When you're in agriculture, your finances can go up and down with the market. Knowing the overall value of your farm assets helps you make wise decisions for your operation's future outlook. With the high cost of machinery today, appraising farm equipment can help you get a better grip on your farm's finances and the overall value of your assets. This can come in handy when you need to make an insurance claim, fight inaccurate tax assessments or secure financing for a farm loan. Here's a quick look at the many ways farm equipment appraisal can help you improve the accuracy of your farm finances.
Going to seed: How appraising farm equipment improves your farm finances
Whether your equipment is the latest model or an aging fleet of implements and tractors, that equipment represents a large portion of your farm's assets. Combine that with the value of your land itself and you're looking at almost every asset for your farm operation. It's easy to see how the value of your farming equipment can strongly impact your farm's economic status.
With the changes in the tax laws, you can choose to deduct the full cost of new equipment for at least the next few years, which reflects a strong change from the depreciation tables of the past. But whether you use standardized depreciation tables or deduct the cost using the new tax laws, your machinery's value probably does not change to meet those estimated values. Why?
When you use a depreciation table, you're assuming that your machinery is losing value at a steady rate that happens to match the time period of the table. However, many farmers have old equipment lying around that is used regularly which reached a value of zero on the depreciation table ages ago. That doesn't mean that that old hay wagon, ancient farm truck or aging tractor has no value in your operation.
What would you do if you had a fire in your machine shed and lost that equipment? The depreciation tables and your books may reflect that the equipment has no real value, but you know you'll need to replace it before harvest comes around. When you need to make a claim with your insurance company, will their standard value actually cover the cost of replacing that equipment? In situations like these, it's important to have your equipment appraised.
When you need to fight a bad assessment or estimate of value from an insurance company, court or financial institution, an equipment valuation from a certified appraiser provides a solid basis for value. Because a certified appraiser uses standardized methodologies to calculate value, these values have been proven to stand up well to strong scrutiny.
Appraising farm equipment helps you record your machinery's value both at current as well as over time. This, in turn, allows you to update your financial books, which tells you exactly where your finances fall when you need to determine whether expanding your operation, replacing older machinery or upgrading machinery to improve productivity. However, before you try to get a machinery value from your local equipment dealer, remember that they have a vested interest in selling you new machinery, which will impact their valuation. Make sure you work with a certified equipment appraiser to get an accurate machinery value.