Wednesday, June 06, 2007

Tractors on eBay Sell for Less

From Russ Quinn DTN Staff Reporter

OMAHA (DTN) -- Farmers have traded farm machinery for generations by the chant of an auctioneer, but some producers today are using the internet, specifically eBay, to alter their machinery lines. During the last two weeks, in fact, the world's most-popular internet auction site reported selling 258 tractors.

The real question for many farmers when using these tools is whether internet auctions bring as much as in-person auctions. The short answer to this question is generally no, but it does depend on the age and usefulness of the tractor available for auction.

A recent study by Ohio State University examined in-person auctions vs. tractors selling on eBay. The results of this first-of-a-kind study showed that the median tractor (i.e., half of the tractors sold for a price less than this, the other half sold for more) was predicted to sell for $7,706 on eBay and for $10,996 at an in-person auction. Once the typical commissions and fees are deducted this resulted in $2,197 more from an in-person sale than from eBay. (Auction services typically charge 2.5 to 15 percent commissions, while eBay charges 1 percent, or a maximum of $250, plus a $20 listing fee).

Brian Roe, an Ohio State University associate professor of agricultural economics and one of three authors of this study, told DTN there was a distinct difference in the number of tractors that sold above and below the $20,000 level on eBay.

The online auction site offers an anti-fraud Buyer Protection Plan for business equipment purchases that refunds buyers' outlays up to $20,000, Roe said.

This coverage protects buyers from seller fraud or undisclosed equipment defects. Anything more expensive than $20,000 is uncovered which is why newer, more expensive farm tractors are fairly sparse on eBay, even though they may offer buyers the best bargains.

"We took 10 months worth of data from eBay and Machinery Pete's Farm Equipment FACT's report to compare the two," Roe said. "We also limited our study to tractors made after 1960, horsepower of 30 or more and limited the data set to 13 tractor manufacturers." The study tracked 588 eBay sales and 1,770 in-person sales.

One farmer from Ohio, speaking anonymously to DTN, said he bought a John Deere 4010 tractor, a John Deere 148 loader and pickup truck this winter on eBay. He puts up hay and likes the John Deere 10 and 20 series of tractors to accomplish this chore.

His experiences on eBay were mostly positive. He paid $6,800 for the 4010, which was sold by a Nebraskan.

"The 4010 was in really, really good shape and was represented very well by the seller which is why I was willing to pay that much for it," he said.

The buyer learned from this process as well. First of all, he did not factor in transportation costs right away, and he freely admitted this was a big mistake. He had to pay someone to haul the tractor back to Ohio which was fairly expensive considering current fuel costs.

"I had a buddy who hauls calf huts out to Kansas and if I had to do it over, I would have had him haul it back because backhauling costs much less," he said.

The other thing he learned was not to assume things. His John Deere 148 loader, which he bought for $900 and was in good shape, came with what he thought was universal mounting brackets. He found out, however, it was previously attached to an International tractor and he had to find different mounting brackets for his new loader.

"You have to be sharp all the time when you are buying, or I suppose selling, something on eBay," he said. "Scammers are out there all the time. If something sounds too good to be true then it is probably is."

The Ohio State study concluded that from the buyer's point of view, purchasing newer, more powerful tractors on eBay may offer the opportunity to find discounts, but buyers also must bear additional risk because they cannot be present to personally inspect the tractor.

For the seller's point of view, eBay may be attractive because it offers flexibility of when and where to sell and also low commissions. However, for tractors sold for more than $20,000 limit of the eBay buyer protection program, the study shows that in-person auctions generate greater total seller revenue.

"For the farmer trying to sell an older tractor, eBay may offer an attractive sales outlet, but the newer tractors seem to bring considerably less than an in-person auction," Roe, the Ohio State University professor, concluded.