When customers want to trade used equipment when making a new equipment purchase, will you take their used on a consignment basis? Why or why not?
Answers:
— Walter Green, Deer County Equipment, Corydon, Ind.
“We will always take a piece of equipment on trade if we are confident it is salable. If we don’t think it is salable, we will take it on consignment even if it competes with something we own. We are in the business of buying and selling equipment, and that is what we do. Everything sells at a price. We need to do the best job possible of determining that price. Our customers expect us to buy or sell their used equipment. We don’t like to disappoint our clients.”
— Brian Hoven, Hoven Equipment Co., Great Falls, Mont.
“I was shocked to find that many dealerships discourage trades and shun consignments all together. My philosophy is based upon several factors”
1. If the trade-in is something along the same lines as what I sell, I will take it as a trade-in so long as I can either make some profit or at least not lose anything.
2. If the trade-in is NOT something along the same lines as what I sell, I will offer to post an ad for it on the two websites I use and try to help them find a home for it that way.
3. If the customer wants more than I think it is worth, I will take it in on consignment and get the best possible deal for the owner without me having any money tied up in used inventory. If it sells for what he thought it is worth, he is happy and I get a sale on a new piece of equipment with no trade-in involved to muddy the waters. If it does not sell for what he figured it to be worth, I keep him involved in any offers that are less than what he sets as a base price, and he will have the option to take the amount offered or he can hold out for a higher amount. Either way, as I have no dollars tied up, I do not mind if it takes a couple of years to sell.
I have been doing this for 18 years and have made the wrong decision on only very rare occasions, so I am sticking with my principles.”
— Russ Hawryluk, North Island Tractor, Courtenay, British Columbia
“We discourage consignments. I covet my salespeople’s attention. When we trade in a unit, I expect and invest in their full attention to reselling it. By definition, a consignment is a unit owned by someone else. Let them invest in the structure to maximize the unit value. The implication that the unit is consigned is that the owner does not accept the value offered at trade time. Why invest our time, if we can’t own it on our terms? And then, sometimes you take one just to make the customer happy!”
— Eric Johnson, Johnson Tractor, Janesville, Wis.
“No, we have three consignment auctions a year at our store, so if we don’t want to trade for it, we offer the option for the customer to put it in our auction at their own risk. In other words, they have to be there to protect their own piece.”
— Fred Drinnon, Baxia Tractor Sales Inc., Seaman, Ohio
“Our dealer group discourages consignments, as there is way too much confusion as to who gets paid, do we make a customer wait for a salesperson who is selling someone else’s machine, who is responsible for repairs, and even though we aren’t the seller, are we still liable if something happens to the machine, or the buyer? Basically, there are too many gray areas, and even a written agreement between the seller and us would not cover all the potential issues.”
— C.H. McCutcheon, Elder AG & Turf Co., East Palestine, Ohio
“Commenting on the excess of used or trade-in equipment, this is actually a long awaited good problem to have as an equipment dealer. With the oil and gas industry boosting our economy, the farmer now has a new product to sell (oil and gas), which does not require much to harvest and gives the farming industry an extra income that makes it possible for the farmer to afford new equipment.
“When a trade-in is involved with a sale, it may be beneficial for the dealer to be choosy or picky and not take in any equipment that is obviously a basket case. In this situation you may suggest to your customer to scrap it or put it in the classifieds. I never lost a deal because I refused a trade-in, but if the trade-in is in demand and in decent condition, give the customer a fair trade-in price and let him go home satisfied. Most likely the customer will be back for another new piece of equipment.
“If your dealership is running out of room because of the used equipment filling the sales lot, go to the customer who cannot afford new equipment and make attractive deals, like rent to own, with low monthly rent payments and when a certain amount is reached the customer will then own it. Writing the deal as a rental protects the dealer from bad pay and the dealer can retrieve the equipment with no legal issues. This type of arrangement keeps cashflow and the dealership from storing used equipment for several years or more.
“Once again, as an equipment dealer, we welcome this surge of trade-in and used equipment, it’s a reflection of our local economy spurred on by the oil and gas industry.”
— Sam Eaton, Knickerbocker Russell Co., Pittsburgh, Pa.
“Yes, we look forward to customers trading in their used equipment, including tractors and implements. We have a 3-store operation in north Idaho and eastern Washington and we consign used equipment as well as take units on trade. Our market for used is excellent and we are able to hold a reasonable profit margin on used sales. A well-priced used piece of equipment brings the customers into our dealerships and from there we have an opportunity to show them other equipment, new and used.”
