Farm & Construction Machinery Fraud Project
Across the United States, a type of commercial transaction that occasionally involves misrepresentation and fraud is the sale of tractors, combines, and other self-propelled farm, construction, and industrial equipment. While dealing in automobiles, trucks, and other motor vehicles has become fairer as a result of laws relating to registration and odometer fraud, sales and transfers of tractors, etc. are less regulated an occasionally tainted by unscrupulous practices of sellers.
Fraudulent practices include nondisclosure of hourmeter tampering, nondisclosure of major repairs made to tractors, and sales of stolen machinery. This type of dealing most commonly occurs with sales advertised in publications, at machinery yards that resemble dealerships, and at consignment auctions.
There are several solutions to this problem, including private litigation, consumer fraud lawsuits by state attorneys general, and legislation. However, the entities who developed this brochure (who are listed on the last page) believe the best solution to this problem is being a careful buyer who has the necessary information to make a smart purchase. This brochure is intended to help buyers become more informed.
Scope of and Terms used in this Brochure
The information in this brochure applies to all types of off-road, self-propelled work machines, including farm equipment (tractors, combines, skid-steer loaders, cotton pickers, forage harvesters, etc.), construction equipment (backhoe loaders, scrapers , dozers, graders, etc.), industrial equipment (forklifts, etc.), and forestry equipment (grapple skidders, feller-bunchers, etc.). Some of the information is applicable to consumer products (lawn tractors, utility tractors, etc.), although the information on hourmeters may not fit because most pieces of consumer equipment do not have hourmeters.
For simplicity, all these types of machines are generically referred to in this brochure as "tractors." References to "you" and "buyers" mean the buyers of tractors. References to "sellers" mean the sellers of tractors.
General Tips for Smart Equipment Buying
Check Out the Seller
The best way to protect yourself against fraud is to buy from sellers you trust. For this purpose, you can do several things:
1. Buy from Established Dealers. While there are isolated cases where equipment dealers with connections to major equipment manufacturers have defrauded buyers, most of these dealers engage in honest sales practices.
- Dealers usually are established in the local community, are well-known, and have remained in business due to their trustworthiness over the years.
- Dealers may be subject to sanction by equipment manufacturers (including contract termination) if the dealers fail to abide by good business practices.
- Dealers often are members of equipment-dealer trade associations that can verify dealers who have good business practices. Ask the seller if he is an authorized dealer, or contact a trade association for your state to determine if a seller is an authorized dealer.
2. Check the Credentials of the Seller. If you don't know a seller or the seller's reputation, obtain as much information about the seller as possible. This particularly important if you are buying outside of your community or through an advertisement in a publication.
- Ask the seller for a list of individuals who have purchased tractors and contact these individuals to find out if they were satisfied with their dealings with the seller.
- Ask the seller for the name of a lender or other reputable businessperson who can give a reference for the seller.
- Contact the Better Business Bureau, the Consumer Protection Division of the state attorney general's office, or law enforcement officials where the sellers is located to obtain any information about the seller's past dealings.
3. Get a Written bill of Sale. Good business practice requires that you get a written bill of sale from the seller when you purchase a tractor. Appendix I discusses what should be included in this bill of sale.
Is the Tractor's Hourmeter Reading Accurate?
Due to the high cost of new machinery, rolling back an hourmeter reading on a tractor allows a dishonest seller to receive a substantially inflated price for the tractor. While there is no guarantee against hourmeter fraud, you can take some very useful steps to protect yourself.
Inspect the Tractor
- Check for Wear on Tractor Parts. Compare the hourmeter reading with the wear shown on the tractor's parts, including the tires, drawbar, clutch and brake pedals, and axles.
If there is a great deal of wear on a tractor with relatively low hours - beware.
- Check for Tampering. A close examination of the physical condition of hourmeters, particularly mechanical meters, may show signs of tampering or replacement. For example, if the screws or mountings that hold the hourmeter are worn or if the hourmeter looks new and shiny, then be suspicious.
Know the Technology
The technology of hourmeters is changing dramatically. Old-style mechanical hourmeters, which are very easy to roll back or replace, are giving way to electronic hourmeters that are becoming close to tamper proof. The new technology allows the product identification number (PIN) of the tractor to programmed into the computer that controls the hourmeter. Tampering requires the expertise of a computer technician.
- Buy Tractors with Electronic Hourmeters. Major equipment manufacturers have been installing electronic hourmeters on some larger tractors for a number of years. If you have the option, buy used tractors with electronic hourmeters. The chances of fraud are greatly reduced.
