A Faint and Dim Light at the End of the Tunnel

Strong supply and favorable interest rates mean 2025 could be a more stable year for the machinery business.

The past couple of years the equipment sector has seen its share of bumps and bruises. Post-COVID supply caught up with demand, and dealership lots went from bare to crammed full of inventory. Expensive late models, low-hour inventory, and high interest rates slowed the purchasing of new and used equipment. 

But 2025 could be when the equipment markets swing in the other direction. 

Used Inventory Sales

The last quarter of the year historically sees the most significant swing in used inventory sales. End users are taking advantage of tax buying sprinkled with a little bit of the variety of suitable machines available. Also, the last quarter of the year normally sees an active auction cycle, however, current auction bills are similar to last year.

A Light at the End of the Tunnel?

New equipment order writing periods for 2025 have yielded smaller than expected numbers across the manufacturer spectrum, and fewer new machines result in less incoming used equipment landing on dealers' lots. The strength and weakness of the ag equipment business is that it takes a year before the next move happens. Because of less used equipment generated from incoming trades, 2025 will have less front-side pressure, allowing for more backside relief. The question is whether the relief will come from the auction or retail channels.

Unlike the last two years, combines will not be the sacrificial lamb offered up to the auction gods; while they will still be on the altar, row crop tractors will have their turn. Row crop tractors are likely to be sold off. It might not be totally at auction, but auctions will play a role in tractor activity. The difference with tractors is they are the first machines bought during any up or down cycle.  

Another reason to look at 2025 as a pivotal point is the reduction in interest rates. If farmers are waiting for low-rate interest to buy new or used equipment, what are they waiting on. The 12- to 24-month waivers and 2.9% interest for 60 months are not hard to find at a local dealer. The good thing about fed rate reductions is that local dealers are more inclined to continue offering low rates, and they might get more aggressive than what has already been published. As rates come down and commodity prices increase, the need to refinance or trade at a better rate will influence the market.

As more machines are traded and demand increases, used equipment values will further solidify and move more positively. As mentioned earlier, because of the low new deliveries for 2025, the tail end of 2025 going into 2026 could see a demand for late-model, low-hour equipment because of the lack of 1- and 2-year-old trades. The market could decrease used inventory, but prices will struggle to rise with demand because of elevated inventory levels. All in all, 2025 should be a stable year ushering in a new normal into 2026. It is not a cold or hot market but a comfortable market. 

EDITOR’S TAKE:

This article is interesting from a couple of perspectives. One, it’s telling us that equipment sales are likely to stabilize and establish a new, but comfortable “normal”. That means good news for equipment dealers. The other perspective, it suggests commodity prices are likely going higher and interest rates lower, which means farmers will be more likely to loosen the purse strings again and begin spending on new equipment that will make their operations even more efficient and productive.

It is an encouraging message for one more reason – farmers/ranchers will also be looking for more new or qualified used trucks as conditions improve. Keep them at the top of your customer prospect list and put all your inventory on AgTruckTrader.com. Train everyone in your dealership about how to approach farmers/ranchers and use AgPack® to conquest more deals!