Determining Usage Costs for Farm Tractors and Field Machines
C. B. Richey, Extension Agricultural Engineer, Purdue University,
D. R. Hunt, Professor of Farm Power and Machinery, University of Illinois
Should I keep my tractor or get another? Do I need a new one or just a newer one?
The question of whether to keep a piece of farm equipment or buy a new or used replacement is a major one for any farm operator. In making the right decision, he has to weigh many factors, such as the capital required, annual usage cost, capacity, functional efficiency, and probable reliability.
Reliability is extremely important to the large operator, who must make every hour count at the peak of his production seasons. Since reliability usually decreases as usage and need for repair increase, the large operator may benefit by trading a particular piece of equipment every 3 or 4 years. A smaller operator, on the other hand, who requires fewer hours for his field work may not require as high a degree of reliability. Therefore, it is sometimes more profitable for him to buy used machinery rather than new.
Over the years, several studies have been made of farm machinery depreciation based on "as is" market values. New information on the relationship of repair costs to total hours of use since new was provided by an extensive survey of 1,800 Indiana and Illinois farms in 1966.
The results from these studies are presented here in a form which should enable the farmer (1) to estimate the usage cost for a new piece of farm machinery based on its probable hours and years of use, and (2) to estimate the usage cost for second-hand machinery when previous hours and years of use are known. Worksheets along with examples are included for determining these usage costs and figuring custom rates.
Operative extension service • purdue university • west lafayette, Indiana