Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?
Tozer, Peter R.
Seven different remaining value functions for tractors and harvesters wereestimated using data from advertised prices for used farm equipment. The generalisedBox-Cox model was used to nest six of the seven functions. The more complex Box-Cox function explained the data better, but simpler models such as the sum-of-theyears-digits, or double-square root models were no different and were easier tomanipulate to estimate depreciation rates and costs. There were up to threecomponents of depreciation, drive-away, age and use related, depending on functionalform. Drive-away depreciation is the immediate loss in value of a machine due topurchase, in some models this depreciation was higher than either age or use relateddepreciation. When drive-away depreciation was treated as a separate cost or whenthere was no drive-away depreciation, due to functional form, age and usedepreciation costs were approximately equal.Show more [+] Less [-]