— John Adams, Coeur d’Alene Tractor, Coeur d’Alene, Idaho
“We are one of the few dealers in our area who actively look to buy and sell used equipment. As far as trades, if they are items that we look to inventory, we like trades. If they are items either too rough or not what we are interested in, we gladly consign them. We also ask customers to bring us items that they want to consign. It is a win-win situation for both parties. This turns unused items into cash for the customer, and inventory with no up front cost for us to sell.”
— Mark Dietz, Dietz Tractor Co., Seguin, Texas
“Our first effort would be to trade the piece in if at all possible because we are then able to offer applicable finance programs when there is a lineage back to a new piece of equipment sold, i.e. statement of origin. On one hand, consigning a machine transfers the risk to the original owner for pricing, aging, etc., but on the other, consignment items require more effort to handle including mandatory lien searches, coordinating offers from potential buyers with the seller’s agreed consignment figure, reconditioning done while at the dealer due to salability issues (lot rot, etc.).
“In addition, most sellers want retail out of their machine and will ask to overprice the piece as they are dreaming. In general, consignments are a hassle and must be taken in with the above considerations in mind.”
— Don Alexander, Filmore Equipment Inc., Hastings, Mich.
“We always offer customers the option of selling their equipment on consignment. We feel that in many circumstances it allows the customer to better understand the actual value of their used equipment. We have some guidelines for selling equipment on consignment so that it is fair for all parties involved (the seller, the buyer and us, the broker).
“There is a signed contract with the consignment equipment similar to real estate listing agreement. It has a start and end date, a defined selling price and a defined commission rate. It states that whoever sells the equipment during the contract period, the dealership still gets its commission. So, the customer cannot directly sell the unit to a third party during the contract period without paying commission on the sale.
“We will not take a piece of equipment on consignment unless we feel the seller has a reasonable expectation of the selling price. We will not take a trade on a piece on the sale of the piece of equipment that is for sale on our lot that is on consignment. We will not list a piece on consignment if it’s not up to our used equipment expectation for quality. There is a flat fee for putting the equipment on consignment to cover our administrative cost of listing the piece for sale.”
— Josh Provost, Champlain Valley Equipment, Derby, Vt.
“Yes, we would do that — especially now that large used equipment values have plummeted tremendously. If a customer thinks it’s worth a lot more, I would gladly sell it to him cash no trade. Let him tell me what he wants for his unit, put it on consignment and collect a fee if we sell it. It’s a no brainer — it made you money up front and could possibly make more with no investment.”
— George Cummings, AC McCartney, Durand, Ill.
“We don’t like to take consignments. There can problems with financing, trade-ins, and flat tires, batteries, and many other things that go bad sitting on the lot. We would work with certain select customers and circumstances.”
— Gerald Heim, Hoxie Implement Co. Inc., Hoxie, Kan.
“I am a small used equipment dealer and yes, I will always take equipment on consignment if I feel I can make a few dollars by doing so. A large part of our income does come by selling consigners’ equipment. I do many things here: we build and install custom truck bodies, sell new Rugby hoists and bodies, snow plows and equipment as well as being a Swaploader distributor. I also do semi-annual consignment auctions here at my shop and have been for probably 30 years. Any time I can sell a customer’s piece of equipment where I have no expense is good. I understand some dealers have large inventories and feel it may take away a sale of their own equipment.”
— Bruce Witte, Witte’s Truck & Tractor, Mount Airy, Md.
“We have no issue in allowing a customer to place a piece of equipment on our lot for consignment. However, the customer agrees to price the equipment at an agreed price that is competitive with the market trends. If that is agreed, we will actively use all of our sales resources to sell our customer’s consignment.”
— Tom Kelsey, Z&M Ag and Turf, Alexander, N.Y.
“We have always taken equipment on consignment as long as we agree on a reasonable selling price so the unit will move as fast as possible. We are always looking for clean consignments to bolster the used equipment on our lots.”
— Dana Harju, Bortnick Tractor Sales Inc., Cortland, Ohio
“We stopped taking in equipment on consignment because customers wanted us to ask too much money for it. Then when it didn’t sell for the season or when it needed a battery or had bad gas from sitting, customers wanted us to pay for repairs because it was in our inventory. We just don’t do it anymore. We will take it on trade or possibly buy it outright at the right price.”
— Kevin Emerich, Emerich Sales & Service Inc., Charlton, N.Y.
“We have taken used equipment on consignment if we cannot come to a ‘trade value’ agreement. But if we do take any piece on consignment, including during a new piece purchase, we charge a consignment fee. The customer is responsible for any expenses incurred in transporting or making the consigned unit salable, to be paid as soon as the unit is ready for sale. Our consignment fee is 15% of the sale price or a minimum of $500, whichever is greater, plus any expenses to complete the sale. We are looking at raising the fee to at least 20% and possibly 25% with a minimum charge of $750. This will discourage most consignments, and we are fine with that. I do agree that consignments are at times difficult, and if you are going to do them, it should be a profitable choice.”
