Farm equipment is becoming an increasingly important financial asset for many farmers. Tractors probably represent the single largest component of equipment asset value. As such, changes in tractor values can have a dramatic effect on a farmer's financial situation. Changes in equipment value can be attributed to depreciation and the value of output produced. The general objective of this study was to identify a specific set of variables explaining changes in equipment value and to determine the relative importance of these variables. The Box-Cox power transformation technique was employed in estimating the depreciation patterns. The method was applied to two different sources of used tractor prices--auction and advertised. Remaining value (RV), defined as the real market price in time t divided by real purchase price, was regressed against several independent variables. These independent variables were age, usage per year, condition, horsepower, manufacturer, regions of the U.S., auction types, and net farm income. A number of these variables were found to have some important impact on RV. Depreciation patterns were found to differ between manufacturers. Significant differences in remaining values (RV) were found to exist for different regions of the U.S. and different auction types. For both auction and advertised data, an increase in usage produces a noticeable decrease in RV. For auction data, however, the level of usage tends to have greater influence on RV when the tractor is newer. The results did not closely approximate any clear depreciation pattern. The depreciation patterns are accelerated relative to straight-line method and are a combination of the geometric and sum-of-the-year's digits functions. The RV model was used to examine optimal replacement ages for farm tractors. Annual usage levels had the most influence on the age at which tractors were replaced. Expensing and some tax law changes had a less significant impact. / Graduation date: 1989