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Fix it or trade it

Andy Overbay for Progressive Dairyman Published on 28 September 2018

Should I fix that aging tractor or piece of equipment or trade it (or scrap it) and purchase a new one? That has always been a daunting question and, in times of tight- to no-profit margins, that question takes on all kinds of new layers.

On the surface, it would seem repairing what you have is always the cheapest route, but with the growing sophistication of equipment and the cost of skilled labour to properly get the job done, this may not always be the case.

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From personal experience, one thing I have learned is: While repairs can be done at a reasonable cost, repairing one component on a tractor, truck, implement or milking equipment can prevent another component from failing in the very near future.

However, rebuilding a transmission or an engine doesn’t necessarily prevent the master cylinder from failing or a control module from parking you on the side of the highway.

A neighbour of mine who was an owner-operator of an over-the-road semi once shared he traded his trucks when they reached a certain mileage limit.

For years, he had been rebuilding his old trucks but decided the costs of payments on a new vehicle were actually cheaper than the continued costs of repair done on a truck without a warranty.

One piece of the puzzle difficult to calculate sometimes is how new technology will enhance the performance of the new purchase.

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While it is also possible the new technologies may not be wanted (the need for DEF in Tier IV engines as an example), it is funny how quickly a few bells and whistles become a “must have.”

In 2014, I spent over $7,500 to repair an aging pickup truck. When I began the process, I had no intention on trading for a new vehicle but, as I reflected on not only how much money was being spent but how long I was having to be without my old friend, I came to realize I no longer owned the truck – but it was quickly beginning to own me.

After its last repair failed to get it to run reliably, I made the decision to end the relationship I was building with local garages and trade my old steed in on a new truck.

No truck that is diesel-powered is cheap, but what I soon found was: While I had to spend about $20 on DEF every 10,000 miles, the increased fuel efficiency of the new truck was saving me over $1,000 a month at the pump. The newer, much more reliable truck was actually paying for itself.

Is it possible this might be the case in your circumstance? Possibly, but to be sure, you need to do your research and have full knowledge of what it costs you to own the present piece of equipment.

Your tax returns will have a total figure on your repair expenditures, but how much of that total is attributed to the machinery in question?

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Also, tax returns reflect what you have already spent on repairs and are not necessarily representative of what may be coming down the road.

Turning to the internet, I found some great material coming from Iowa State University (ISU) regarding evaluating equipment, leasing and ownership costs.

William Edwards, retired ag economist and extension specialist at ISU, shared you can expect a continuously increasing cost of repair on equipment as it ages.

That makes sense, of course, but Edwards takes it a step further and graphs what you can expect to pay as a tractor ages and adds hours of operation to its tachometer.

For example, let’s say you have a two-wheel-drive tractor you use 400 hours per year. In 15 years, that tractor will be sporting 6,000 hours of experience.

From the graph Edwards assembled, you can expect the cost of ownership to be about 25 percent of its original purchase price in repairs to that aging tractor.

If you paid $100,000 for that tractor, it is reasonable to expect you will spend $25,000 on that machine this year and a little more than that next year.

With that figure in mind, you can now weigh how far that might go in replacing the tractor with a new model. At no point is there a free lunch.

You are merely shuffling where you spend your hard-earned dollars. You are evaluating a fixed cost (payments) versus a variable cost (repairs).

It needs to be said repair costs are truly variable. They may range from nonexistent to cripplingly high depending on your maintenance schedule and operating habits.

As Dad used to say, “If [the manufacturer] had meant for you to ride the clutch, they’d have made the pedal look like a stirrup.”

One added benefit you may find from replacing an aging tractor is: A new model adds to the pride and pleasure your labour takes from being part of your operation.

It is easy to say a new tractor won’t last long with operators who really don’t care about the state in which it returns to the shed, but my suggestion on that subject would be: Replacing the labourer may be the first step needed in improving your equipment’s life.

If nothing else, what you may find is: There is a benefit in how much manufacturers of new equipment are paying to ergonomics or the creature comforts of their products.

Not only will you find you can get more done, but your own aging parts may last a little longer too.  end mark

Andy Overbay holds a Ph.D. in ag education and has more than 40 years of hands-on dairy and farming experience.

Andy Overbay
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