— Bill Wagie, Triebold Outdoor Power, Whitewater, Wis.
“We do sometimes because it keeps us from ‘stretching’ our resources on used equipment, which isn’t our focus anyway! Solves our concerns at the same time as solving a customer’s concerns.”
— Arnie Kroener, Maple Lawn Equipment, Elkhart Lake, Wis.
“We often offer consignment to our local customers. It usually accomplishes two things: First, it shows the customer that we want to be flexible with him to maximize his value. Secondly, consignment with a time limit often proves to a customer that his expectations might be unrealistic and we as a dealer were being fair with the initial trade value quotation. We often negotiate that if the unit does not sell within a certain timeframe that we as a dealer will own it for a predetermined price and then take it as a normal trade. What we have learned in the consignment game is to clearly identify the time limit (never more than 60 days) and clearly define the expectations of the dealer with the consignee should a sale occur.
“The dangers of consignments include dealing with insurance issues should something happen to the piece while on the dealers’ lot, another is working with the intricacies of taking trades on the consigned piece, and lastly dealing with the perceived after-sale warranties on a consigned piece that customers have come to expect from non-consigned pieces purchased from your dealership in the past. Even when the salesman spells out ‘as is’ on the contract, a customer will often choose to leverage his position against the dealer that he would not if he had bought direct from a farmer.”
— Darren Nickel, Greenvalley Equipment, Morden, Manitoba
“We will take a consignment unit if it is in respectable condition; we don’t have a similar unit; it must be priced right; and it must be a unit that fits our product offerings, something we can sell.”
— Gordon Gent, Noble Tractor Equipment, Kamloops, British Columbia
“We accept trade-ins all the time. With that being said, there are many times the customer expects more for that trade-in than we feel the market will bear. We will always encourage consignment as long as it will be priced as to market conditions. It does not pay to have over-priced consignments.”
— Denny Baumann, Swiderski Equipment, Mosinee, Wis.
“We have bought used equipment for over 50 years. The last few years the larger dealer we purchased from would have nothing to do with us or would only give small disc. Maybe things need to get a little tough.”
— Wayne Kuhl, Kuhl Equipment, Granton, Wis.
“Here at S&H we take several pieces on a consignment arrangement. This frees up our cash and very seldom do consigned pieces compete with company inventory. As used equipment prices become more variable, we will consider doing more on consignment.”
— Kenny Bergmann, S&H Farm Supply, Lockwood, Mo.
“Probably not. The main reason we would not want to take their trade is that we already have a like trade-in inventory. We all have enough competition selling used as it is. In addition, the customer, even advised on true value, may have an inflated view of his equipment. Then who looks out of touch pricing it? Would you partner with customers on trades on trades? Will you make any money? Lots of other issues.”
— Todd Channell, Farmers Equipment Inc., Urbana, Ohio
“We do not like consignment due to insurance and sales commission issues. We either trade it or give an outright price if we do not want it. If the farmer persists, we give him a ridiculously low trade-in price and sometimes that even backfires!”
— Kevin Heisterkamp, Vetter Equipment, Storm Lake, Iowa
“First, I would start by saying we are not minimizing the quantity of equipment we are taking in on trade. We are, however, being extremely conservative with our values. If a customer does not like the trade value that we establish, we offer him the choice to consign the piece at his asking price. We take 8-10% commission off the sales price if we sell it for the customer. Our contract is typically good for 90 days, after which we determine if both parties would like to list the piece again. We do not take consigned piece asking price as a trade price off of the new equipment purchase price. There are two separate transactions. Why do we do this? We want to offer the customer as many options as possible to help move a new piece of equipment and to make sure the customer is happy with his transaction with our company.”
— Tad Dinkins, Butler Ag Equipment, Fremont, Neb.
“Many dealers look at trades as a nuisance and don’t want to be bothered. We take the posture of being honest with the customer about how the trade should be disposed, however it might be. We just don’t make a blatant policy of no trades. We are glad to take consignment and quality trades. Having an off-brand piece on the lot is a draw, and it shows people we mean business. Sometimes losing a little on a trade is cheaper than a Penny Saver ad, and we get more exposure with them. Customers want dealers to make it simple and they are usually willing to accept less for a trade than they think it may be worth, in that situation it’s a waiting game, they have to go through all the motions of trying to trade or sell it on their own. A lot of customers don’t want to go the Craig’s List route with all the inconsistences and tire kickers. Getting into the trade at the right price is the intelligent answer, whether it be a carried product line or an off-brand, the secret to remember is that the ‘the profit is made upon the purchase.’”
