Dealers chipped away at their piles of used construction equipment in December, but older-model-year inventory and a volatile auction market continued to depress prices.
Heavy- and medium-duty inventory fell for a third straight month in December as dealers aggressively offloaded used gear while capitalizing on increased construction activity. Still, values were down partly because equipment manufactured pre-pandemic lingers on the market, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.
Prices have yet to bottom out and inventory could creep back up in the coming months when rental equipment hits the market, he said.
“There’s a ton of [Caterpillar] gear that’s not being accounted for in the market right now because a lot of those Cat dealers shut those in rental inventories to try to recoup some money there,” Ryan said. “So, there’s a lot of inventory sitting out there that’s going to hit this market. For rental fleets, their fiscal years are typically March and April.”
Used-construction inventory dropped month over month across the board in December but increased year over year, according to Sandhills Global’s monthly report, released Jan. 7.
Medium-duty equipment
- Used inventory rose 18.8% YoY, but fell 0.8% MoM;
- The used wheel skid steer category saw the largest inventory gain, up 24.8% YoY; and
- Auction values dropped 6.8% YoY, while asking values dropped 5.7% YoY.
Heavy-duty equipment
- Used inventory jumped 17.6% YoY, but fell 1.8% MoM;
- Used wheel loaders drove the inventory increase, rising 31.8% YoY; and
- Auction values and asking values decreased 9.3% YoY and 6.6% YoY, respectively.
Used lifts
- Inventory increased 19.7% YoY, but fell 1% MoM; and
- Auction values dropped 15% YoY, while asking values declined 11.7% YoY.
Dealers pivot amid beleaguered auction market
While auctions can be an effective way to offload stale inventory, depressed auction values can make turning a profit tough for dealers who choose that route. Thus, some dealers are deploying “really aggressive pricing” strategies over a three- to four-week stretch before turning to auctions as a last resort, Ryan said.
“If we can increase the bottom line 10% or you can sell four out of 10 units, that’s more money in your pocket than you would have if you had just sent them to auction,” he said.
Second quarter boost on horizon?
Recent Federal Reserve rate cuts have marginally benefited dealers, with some businesses waiting for borrowing costs to drop further before purchasing equipment, Matthew Isgrig, a sales representative at Landmark Equipment in Fort Worth, Texas, told EFN.
However, Isgrig said he expects demand to pick up in the second quarter as federal rate cuts materialize in the equipment finance sector. He also expects business confidence to improve under a new presidential administration.
“So many people thought interest rates would go down automatically, but it takes a little bit of time,” he said. “But I think the second quarter will be better. And contractors usually get more busy in March and April” ahead of peak season.
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