Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?
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Seven different remaining value functions for tractors and harvesters were
estimated using data from advertised prices for used farm equipment. The generalised
Box-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 to
manipulate to estimate depreciation rates and costs. There were up to three
components of depreciation, drive-away, age and use related, depending on functional
form. Drive-away depreciation is the immediate loss in value of a machine due to
purchase, in some models this depreciation was higher than either age or use related
depreciation. When drive-away depreciation was treated as a separate cost or when
there was no drive-away depreciation, due to functional form, age and use
depreciation costs were approximately equal.