— Harry Wells, American Equipment LLC, Farmington, N.Y.
“The answer would depend on the situation. We are not opposed to the concept of consignment and we do consign machines from time to time. If we don’t want to take a trade because we have too many of the same item in our inventory anyway, then consignment does not make sense. Our motivation is to sell our units, so having a customer’s unit in the yard would be doing the customer a disservice if we are competing with his unit trying to sell our own. We would typically take a consignment piece if we were concerned it is something that may not sell very quickly because we just don’t have a good market for it. In this case, we’ll explain that to the customer and then agree to consign it and try to sell it. In today’s environment, if we don’t want a trade, we’ll tell the customer we are not interested or we’ll suggest they sell it on their own.”
— Rob Rosztoczy, Stotz Equipment, Avondale, Ariz.
“We have become more and more particular on what equipment we are willing to take on trade or at least at what price we will take it. Most everything will sell provided the price is right. We have and do take some equipment on consignment when the customer wants to deal with us but feels he can get a better price than we’re offering for trade. Other times we walk away from a deal if the numbers don’t work for us. Our used equipment fluctuates between 5-10% consigned on average, and it’s a scenario that we are open to if customer expectations are reasonable.”
— Brent Thulien, Future Ag Inc., Red Deer, Alberta
“Yes, we do consignments quite often. The reason we do this is we don’t tie up capitol and the customer will get retail out of his trade-in as opposed to wholesale. We then charge a commission to the customer when the used piece is sold. In these tough times we just can’t take a lot of trades that eat up our operating capitol.”
— Russell Ruh, DeKane Equipment Corp., Big Rock, Ill.
“We do very little of this due to the fact it creates issues with financing those units as well as taking trades on those units. By and large there are ways customers can dispose of their used if we don’t take it on trade or want it. However, in saying this, we have done it on an extremely limited basis.”
— Mark Foster, Birkey’s Farm Store, Williamsport, Ind.
“In some cases we will take it in on consignment onto our yard, and in other cases we just advertise it for the customer. We do this only as a suggestion to a customer when we do not want the trade or cannot allow them what they should get for it and we explain this to the customer. Our goal over the last couple years has been to reduce the amount of trades we take.”
— Tom Snyder, Oneida New Holland, Caledonia, Ontario
“We do take consignments, but they don’t happen very often. Consignments are tough on high dollar machines because the purchaser of that consigned machine normally has a machine to trade in. If I trade a machine on a consigned machine, I cannot floorplan it or use any of our finance programs. Most of our consignments are older/low dollar.”
— Ben Blasberg, Bodensteiner Implement, Tripoli, Iowa
“We view appropriate consignment equipment (like items to what we sell) as a viable part of our operation and actively solicit the equipment. We treat consignment equipment as part of our overall used equipment inventory and include it on the same inventory lists and within the same displays.
“Consignment equipment sales have always been a profitable part of our business as the commission is charged as a percentage of the selling price. While we do not make the same margin as we feel we need on our own equipment, it is viable because we do not need to budget anything for warranty work and we have none of our money tied up in the equipment. Since people understand that we cannot afford to perform free work on something we do not own, quite often we will benefit from additional parts and service and transportation business.
“And, finally, two additional benefits of selling equipment on consignment include helping people sell their equipment who are not willing or able to sell it themselves. And, for the customer who thinks their equipment is worth more than we are willing to give them on trade, it provides a non-confrontational mechanism to avoid the trade value argument.”
— Ken Keiran, Union Farm Equipment Inc., Union, Maine
“Having it on consignment is a win-win — you have no risk, it is the customer’s money, not yours, tied up. This way you don’t have to trade for something you maybe didn’t want or maybe you value less than the customer does. It breaks down to this, the customer wants to buy at wholesale, and trade in at retail, this way he can set the price for his trade, and get the best price on an outright deal on what he is buying.”
— Ken Jordan, Sundown Equipment, Bevington, Iowa
“Occasionally we consign used equipment, if it is equipment that we can sell and are not overstocked on. We make certain our customer understands that all charges for transportation, cleaning and any work needed to make the equipment ready for resale will be deducted from the final price along with the commission we charge for selling the equipment. We are a rural lifestyle dealership — we don’t sell combines and 4WD tractors — so we don’t have a glut of used ag equipment. We do have too many round hay balers at the present time, but we could certainly use some nice used under 100 horsepower tractors.
“If a customer is not willing to take what his dealer is offering for trade, it probably doesn’t make sense to consign the used item. It will just sit on the lot taking up valuable space and could possibly alienate the customer when it doesn’t sell.”
— Mike McCrate, Tulsa New Holland, Tulsa, Okla.
