Equipment Inventory is Running Low - What are Your Options?

Equipment inventory issues are creating serious challenges in many industries, and more than likely, you’ve lived some of these challenges yourself. Our friends at Messick’s gave us a dealership’s perspective in their recent video about equipment inventory and a supply chain update.

Need a skid loader? Or maybe you’re looking for attachments? Brace yourself, there’s not much to choose from. No matter what manufacturer, what piece of equipment, new or used, inventory is tough to come by and parts are the same way. These challenges have impacted so many different factors of the supply chain: we’re also seeing new build times being pushed months out, prices have gone up significantly, and trucking deliveries have been inconsistent.

The end of the year is fast approaching and, like many things, it probably doesn’t look like it used to. We know that you’re trying to be smart about managing your business’ finances and purchasing equipment before year-end may not be an option for you this year. Here’s a few ideas to help you navigate the uncertainty supply chain issues have brought:

1. Talk to your accountant now.

You probably have an idea of what you may need to spend before this tax year ends, but don’t wait until mid-December to talk with your accountant about what’s best for your books.

2. Talk to equipment dealership salespeople.

It doesn’t matter what color equipment, new or used, talk to your salespeople about what they’re seeing in the industry. They will know estimated build times, delivery times, what the realities of ordering now are, other possible outlets or other models that might suit your needs. Sure dealerships are competitors, but they do work together to move equipment to the lot and the person it needs to be with.

3. Take a look at auctions.

Yes, auctions can be hit or miss, but with equipment availability the way it is now, it’s worth it to see if there’s a hidden gem looking for a new home. If you plan to check out this option, don’t miss our guide on buying used farm equipment.

4. Look outside of your local area.

You may need to look outside of your state to pick a certain piece up. If you’re not interested in making a trip out of it, you can always look into someone hauling it home for you too.

5. Think outside the box.

You may be used to ending the year with an equipment purchase, but pre-purchasing isn’t restricted to equipment. Oftentimes there are significant discounts for early ordering chemicals, seed, and other supplies. Be prepared – supply chain issues reach far and wide, so prices for other inputs for 2022 are going to be higher as well.

6. Look into leasing options. 

Leasing is a pretty neat tool because of its flexibility. Although you probably won’t be able to find anything to lease currently, this can be a good option as you get into the 2022 growing season.

You may also want to consider a purchase lease back. As long as you're in the same calendar year as your purchase, you can lease your new equipment, which changes your payment tax write-offs to rental payments.

Another option to consider is step-down payments. You can set up the lease so that your first payment is larger than the following payments. Let’s say you’re getting a combine this fall. You know you need to spend $100,000 this year. Set up for your first payment in 2021 to be $100,000, then the following payments are set at $50,000 or wherever your normal payments are. Your 2021 payment gives you a larger write-off/ rental expense, and then you’re back to your normal payment going forward.

Another question we get all the time is: “What are interest rates going to do?” Without a crystal ball, it’s hard to tell, but we’ve seen a lot of pressure on the Federal Reserve for rates to go up. Emily Snyder, Farm Credit EXPRESS Relationship ManagerIf you’ve been coasting along with a variable rate, you may want to consider locking in while rates are relatively low. As you look to take out new loans, try to lock in the lowest rate possible before they start going back up. We haven’t worried about rate increases thus far in 2021, but that shift is on the horizon.

As this article is being written, it’s been exactly one week of John Deere workers on strike. Case New Holland Industrial has several of their European plants shut down due to a semiconductor shortage. Pick any manufacturer, and they’re having similar issues. Uncertainty has been a theme for what seems like too long, but those in agriculture are the most resilient and optimistic people we know, and we will weather this storm together. 

 

This article was written by our Farm Credit EXPRESS Relationship Manager, Emily Snyder. Farm Credit EXPRESS is a fast and easy financing option that allows you to apply right at the dealership. Find a dealer near you today!