2023 2Q Cost Report
Heavy Equipment Across Categories Shows Signs of Prices Stabilizing
Prices for used construction equipment have continued to show signs of stabilizing over the last few months, a trend also seen in other heavy equipment categories. They are not all that much higher than they were in the same period last year, according to the most recent data collected and published by industry analyst EquipmentWatch. And construction equipment is also not showing any sign of tracking with the more than 10% year-over-year climb in prices seen in used equipment for the agricultural and lift/access markets.
“Looking over the last couple of months, construction equipment values in particular are showing a slight growth, which is typical of what we have been seeing lately,” says Samuel Pierce, sales analyst with EquipmentWatch. And the slight rise of resale prices in May 2023 being only 2.7% up over May 2022 can be encouraging, if only because it may be a sign that the hunt for equipment due to limited availability during the COVID-19 pandemic may finally be over. In the auction space, EquipmentWatch’s year-over-year metrics show steep climbs in valuations across all equipment categories, but this is due to a recent revision in the analyst firm’s methodology and do not reflect a genuine price spike at auctions.
There’s also a sign that the equipment in the secondary markets is showing the effects of the extra hours they put on during the pandemic shortage. The ages of used equipment are stable, but usage hours are up across the board compared to the selection of machines on the market one or two years ago. “Usage across the whole resale market has been up,” says Pierce. “What we’re seeing is models with higher meter reads on them.” And seeing a decline in equipment age while usage goes up in resale channels is a strange trend as well, he adds. “It’s a bit of an anomaly there, usually those two [data points] move together—older machines generally see more hours of usage.”
Order Books Filling Up
Demand for new equipment remains strong as well. Deere & Co. reported in its second quarterly earnings call that demand remains strong for new construction machines, and the equipment manufacturer says that its order books are full through the 2023 fiscal year.
A decline in activity in residential and commercial construction has been offset by work on infrastructure projects in the U.S., according to Deere’s earnings report. And a persistent lack of labor for construction projects may also be impacting the kind of new equipment being purchased, according to Joshua Jepsen, Deere senior vice president and chief financial officer. “Contractors for the first time in their careers are turning down jobs because of lack of labor,” Jepsen said on Deere’s 2Q earnings call. “So I think the desire for more technology, the ability to do jobs in an easier, more simple manner is desirable. So we see a lot of opportunity there to continue.”
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