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Nw Iowa | That is false. Most well capitalized dealers in Deeres eye when we were in business had about 40% equity ( actually slightly less than that) That would be the very well capitalized. Low capitalized were closer to or under 30%. You have to remember that includes parts, used equipment and new equipment that is on floor plan. So if a dealer had a 100 million of total inventory and had 40 million of his own money in, he would have been a top tier dealer as far as capitalization. You have to remember per contract that if new equipment was current and unused if dealership closed Deere would take new equipment and unopened parts back at full wholesale value so banks would count that against your liability so not quite so bad. So every dealer had to have parts payed for, Deere billed them at end of every month, which was included in capitalization and had their own money in percentage of used equipment but per dealer contract Deere had Mortgage on everything just as a bank has a blanket mortgage. We had statement once a month when all accounts had to be straightened with Deere which included any new sold or used sold financed equipment and any parts. Deere did inventory every so many months as they do with all dealers to keep everybody honest. I am guessing the AC Brandt and RDO dealerships do the same. Most dealers have a line of credit with a bank so that they have money to make statement at end of each month just as a farmer may need a line of credit even if he doesn’t use it much.
These were numbers pre Covid so Deere may have different metrics now but I am guessing that they use pretty close to same although many dealers needed very little financing last couple of years when they had no inventory. As I have said many dealer have expanded in last 4 or 5 years and haven’t had normal credit needs until now, which makes things more interesting. | |
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Used Machinery Market Talk- How do these Inventory Reduction Auctions work out for JD dealers?
