Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?

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.