The Big Shift
If you’ve bought any new farm equipment in the past couple years or you’ve been looking at doing so, I’m sure you’ve noticed several trends when you look at your local dealerships. One of the first things you’ll notice is that all of the equipment has gotten much bigger and more expensive. As the average farm size keeps climbing and economies of scale have forced more and more producers to increase their acreage and spread out the cost of their many expenses. More acres to cover means bigger equipment to cover it with. This increase in equipment size has come with an increased price tag as well. This makes things more difficult for producers because they have more dollars at risk in each machine. This also makes things more difficult for dealers because they have that same risk increase but multiplied across more machines.
One of the ways that dealers are being forced to deal with this increased risk is by stocking fewer machines. Gone are the days when you can expect your local dealer to have row after row of the equipment you might need whenever you need it. While your first reaction might be to see that as a bad thing, some of the changes that come along with it can be a good thing for both the producer and the dealer. Dealers and manufacturers are shifting to early order programs to help them mitigate the risk involved but it also helps the producer buying the machine if they take the right approach.
Early Order programs allow the buyer to custom order their machine. In the past, dealers would typically just order machines from the manufacturer in mass quantities with primarily the same specs. They did that for a few reasons. One is that it made ordering much easier. The other is that it helped when trading for machines because you knew how it would be equipped and whether or not it would fit the next customer who might want to buy it. In addition, it made machines easier to transfer to another dealer if they were all equipped the same.
Now, with Early Order programs, producers have the option to custom order their machines. They can get them built with exactly the options they want and not have to pay for any of the options they don’t want. This can be a big advantage when looking at options like tire sizes, guidance systems, etc.. that can not only be extremely expensive but can also be critical to the type of crop your producing or your tillage practices. Being able to custom order machines will cut down on excess cost and ensure the right tool for the right job.
Peace of Mind
Early Order Programs can provide producers with peace of mind in knowing that they not only have the exact machine they want but also in that they actually have a machine coming with their name on it. As the industry is changing, we are seeing tighter and tighter windows of production for specific machines. Therefore, if you miss your window, you might not get a machine this year. I can remember a time when that statement would have sounded absurd but it doesn’t anymore. It actually happens with certain products every year. Utilizing Early Order Programs is a great way to make sure you have the machine you need when the time comes and you’re not left working with a machine that’s not reliable or having to hire your neighbor to do it on their schedule.
Effective Warranty Planning
This is another factor that people haven’t really thought about in the past but it can actually be a really big deal. Effective Warranty planning not only allows you to know exactly when you’re warranty starts and ends so you’re covered during season. It also allows you to time your warranty so that you are covered during season and the machine is still under warranty when you trade. This is critical to resale value because it allows your dealer to trade for it knowing that any major problems will be covered by warranty. Without warranty to cover both the big and small issues, your dealer is going to take that cost out of the value of your trade in. Therefore, effective warranty planning with early order programs can make a big difference in your bottom line in multiple ways.
Another big advantage of using early order programs is that it allows you to do more financial planning. Not only are you often able to order your machine ahead of time and then decide which year you want to make that purchase in for tax purposes, it also allows you to plan out when you want the machine to come and when you want your payments to be. If you need to make arrangements for things like split payments where you take what would have been a large annual payment and break into two smaller payments that happen when you know you’ll have income, you have plenty of time and lee way to do it. Advantages like this make it better for planning out your cash flow and tax planning.
Because early ordering is the most advantageous to the manufacturer, you will always be offered the best pricing on early orders. Having the orders retailed before the actual manufacturing takes place allows the manufacturer to plan ahead so they have exactly the right materials bought at the best possible price and also allows them to plan out their cash flow. Early order retails mean the manufacturer will only be out the cash of owning the machine for a period of 30 days after the machine comes off the line. Therefore they don’t have the expense of carrying the machine on a floor plan note and they are able to take that cash and reinvest it in more materials to produce more machines right away. This creates both a profitability and a cash flow advantage for them and they pass those savings on to the customer in the form of better pricing to encourage more early orders. So if you are concerned about the price of the machine you want to purchase, and we all are, early orders are easily the best way to go.
It All Adds Up
In summary, there are too many advantages to early order programs to ignore them. They allow you to custom order your machine/equipment so you get exactly what you want and nothing you don’t. They give you the peace of mind that comes from knowing you have a machine secured for the upcoming season. They allow you to more effectively plan your warranty so that you have coverage when you need it and still get the best possible trade in value when it’s time to upgrade. Early order programs give you more options for both tax planning and cash flow planning. To top it all off, early order programs give you the best price on the machine that you want. With that list of advantages, I would highly encourage you to plan ahead and talk to your dealer about the early order programs available to you. You have nothing to lose and a lot to gain.