Selling tractors and equipment on Internet sites such as eBay offers a wide pool of potential buyers, but the average selling price is better in traditional auctions, say Ohio State University researchers.
They looked at data from Internet and in-person used-tractor auctions conducted between June 1, 2005 and March 31, 2006, in 11 Midwestern states. The states included Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. The Internet data, purchased through eBay, included information about auctions that took place in its "Tractor and Farm Machinery" category. Final sales price, make, model, engine horsepower, year, hours of use and other information were given. The in-person auction data was bought from Machinery Pete's Farm Equipment FACT's Report, which summarizes reports from more than 600 auctioneers.
The researchers found that buyers may be able to get newer, more powerful tractors at a discount compared to traditional in-person auctions. However, they must bear additional risk because they cannot be present to personally inspect the merchandise. Also, occurrences of fraud or misrepresentation cannot be fully covered under eBay's buyer protection program, which currently covers items up to only $20,000.
If you're selling equipment, eBay is attractive because it offers great flexibility such as absolute freedom to choose sale dates, no transportation of equipment to a central location and low commissions capped at $250. However, for tractors that sellers think will sell above the $20,000 buyer protection program limit, the researchers' calculations suggest that in-person auctions generate greater total seller revenue. The higher commissions paid to in-person auctioneers are outstripped by higher selling prices. Indeed, the flat commission rate charged by in-person auctioneers would have to rise to 31.3% before for the two types of auctions would offer the same net sales revenue. That's double the highest commission charged by in-person auctioneers, say the researchers.
Learn more about the study and view the tables that go with it at ohioagmanager.osu.edu/resources/May07%20eBaytractors.pdf.