Check hourmeter reading with Dealer or Manufacturer
Equipment dealers and manufacturers maintain tractor hourmeter information on most tractor hourmeter information on most tractors on computer databases and this information can be extremely helpful to you for determining the accuracy of the hourmeter reading on a tractor you want to buy. Hourmeter readings are recorded by dealers in these computer databases when tractors are serviced or repaired under warranty (warranty periods range from 1 to 5 years) and by manufacturers or dealers when they are extending credit on tractors to dealers or farmers, respectively.
Follow these steps to utilize this information. (If you plan to buy a tractor at an auction, then you must arrange to do these things in advance of the auction date.):
1. Record the hourmeter reading on the tractor you are considering buying.
2. Find the product identification number (PIN) on the tractor. Appendix II describes how you can find the PIN.
3. Go to a dealer selling the type of tractor involved. (It is helpful if you have done business with the dealer before.) Ask the dealer to access the manufacturer's computer database using the tractor's PIN and share with you any hourmeter information on the tractor. The hourmeter readings would have been recorded when warranty work or other service was done on the tractor. By comparing the current hourmeter reading with reading recorded in the computer, you may be able to detect tampering.
While there are good marketing reasons for dealers to share this information with you, dealers are independent businesspeople and have no obligation to provide this information.
4. If the dealer refuses to provide this information, contact the manufacturer directly. Even if the dealer does provide this information, you may want to contact the manufacturer to access any additional computer data with hourmeter readings that the dealer does not have. This information is recorded by manufacturers when they extend credit to dealers on used tractors (so-called "floor planning"). This information is valuable to you because it may provide hourmeter readings for several years after the warranty period expired.
However, be aware that manufacturers have di8fferent policies concerning the availability of these computer databases. Information about how you can contact manufacturers is found in Appendix III.
While comparing the tractor's current hour-meter reading to readings in these computer data-bases doesn't provide you with a guarantee of accuracy, it gives you some notion of the usage of the tractor in its early years of operation and may disclose tampering.
Ask where the Tractor has Been
There are cases where late-model tractors are worked long and hard in areas where the growing season is longer (the southern United States and Central America), are transported northward, and are sold with roll-backed hourmeter readings. The scam is often successful because the hour meter readings appear consistent with the age of the tractor.
When you buy a tractor, be aware of this practice and ask plenty of questions about the tractor's origin. Be persistent in questioning the seller about previous owners of the tractor. Contact the previous owners and ask them about the tractor.
Has the Tractor had Major Repair?
When buy a tractor, y9ou also want to determine whether major repairs have been done on the tractor, including the replacement of major components. There are too many cases where used components (engines, transmissions, etc.) are installed into sold as if all components are original. Several steps can be taken to detect "chop-shop" tractors.
Have the Tractor Inspected
The best way to detect major repairs is to have the tractor inspected by a knowledgeable mechanic. As in the case of used car purchases, the cost of a tractor inspection is usually money well spent. If the tractor is at an auction or on a lot, then you may need permission for the inspection. A reputable seller should freely grant this permission.
If there is no opportunity to inspect the tractor prior to the sale, then buy the tractor inspected by a knowledgeable mechanic. As in the case of used car purchases, the cost of a tractor inspection is usually money well spent. If the tractor is at an auction or on a lot, then you may need permission for the inspection. A reputable seller should freely grant this permission.
If there is no opportunity to inspect the tractor prior to the sale, then buy the tractor subject to it passing an inspection after you have received possession of the tractor. The written agreement might specify no payment or partial payment until the tractor passes inspection. This advice is particularly important if you are buying a tractor through a published advertisement and would have to travel a great distance to inspect the tractor prior to purchase and delivery.
Check with the Dealer or Manufacturer
As discussed above, computer databases on tractors are maintained by dealers and manufacturers and can be useful to detect major repairs in two ways:
1. Major repairs are often recorded on computers and dealers and/or manufacturers may provide information about those repairs.
2. Identification numbers on engines, transmissions, and other major components can often be cross-referenced by dealers or manufacturers to determine if all the components are original on the tractor. Appendix II provides information on how to located identification-number plates.
As with hourmeter information, dealers and manufacturers may differ on their willingness to provide this information.
Has the Tractor Been Stolen? Check if the Tractor is Stolen Property.
To help protect yourself from buying a tractor that is stolen property, you can seek access to a computer database maintained by the National Crime Information Center (NCIC). It has information on stolen tractors extending five years into the past. If you are suspicious that a tractor you are considering buying may be stolen or from questionable origins, then take the tractor's PIN number to your local police department or sheriff's office. Law enforcement officials can run the PIN number to determine if the tractor is listed as stolen in the NCIC computer.
While this is useful data, be aware that if a tractor theft has not been discovered or reported (or the report is more than five years old), it will not be in the NCIC database. Law enforcement officials may also have access to a computer database maintained by a nonprofit organization called the National Insurance Crime Bureau (NICB). This database has information about tractor thefts (including thefts reported more than five years in the past) and may also have useful information about property/casualty insurance claims that have been filed on the tractor. If your law enforcement official has access to the NICB database, ask him or her to run the tractor's PIN number on this database, in addition to the NCIC database.