“It would all depend on the equipment the customer has. Is it in good shape or a piece of junk? Do I have too many of the same already on our lot and do we have enough space for it?”
— Jan Rude, Titan Machinery, Grand Forks, N.D.
“We do take trades on new equipment purchases, if it can be resold without too much investment and normally same brands as we carry! We do sometimes offer to sell theirs on consignment also.”
— Mike Crick, Spear Chardon Tractor Sales, Chardon, Ohio
“I guess we are in a different boat. Many of the local dealers do have large inventories of late model, high dollar trade-in tractors and combines. We haven’t had the opportunity to play in that market. We haven’t had a combine contract so that doesn’t apply. On the other hand, high horsepower tractors have always been difficult. It always seems like the other guy was willing to lose more money than we are on trade-ins.
“We have kept inline with lower horsepower tractors, hay equipment and other shortline type equipment. Really, the only thing we are long on as far as used equipment goes is round balers. We really could use some used tractors on the lot but don’t envy the dealers with millions of dollars of equipment. I think we’ll just keep doing what we have been — going against the grain. Our dollar volume isn’t as large as most, but we probably sell as many pieces, just smaller.”
— Jeff Suchomski, Suchomski Equipment, Pinckneyville, Ill.
“We will not consign! Years ago, we had a tractor on consignment, and the consignee said that the powershift was overhauled. (He just failed to tell us when it was overhauled and also failed to produce any paperwork). Our customer bought the tractor and assumed we would guarantee the consignee’s tractor. Anyway, after eating a bunch of freight bills and hiring an attorney, we had the tractor returned and settled the lawsuit out of court. We informed our store managers and sales people — no more consignments! They’re not worth our effort.”
— Glen Vetter, Vetter Equipment, Denison, Iowa
“We have always allowed consignment of equipment as long as the customer accepts a realistic value and understands that the item is on their liability insurance and has to be removed if unsold after 6 months. Since mid-2014 and possibly all of 2015, a dealer has been or will be lucky to guess the true value of any equipment starting with used large combines, cornheads, large planters and self-propelled sprayers. On any given day, what the winning price for an item received on a national auction can be construed as true market value for THAT day. As our major manufacturers continue to take risks and apply it to the dealerships, we may reach a time when, as our margins decline, a dealership’s only protection will be the requirement that all used equipment be placed at auction and what the item sells for will be the trade allowance.”
— Alan Anderson, Grosshans International Inc., Aurora, Neb.
“We trade, but if they think their used is worth more than I do, we’ll take it on consignment and we get 10%. If they don’t sell it or take it to a sell lot to sell, we get zero.”
— Steven Swartzrock, Swartzrock Implement Co., Charles City, Iowa
“This is a great sales (closing) tool to leverage, especially when the customer believes their equipment is worth way above the market value. This will eventually prove itself to the customer, and thus is a good lesson. In addition, it limits the risk on the dealer side. We have a predetermined percentage we charge based upon sales price and it is signed upfront.”
— Jed Bengston, Torgerson’s LLC, Havre, Mont.
“Yes we do. Sometimes a customer might not think you are allowing them enough trade-in dollars on their equipment or you may not want his trade-in, so consigning their trade is a option.”
— Rick Mallo, Titan Machinery, Pierre, S.D.
“Yes, providing the piece is priced correctly for its value in its current condition.”
— Name withheld by request
“I’m not sure I follow the question. We have not stopped taking equipment on trade, but the secret is to have it priced right and be able to move it. If we offer the customer a fair value for their trade and if they don’t feel it’s enough, I’ll be happy to set it on my lot and see if it sells. My goal here is to try and maintain 2.0 or higher turn on used equipment. So far all our stores are on the mark.”
— Ken Mast, New Holland Tri County, Bluffton, Ind.
“We rarely take consignments, and never in lieu of trade. We just trade for the equipment. We do not like consignments due to issues with trade-in and reconditioning. If it is not our piece of machinery, it does not go through an inspection and reconditioning, which we do for all our trade-ins.”
— Lee Ann Sydenstricker, Sydenstricker Implement, Mexico, Mo.
“Taking a piece of equipment on consignment rather than trading it in can create a whole different set of concerns. Some of which are insurance, reconditioning and agreeing on a selling price. Also, your customer becomes your competitor if you have a similar piece already in your inventory, which may be the reason for not taking the item on trade in the first place.”
— Tom Burmeister, Bennet Farm Equipment, Bennett, Iowa
“We have done this from time to time. We do charge a fee if we sell the unit. It depends on what the equipment is and if it competes with what we are selling. In cases like this, we try hard to wholesale the unit out if possible. The used wholesale market in this area has slowed way down. The wholesale buyers are not buying much equipment at this time.”
