With higher prices of fuel, you decide a small utility tractor is needed around the farm, but there are no used tractors on dealer lots and no farm sales scheduled in the near future. You’ve just about given up looking until you noticed that your spouse was looking at eBay on your computer. Suddenly, it dawned on you that eBay might be the place to find that utility tractor! But are you going to be paying more than it is worth?

eBay may not offer the cadence of an auctioneer’s call, but that is about the only thing missing on the Internet’s primary buy/sell marketplace. And that includes utility tractors of all sizes, shapes, colors, and conditions. But your main question is whether you’ll pay more or less for the same tractor that you might find at a farm sale. Ohio State University economists Florian Diekmann, Brian Roe, and Marvin Batte wondered the same think and calculated those variations for you in a research report. You have a choice of the short version or the long version.

The economists say Internet auctions will become more popular for the exchange of farm equipment, since fewer and more widely dispersed buyers will impact the success of local auctions. One of the problems of Internet auctions, particularly eBay, is the lack of inspection services to manage the buyer’s risk. However, there are reliability ratings of individual sellers, photos and videos of the item for sale, and the availability of a fraud insurance policy. They look at several questions in the long version you should ask yourself about such a venture:
1) Do eBay and in-person auctions yield similar average prices for comparable equipment?
2) What influences whether tractors are offered for sale on eBay versus in-person auctions?
3) What kind of tractors is being offered for sale on eBay and which ones are actually getting sold, i.e., generating bids that surpass reserve prices?

To get to your primary curiosity reflected in the first question, the researchers analyzed data from the Internet (eBay’s Tractor and Farm Machinery) and from Cornbelt auctions (Machinery Pete’s Farm Equipment FACT’s Report) from June of 2005 to March of 2006. They excluded pre-1960 tractors, tractors with expensive attachments, and sub-30 hp tractors used in landscaping, as well as those being sold for parts. They ended up with 588 eBay transactions and 1,770 auctioned tractors, all from the major equipment makers. Developing a base price, and then premiums and discounts for various attributes, the researchers compared the sale prices, as well as the commissions and other fees that were charged by both eBay and the 600 auctioneers providing sale data to the FACT’s Report.

“The results are quite stark,” say the Ohio State economists. The median price on eBay was $7,706, while the median price at an in-person auction was $10,996. Another difference is transportation of the tractor, borne by the seller at the local sale barn, but borne by the buyer on eBay. Using some standard tractors, the researchers report, “All three of our example tractors which are predicted to sell for more than $20,000 at an in-person auction, are predicted to sell for considerably less on eBay. For example, the Case-IH tractor is predicted to sell for $23,367 less if sold on eBay than if sold at an in-person auction. For 2 of the 3 example tractors (In the lower priced range) eBay generates higher net prices, including $1,416 more for a 43-year-old Allis Chalmers D17 with a front-end loader. For a John Deere 4020 the mean in-person auction price ($8,212.50) is quite close to that of the eBay sample ($8,166.37). Several statistical tests suggest that the two venues yield the same sales price for this venerable tractor. Hence, in-person and eBay auctions provide similar prices for the John Deere 4020’s sold in the Midwest during this time frame.”

The Ohio State economists found “the average price received in eBay auctions is substantially lower than in in-person auctions; the average tractor in our sample is predicted to sell for nearly $10,000 less if sold on eBay. However, the percentage discount for eBay tractors is smaller for items that sell for less than $20,000 – the price threshold beyond which goods are no longer covered by eBay’s Buyer Protection Program. In fact, for the most frequently traded model in our data set (the John Deere 4020), which normally sells for prices well below the $20,000 threshold, the distribution of prices obtained in eBay and in-person auctions is no different.”

Summary:
Farmers wanting to buy or sell farm machinery have an Internet alternative to the local farm sale or sale barn, in the form of eBay. However, this alternative should be considered by the first time buyer or seller as having characteristics somewhat different from the time-tested local auction. While it is difficult to closely examine the product, risk management insurance is available to ensure the product is what it is claimed to be, and there are scores awarded to sellers for their reliability. However, the base prices will differ somewhat between eBay and in-person auctions, based in part on the cumulative value of the item. On eBay, lower priced items might sell for more, higher priced items might sell for less, and certain standards such as a John Deere 4020 might sell for similar values in both types of auctions.