipment sales. I estimate that dealers still need to reduce used equipment inventories by 12% to adjust to today’s sales. The rate of drop in new inven- tory is flattening.
Observations: More dealers feel comfortable with their used equipment inventory levels. A few felt more in-
100.0 110.0 120.0
84.0 2013 2014
51.2 73.3
2015 63.9
2016 66.6 51.2 2013 2014 2015 2016 New & Used Equipment Inventory – 2013 (Jan. - Sept.) Base = 100 106.0
New & Used Equipment Inventory – 2013 (Jan. - Sept.) Base = 100 94.0
106.2 100.0
100.0 110.0 120.0
60.0 70.0 80.0 90.0
ventory adjustments were needed when local corn prices were under $3/bushel but that has subsided since harvest. Concern remains that manufacturers are loading dealers up with new inventory by enticing them to order so they qualify for new and used equipment retail programs.
60.0 70.0 80.0 90.0
Equipment Sales Margin It’s no surprise that the equipment margin has been dropping. According to the State of the Industry Sur- vey, total equipment margins have dropped 37% since 2013. Looking at the Cost Of Doing Business Studies, the drop has primarily come from used equipment. The margin in 2015 dropped to -.3%. The overall average for both new and used equipment has dropped from 6.1% to 4.3%.
Observations: While there is still pressure to sell equipment, dealers are getting better at bringing in trade-ins. Also, there is less used equipment being auctioned, so used equipment margins should have
-2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
2013 Used Equipment Sales Margin 2014 6.85%
-2.00% -1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00%
Used Equipment Sales Margin 4.50%
6.85% 2.07% 4.50% -0.30% 2.07% 2012 2012 2013 2013 2014 2014 2015 2015
bottomed out. New equipment margins may suffer due to larger new equipment inventory coming to deal- erships.
So are we there yet? More precisely, have we hit the bottom of ag equipment sales? Probably not. Dealers are concerned that farmers won’t have an opportunity to lock in higher commodity prices in 2016 like they did this year. According to our 2nd
quarter State of the Industry survey, 50% of dealers feel conditions will be better in the second half of 2017 while 35% believe it won’t happen until 2018. iowa SALES TAX spotlight
Q: A:
If a dealership agreement is terminated by cancellation or nonrenewal, the supplier must repurchase equip- ment according to Iowa Chapter 322F. What are the terms of the repurchase?
The supplier must pay to the dealer or credit the dealer’s account with 100% of the net cost of all unused complete equipment including attachments. The equipment must be in new condition and purchased by the dealership from the supplier within 24 months preceding notification by either party of the intent to terminate the contract.
Nov/Dec | The Retailer Magazine | 13 -0.30% Margin % Margin % 2015 2016 106.0 106.2 100.0 94.0 2013 2014 2015 2016 86.6 78.9 77.5 86.6 78.9 77.5
New Inventory YTD
New Inventory YTD
Used Inventory YTD
Used Inventory YTD
Used Sales YTD
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