In the wake of CONEXPO-CON/AGG 2011, “I’m that one contrarian, I think, who is not living under that euphoria. I guess I’m a little on the negative side,” says Yengst, “because I don’t see how we can keep going like this with everybody yelling, ‘Hoopla,’ when there is nothing happening in the real world. I want to start seeing housing starts moving and I want to see money being spent on things other than repaving a road here and there. I want to start to see buildings going up, and factories and schools and everything else. I don’t see any of that stuff, and I’m saying, ‘What are you people doing? This is a shell game you’re pulling on me here.’”
As for potential sellers, “they all don’t want to get rid of the best used equipment they’ve got,” especially at auction, says Yengst. “The one thing that they’ve got going for them is to hang onto the stuff and move it if a customer comes to the front door. However, you won’t find dealers holding onto this stuff forever, if cash flow starts to be a problem.”
Caterpillar’s Tisdale says the market is ripe for those wishing to add, turn over or reduce fleet. “This may sound like a political answer, but we’re in a unique period when it’s actually a very good time to both buy and sell,” he says. “It’s a good time to sell because the prices have recovered nicely from what was a historical low about a year-and-a-half ago, when we had what I’ve seen as the lowest used equipment prices in probably 20 years. Many of our product families and models have recovered 20, 30 and 40 percent on pricing in that time frame since, so from that aspect, if you have idle equipment that you don’t need, it is a very good time to move it. But it’s also a good time to buy, because high demand for new machines makes immediate availability a challenge. Many of our models and our competitor models are extended on the delivery of the new machines, so if you’ve got work to do, you really have to consider what is available in the used market and consider refurbishing, repairing and upgrading a used machine just to take advantage of your projects. The other thing to consider is what technology and regulatory issues do you need to meet today’s business requirements and challenges.
“As Tier 4 is being launched,” says Tisdale, “the flow and disposal of used equipment is going to change. Machines won’t be able to operate or move as freely around the world as they historically have.” At the same time, older Tier 2 or 3 machines that in times past an owner might not have considered having may, in fact, be the best choice for some customers for years to come, either making it worth holding onto or even searching for to add.
“We are constantly looking for machines,” says broker Robertson. “It’s a struggle to find machines, at the right price, because of course all these guys wanting to buy remember the prices two years ago when everything was dirt cheap.”
Rationale, reasoning and conclusions may be debatable, but there are indisputable facts about today’s used equipment market, says Rouse’s McArdle. Equipment values are up and the nine largest equipment rental companies are showing increased utilization and rates, he says. At the same time, “every report we see shows construction spending was down in 2010 over 2009,” he adds, “and, of course, 2009 was down over the peak in 2007.” The first meaningful increase in construction spending in the U.S. is projected in 2012.
Boosted values, usage and rates in the face of decreased spending? “I would argue that no one could tell you for certain why that is,” says McArdle, but he has a theory. “As equipment falls out of service, whether you are an end-user contractor or the rental companies themselves, you need to be able to replace it . . . or find another piece of equipment that you can put into service to be able to do the jobs that you have. There’s fewer jobs, but you still need to have equipment to service the work that you have.
“If newer equipment is going to represent a larger investment, then maybe you want to look to used equipment first,” adds the Rouse Asset Services vice president. “If you have less visibility into where your future work is going to come from, but you do have a job today that you need to put equipment to work at, then maybe you want to rent instead of purchasing that new piece because you don’t know if you’re going to have work for it three months from now or a year from now.”
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