— Bob Souza, N&S Tractor, Merced, Calif.
“Over the years we have made the choice whether to take equipment on consignment on a case-by-case basis. The following issues play into our decision. Is there ‘demand’ for the piece? Something may be worth the money, but if there is no demand, better not put it on the lot. Do we already have excess inventory of like pieces? Our inventory still needs to go, and consigned will grab some focus. Has the customer bought from us regularly? It’s pretty hard to not help them if they have been good for the dealership.
“Does the customer have reasonable or unreasonable expectations of what price the piece will bring? Before the drop off in used values, some had the feeling we dealers could land them a premium price. Not always true, and we don’t want overpriced consignments. It just takes up space and has to be moved around. It has to be priced at current market conditions.
“Is the piece ready to go? Will it start and perform. It needs to show well, not be a ‘mechanics special.’ Salesmen will lose interest if it is a ‘dog.’ Will the customer keep it insured? We require them to insure their piece even when it is on our lot. Will the customer accept the fact it will be outside, not housed? The best thing is, we have no money tied up with a potential for profit.”
— Steve Wells, Wells Equipment Sales, Litchfield, Mich.
“I would consider and promote the consignment if we do not already have a used supply of said equipment.”
— Lucas Hilgemann, Titan Machinery, Marshall, Minn.
“Yes, if required to make the deal work.”
— Allan McKeown, McKeown Motor Sales, Springbrook, Ontario
“We will take it in on trade. If we can’t agree on the trade allowance, then we will entertain taking the unit in on consignment. But most of the time we will agree on a difference number.”
— Gregg Erb, Erb Equipment Co., Fenton, Mo.
“No, this has never been successful. You run into reliability issues when sold. We require comps at recent auctions and go from there to establish a trade value. We take a different approach if trading used on used. We will consider most anything if it reduces our used inventory dollars. This is not the time to be concerned with market share.”
— Joe Hlavinka, Hlavinka Equipment Co., East Bernard, Texas
“That is a good question and I can see with the used market like it is why dealers may consider this option. At H&R, we have never been very successful with consigned equipment. There are several reasons. Some of the disadvantages of consignments are: 1. What do we do if there is a trade on the consignment? 2. Financing usually enters the picture, which can be an issue. 3. Company programs are a part of most deals today and a consigned piece likely would not qualify. 4. Our sales people are commissioned and that can be a problem with a piece we don’t own.
“We still trade for used, but we try to stay current on the market and try to trade for it where we can resale it in the current market.”
— Wayne Hunt, H&R Agri-Power, Hopkinsville, Ky.
“Used is always an interesting topic. I was at the FEMA convention and it was a buzz of trade-in values and inventories. We are always looking for good machines, properly priced to the dealership, so they can be offered at good value to the end user. You have to take it in on trade at the proper time of the year so it can be marketed shortly or discounted properly to allow for it to be kept in inventory until you’re able to market it. When taking equipment on consignment, you need to follow similar rules on trade-in equipment. What are my opportunities to market? How many months will it sit here? For example, a haybine in late summer is of no value to the dealership, or to the person trying to sell, unless it is sold at a distressed price. But a haybine in late winter or spring is perfect because hay season is right around the corner.
“The value expected by the consignee must be established up front and not as a percent but hard dollars. The potential purchaser may be many miles away, and delivery, adds to the price of the machine. Or the purchaser may want service, attachments or modifications made to the machine, before delivery. The salesperson needs to know where to start to allow for a good deal for the purchaser, respectable return to consignee, profit to dealership.
“If a few ‘rules’ are followed before the machine is taken on consignment, good outcome can be had by all.”
— Gene Saville, Lamb & Webster, Springville, N.Y.
“Yes, we will take used equipment on consignment, but only if the customer has realistic expectations of what it is worth. (They very seldom do).”
— Christopher Carnevale, McFarlanes’, Sauk City, Wis.
“We are more than happy to take consignments and also turn potential trades into consignments because it removes the hassle of value differences between us and the customer on their trades. So, it makes the buying process easier. The customer can set the price, and if we feel it is too high we can warn them that it may not sell at that but it is their decision. On our side, we don’t have our money tied up in the trade and still make our commission when it does sell and probably can give a little better deal to the customer on what they are purchasing. It’s a win-win situation for both sides.”
— Alex Lush, Connect Equipment, Rockwood, Ontario
“In the past 2 years, most customers have opted for us to sell their used equipment rather than trade it in. We normally get 10% of the asking price (not the actual sell price) for the equipment that we consign. If you buy new from us, we consign one piece for 5%. When we sell traded-in equipment, for insurance liability, we have to install all missing safety shields. I know a lot of dealers don’t do that, but we were advised to do this. When we sell for the customer, it is not ours to sell, so all safety liability goes to the owner. And normally we get more for the equipment even after the 10% than we can offer to trade. It’s a win-win situation.”
