Economic Depreciation of In-Woods Forestry Equipment in the US South

Forestry machines sold at auctions across the southern United States covering the years 2005 to 2019 (n = 640) were compiled into three equipment categories—rubber-tired feller bunchers, grapple skidders, and trailer-mounted loaders—with inflationary effects removed. The data were discounted by a reliability function derived from a two-parameter Weibull distribution, which defined the probability of future operability at machine hours h and a wrecking value based on each machine’s specified worth as scrap. These adjusted salvage values were then transformed using the Box-Cox normal method. Age affected all fellers and certain manufacturers of skidders and loaders. A significant annual use effect was revealed for fellers and skidders. Interactions of age and use with horsepower revealed that machine size influenced buyers’ feller and skidder purchasing decisions. Manufacturer intercept and slope shifters pointed to potential brand recognition by buyers. Perceived quality differences between manufacturers, however, were not revealed. Depreciation occurred at ever-increasing rates over machine lifetime. Study Implications Salvage value is not simply machine residual (resale) value. The probability of surviving to perform work must be incorporated. Box-Cox transformations revealed that salvage value was not a linear function for any equipment class, nor was a geometric function wholly justifiable. The implication that in-woods forestry equipment depreciated at neither a constant level (straight line) nor percentage rate (declining balance) is an important one. Specifically, incorporating machine reliability and data transformation flexibility revealed that the US tax code provided certain savings to forest equipment owners. More broadly, depreciation affects harvest system costs and ultimately the agreed on value for a timber tract.