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New Tractor Depreciation

  • 05-04-2013 7:48pm
    #1
    Tibulus
    Registered Users, Registered Users 2 Posts: 205 ✭✭



    I was interested to see what the your viewsand experience are on buying new tractors, rate of depreciation and how oftenrenewing is recommended.

    Was discussing with a friendrecently who is considering trading a 5 year old tractor against new. The cost is 36k but is going up in powerand spec also.

    Unableto find the list price for the new tractor online, but the model is a NH T6.140.



    Iam a firm believer that buying new is the best policy. But I believe that thepurchase should then be retained for minimum 8 years to receive value.



    TheJohnNix Farm Management Handbook estimates tractor depreciation at 8% per yearassuming reasonable usage and maintenance.



    Going with that rate of depreciation a 5 year old is worth 65.9% of originalvalue, opposed to a 10 year old being worth 43.43%.



    My argument is that changing every 5 years he will be paying 34.1%opposed to paying 56.57% if waits 10 years.



    Would you agree with the 8% rate? Would a tractor loose more than the 8%in the first year?


Comments

  • #2
    reilig
    Closed Accounts Posts: 7,401 ✭✭✭reilig


    Two sides to the coin.

    Neighbour bought a NH TS90 in 2002 for 30k. Traded it against a NH T5060 in 2009. Had to back it 16k. Trade in allowance for his 2002 TS90 was 30k - exactly what he paid for it. less than 2000 hours on it.

    On the other hand a cousin of mine bought a Valtra a95 in 2005. Traded it in 2012 for an a92 (same tractor as the a950), Had to give 25k with his tractor to get a new one. Over 4000 hours on it.

    If I was trading a modern tractor, it would have 10k hours on it minimum.
    Tibulus wrote: »

    I was interested to see what the your viewsand experience are on buying new tractors, rate of depreciation and how oftenrenewing is recommended.

    Was discussing with a friendrecently who is considering trading a 5 year old tractor against new. The cost is 36k but is going up in powerand spec also.

    Unableto find the list price for the new tractor online, but the model is a NH T6.140.



    Iam a firm believer that buying new is the best policy. But I believe that thepurchase should then be retained for minimum 8 years to receive value.



    TheJohnNix Farm Management Handbook estimates tractor depreciation at 8% per yearassuming reasonable usage and maintenance.



    Going with that rate of depreciation a 5 year old is worth 65.9% of originalvalue, opposed to a 10 year old being worth 43.43%.



    My argument is that changing every 5 years he will be paying 34.1%opposed to paying 56.57% if waits 10 years.



    Would you agree with the 8% rate? Would a tractor loose more than the 8%in the first year?


  • #3
    limiter12
    Registered Users, Registered Users 2 Posts: 49 ✭limiter12


    To put it this way id rather spend the 36k else where.


  • #4
    kboc
    Registered Users, Registered Users 2 Posts: 458 ✭✭kboc


    Tibulus wrote: »

    I was interested to see what the your viewsand experience are on buying new tractors, rate of depreciation and how oftenrenewing is recommended.

    Was discussing with a friendrecently who is considering trading a 5 year old tractor against new. The cost is 36k but is going up in powerand spec also.

    Unableto find the list price for the new tractor online, but the model is a NH T6.140.



    Iam a firm believer that buying new is the best policy. But I believe that thepurchase should then be retained for minimum 8 years to receive value.



    TheJohnNix Farm Management Handbook estimates tractor depreciation at 8% per yearassuming reasonable usage and maintenance.



    Going with that rate of depreciation a 5 year old is worth 65.9% of originalvalue, opposed to a 10 year old being worth 43.43%.



    My argument is that changing every 5 years he will be paying 34.1%opposed to paying 56.57% if waits 10 years.



    Would you agree with the 8% rate? Would a tractor loose more than the 8%in the first year?


    Everybody situation is different, especially those who are employed (on a relatively large house hold wage(s)), a new machine can reduce your tax bill. But it is an expensive way to do so.

    In my humble opinion there is a far better return on a top 10% (or even 1%) Bull or Ram, or some excellent female genetics. Or maybe save the money in ISA's using your tax deductible yearly allowances, buy a bit of ground in a few years! All have far better returns.

    Oh, and a nice clean s/h yoke aswell.


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