— Kenny Sipes, Flaherty Tractor Co., Vine Grove, Ky.
“I’ve seen this question many times in the last 25 years. It’s actually presented WRONG. The real question is: How do we make a sale without increasing our used equipment inventory. The difference is, that we will handle the used equipment; we just don’t want it becoming inventory. This generally means one of two things, either we will find a customer to sell the trade-in unit to, or we will find a wholesaler to buy it from us. But sometimes it could even mean helping the customer who is buying the new equipment sell it, getting him to accept putting it on our lot as consignment or going really far out and showing him/her why they could still keep it and utilize it in their operation in a different way.
“When we present this question as ‘we’re not taking trades,’ everyone’s back gets up. When we talk about how do we make sales without increasing used inventory we have other options to discuss. Does that mean it will be easy? Of course not! Doing a new sale without increasing used inventory requires more salesmanship and creativity, but the good salespeople will do it and they will do it well!”
— George Keen, New Virginia Tractor, Charlottesville, Va.
“This is the first I have heard of this idea with regard to the current used equipment inventory situation. I would certainly answer yes if only all other dealers would do the same. Ultimately, I still believe it is about putting proper dollars in a trade and not buying a deal as there has been way too much of this going on for the last few years. I read a comment the other day stating that if manufacturers would put dealer profitability first instead of market share, that the market share would follow. Chasing market share will never work!”
— Darryl Buttar, Bob Mark New Holland Sales, Lindsay, Ontario
“We will take trades if they are 3-4 years old or older. Late model low hour trades tie up too much capital if they do not move rapidly, and they are not. We discourage consignment machines as expectations are always too high and they have to compete with the machines we have run through our shop and will stand behind. Consigning customers usually do not want to spend the money to run their used machines through the shop, nor do they want to get calls if the next buyer is unhappy. As is/where is will not bring the dollars that dealer backing will bring.”
— Greg Simpson, Simpson Farm Ent., Ransom, Kan.
“In some cases we prefer to take a consignment vs. a trade since the dollars are on the customer. It often comes about when a customer thinks his trade is worth more than what we are going to allow. It is an option that we offer. We have a specific agreement with customers for consignments. It will outline the commission schedule along with our agreement to advertise and promote the item. We limit the agreement to 120 days. At 120 days, we ask the customer to remove the item from the lot or reduce the price to a level we feel we can sell it at. We try to be accommodating as much as reasonably possible.”
— Dave Colvin, Lowe & Young Inc., Wooster, Ohio
“Our dealership is finding that many farmers are wanting to rid themselves of unneeded or unused equipment and trading it rather than selling the item, which would limit their tax consequences. When they feel our trade values are not in line with their thoughts, beliefs or expectations, they do want to consign the equipment. If they are expecting values higher than the market will bear, which it is in most cases, we will not consign equipment. If they are realistic in their value expectations, we will consign, but we make certain they understand that if we have similar machines in our inventory, with the ability to trade with our inventory machines, their machine will be overlooked as we will not take a trade on a consigned item. We are also finding that many farmers are trying to or wanting to trade multiple items on a single piece. Normally when questioning the customer regarding this, they indicate they are getting lender pressure to liquidate minimally used items. After researching, we will take multiple trade-ins at our value and many times we have wholesale numbers to move these items right away and not inventory them.”
— Name withheld by request
“We like to take used equipment on trade. Sometimes people just want to sell their equipment and we will take those on consignment, if it is something we don’t want to buy. Our stipulation is that the unit has to be priced to sell. I don’t want to sit on consignment equipment that is priced too high.”
— Corey Chappell, Chappell Tractor, Milford, N.H.
“We sell new and used equipment and have auctions at our location twice a year. We give the customer the option of trading the equipment in or they can consign it to Kaddatz Auctioneering and Farm Equipment Sales. If the customer consigns it, they will give us a price. We may get it sold before our next auction. If not, we will sell it in the auction.”
— Alvin Kaddatz, Kaddatz Farm Equipment Sales, Hillsboro, Texas
“We will take used equipment on consignment instead of trading for the following reasons. Dealer management feels that it is unwise to tie up cash on a piece of equipment that has limited potential to sell in the local market. The customer believes our trade-in value is too low and thinks the equipment will sell at a certain (higher) price and still bring profit to the dealership. (This would typically apply to a long-standing customer with a good relationship with us.)
“We will not take used equipment on consignment for the following reasons. When we believe the customer price expectation is too high for the market. If we know of and are uncomfortable with certain mechanical conditions of a used piece.”
