For the distributions above, annual usage hours were calculated for each asset by dividing the unit’s total usage by its age. Annualized usage was then summarized for each horsepower range. The minimum and maximum values displayed do not include outliers.
Key Takeaways for Decision Makers
SELLER: The majority of tractors on the resale market exhibited annual usage that was lower than the mean, so be wary of using simple averages to gauge utilization.
INSURANCE: As annual usage varies between different types of tractors, the impact meter reads have on a specific asset’s value will also differ.
Usage is a critical factor in valuation and purchasing decisions for heavy equipment, and agricultural tractors are no exception. To determine whether a used tractor is a great deal, buyers must have a sense of the average usage hours for that piece of equipment. Working with over 175,000 individual records, we analyzed meter reads to find representative usage hours for tractors in six horsepower ranges. For the purpose of visualizing the data, annualized usage rates that fell beyond two median absolute deviations were considered outliers and excluded from the minimum and maximum figures.
Using these distributions, one can easily find typical usage for tractors manufactured within the past 20 years. For example, given that the median annual usage for a 250 hp model is 356 hours, median usage for a 2010 model year is 1780 hours, or 5 x 356 hours. Average usage is somewhat higher at 1981 hours.
In every horsepower category, mean annual usage was greater than median usage. For tractors over 74 hp, mean usage was between 10% and 13% higher than median usage. The difference was much greater in tractors with 25-74 hp (47%). This positive skew in the distribution indicates that a large portion of units have annualized usage clustered at the lower end of the scale. Units with very high hours are less common but still drive average utilization up.
Mid-range tractors with 125-174 PTO hp had the greatest annual usage. The median number of hours accumulated annually was 392, and the mean was 441. At 671 hours, these units also exhibited the largest range in annual usage.
Utilization was comparable for tractors in the 75-124 hp and 275+ hp categories. Median usage for these two ranges was 308 hours and 306 hours, respectively. Sellers reported more consistent usage on the more powerful tractors, however. Excluding outliers, annual usage for 75-124 hp units ranged from 45 hours to 610 hours, while the largest tractors had utilization ranging from 111 to 561 hours.
Tractors with 25-74 PTO hp stand out with a median usage of just 107 hours. Although the annualized utilization value of 1 is not typical, it did not meet requirements to be excluded as an outlier. Over 25,000 assets in this category were examined, so a single extreme value has little impact on the mean or the median. This example highlights the benefit of analyzing thousands of data points rather than relying on a small sample of used tractors.