APPENDIX I Bill of Sale for Tractor Purchases.
When you buy a tractor, you should have a written bill of sale. The bill of sale should be dated and signed by the seller. The bill of sale should include the following:
1. The tractor's make, model, and product information number (PIN), discussed in Appendix II.
2. The price and payment and credit terms of the sale.
3. The terms of any trade-in allowances.
4. In the case of newer tractors, an explanation of any warranties that may still be in effect on the tractor. In the case of older tractors, sellers usually disclaim all warranties and sell the tractor "AS IS." Nevertheless, it is wise to ask the seller to disclose any major repair major repairs made to the tractor. The following are two examples of statements to include:
a. "Seller certifies that, to the best of the seller's knowledge, no repair has been made to the tractor that exceeded [insert appropriate dollar value] in cost except for the following repairs:
b. "Seller certifies that, to the best of the seller's knowledge, no repairs has been made to the tractor that exceeded [insert appropriate dollar value] in cost."
[Have seller list repairs and costs.]"
5. The schedule for the tractor's delivery and a determination of who pays the costs of delivery.
6. The tractor's current hourmeter reading and a statement by seller regarding the accuracy of that reading. One of these three statements should be included:
a. "Seller certifies that, to the best of seller's knowledge, the hourmeter reading on this tractor is accurate."
b. "Seller certifies that, to the best of seller's knowledge, the hourmeter reading is not known to be correct and that the actual hours may differ from the hourmeter reading for reasons other than hourmeter-calibration error."
c. "Seller suspects the hourmeter reading is in excess of the mechanical limits of the meter."
If you are considering buying a tractor at a consignment auction, then getting a written bill of sale with these provisions from the seller is not usually possible. You could ask the auction dealer to try to get these types of assurances in writing from the seller, but that is difficult. Your best bet is to publicly ask the seller or the auction dealer these types of questions at the auction.
Location of Product
(PINS) and Component
Equipment manufacturers adopted a standard in 1981 for identifying tractors and tractor components. The standard was revised in 1987. (Society of Automatic Engineers [SAE] Standard J1360, Sep87.) The standard contains the following provisions , which should help you find the identification number on tractors manufactured sine 1981.
1. Product Identification Number (PIN). The PIN is a unique identification number assigned to a tractor. The PIN contains at least six but not more than 17 letters or numbers. The preferred location for the label with the PIN is on the left side of the machine, adjacent to the operator's access area. If it is not there, then it is to be in a location that is considered obvious to someone looking for the PIN label. PIN Labels look like this:
Manufacturing Company's Name _______________
Model No. 425A
Figure 1. Sample "Pin" Label.
2. Component Serial Numbers. Component serial numbers are assigned to major components on a tractor, including engine, transmission, and axles. Component serial numbers are also six to 17 characters long. They are to be located in such a manner to maximize visibility and may be on a label or indelibly etched or imprinted on the component. Component serial numbers look like this:
Manufacturing Company's Name ______________
THIS IS NOT A PIN (PRODUCT IDENTIFICATION NUMBER) PLATE
Name A129F ENGINE
Serial No. *5669304*
Figure 2. Sample Component/Attachment.
Older tractors may have identification numbers that are much different than this standard and located in different locations. If you cannot find a PIN or component serial number , ask a dealer to tell you the location or provide you with an owner's manual (or other general publication) that depicts the location.
Take the time to accurately record the entire PIN or component serial number.
Look for evidence of tampering, alteration, or obliteration of identification plates. If you have suspicions about the authenticity of the plates, then resolve your doubts with a dealer, manufacturer representative, or law enforcement official before you buy the tractor.
Tractor Manufacturer Information
Tractor manufacturers have different policies on providing information on computer databases to buyers of tractors. As a general rule, manufacturers prefer that buyers work through dealers. However, if you cannot get the information from the dealer or if you need information that dealers do not have, then contact these manufacturers:
Attn: Ken Shaffer
P.O. Box 100/627 S. Cottage St.
Independence, MO 64051-0100
Attn: Corporate Security
700 State St.
Racine, WI 53404
100 NE Adams St.
Peoria, IL 61629-7150
Deere & Company
John Deere Road
Moline, IL 61265
New Holland North America, Inc.
200 George Delp Road
New Holland, PA 17557
This brochure was developed by the
Iowa Attorney General Farm Division
321 East 12th St., Room 018
Des Moines, Iowa 50319
The Farm Section would like to acknowledge the following entities for their assistance and cooperation in the preparation of this brochure.
Deere & Company
Equipment Manufacturers Institute
Iowa Farm Bureau
Iowa-Nebraska Equipment Dealers Association, Inc.