— Emmet Bowman, Garton Tractor Inc., Modesto, Calif.
“Yes, but it must be at saleable condition. We charge 10-15% and any labor or parts cost.”
— James Dietz, Dietz Tractor, Seguin, Texas
“It has been a long standing policy at RDO to not offer consignment of customer-owned ag equipment. We have two primary reasons for this policy: the first is that typically a consigned piece is one that the desired asking price is higher than the current market warrants. The pricing of this item can represent us as being ‘high priced’ in the advertised area. The second reason we do not consign items is that with over $100 million of our own used equipment it does not benefit us to compete against ourselves.”
— Mark Kreps, RDO Equipment, Moorhead, Minn.
“Yes we will put equipment on consignment, but we are very honest with the customer as far as price that will enable the unit to sell as well as the possibility of waiting some time for it to sell. We have a consignment sheet that explains hauling, repairing and other costs related to selling their unit or any unit. This might also change because of many variables, such as similar units already on the lot, popularity of the unit, current auction prices, etc. A customer’s idea of a price on a particular piece may not be in line with current values and auction prices, which could be less because of lower commodity prices. Now is a good example of this.”
— Dave Ott, Ott’s Farm Equipment, Fallon, Nev.
“Yes, we will take trade-ins. Big market for used equipment.”
— Jimmy Jenkins, J A Farm Equipment, Orange, Texas
“We normally trade in. If we can trade the machine in, then customer is out of the picture. If the customer wants retail price for a trade-in, then we will sell it on consignment. We have a couple consignments, but not more than normal.”
— Jayme Finafrock, Smith’s Implements Inc., Mercerburg, Pa.
“Here in Owensboro we sell anhydrous applicators and liquid nitrogen applicators. In the last 4 years, we have not taken any trades. Farmers don’t like it, but we don’t take trades. We help the farmers sell their used bars, which usually gets the farmer more than we would have allowed on a trade.”
— Steve Stemie, Mid-South Ag Equipment, Owensboro, Ky.
“I take a lot of consignment equipment and do well with it. It takes the financial pressure off the dealership and nets the customer a better value, sometimes. All equipment has to be screened, serviced and certified at sellers expense before we sell it with our name on it. On the lesser quality or worn out equipment, this can turn into a real loser and the selling customer participates in the loss instead of the dealership.”
— Tony Shaw, Toreku Tractor & Equipment, Ayer, Mass.
“Yes we take trades. I try to keep the trades in the same category as what they are buying, i.e., a used manure spreader for a new manure spreader. Not always doable and there are always exceptions. Also, one for one so we don’t clean out the whole back fence row to sell one new piece of equipment. We sometimes take a trade on a trade — used for used — but get pretty picky. We fix the trades so that they are completely ready to use and put a parts and labor warranty on them. We repaint some as needed and use the Internet to ship them all over the U.S. and beyond.”
— Floyd Helmuth, Helmuth Repair Inc., Kalona, Iowa
“We do quite a bit of consignment sales, and it’s increasing every year. The bulk is in lawn and garden and smaller utility tractors. In most cases, it is not in place of doing a trade but a situation where someone is downsizing or moving south to retire and no longer needs the equipment. They come in asking if we will buy their equipment because they don’t want the hassle of selling it themselves. We don’t typically buy outright, but we offer consignment as an alternative. It’s worked very well for us. The key is having a good policy that is simple and easy to implement. We have a 1 page consignment form with the terms spelled out clearly and a place for them and us to sign. It clearly states the seller is responsible for any hauling and repairs needed to make the equipment saleable and these charges are due up front.
Most people leave it up to us to recommend a realistic selling price and we also establish a minimum selling price acceptable without calling them for approval. We have wording on the contract that if the piece is not sold within 6 months they need to allow us to lower the asking price or remove the piece from our lot. We have a 4 tier consignment rate based on selling price that ranges from 10-25%. Another key is pricing the unit to sell in as-is condition and making clear to the buyer that we assume no responsibility for any repairs needed.”
— Dale Martin, Deer County Farm & Lawn, Adamstown, Pa.
“Depends on the fallowing: 1. Do we have any similar models on yard? Will it help or hurt our used selection of equipment? 2. What condition is it in? Does it need work to make it presentable to meet our standards? 3. What price is he expecting out of it? Is it fair value? Can we make a 10% minimum margin plus repairs to get sold? 4. Will it build customer relations and loyalty? It depends on the customer, but most times we will.”
— Earl Neuhaus, Neuhaus & Co., Welaco, Texas
“We are taking trades and in some cases will sell customers equipment on consignment.”
— Emery Seiy, D&D Equipment, Chilton, Wis.
