High inventory continued to depress used construction equipment values in October as dealers reevaluated their strategies to offload equipment.
The increased inventory comes as the used-equipment market wrestles with high interest rates, rental returns and manufacturers’ push to sell new equipment after pandemic-fueled supply chain disruptions. Rental and lease returns could ramp up even more in the final months of the year as contractors look to create cash flow, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.
“As we’re getting these contractors finishing their jobs for the year, depending where you’re at in the country, there is always an influx of inventory dump toward yearend, just needing cash flow going into next year,” he said.
Auction values depreciated faster than asking values in October as an excess of used construction equipment continued to sit on dealer lots, according to Sandhills Global’s monthly report on trends in the heavy-equipment industry, released Nov. 7.
Medium-duty equipment
- Used inventory rose 26.6% year over year, but fell 3.3% month over month;
- Wheel skid steers drove the inventory surge, rising 35.9% YoY; and
- Auction values fell 8.2% YoY, while asking values dropped 5.3% YoY.
Heavy-duty equipment
- Used inventory increased 19.3% YoY, but dropped 1.9% MoM;
- The wheel loader category saw the largest inventory jump, rising 35.9% YoY; and
- Auction values decreased 10.3% YoY, while asking values fell 5.8% YoY.
Used lifts
- Inventory rose 17.9% YoY, but fell 2.9% MoM; and
- Auction and asking values decreased 11% YoY and 6.5% YoY, respectively.
Dealers turn to rental market
Rather than trying to offload inventory via auction before yearend, dealers may look to capitalize on strong rental demand, Ryan said.
“Some of the yellow iron dealers that are loaded with inventory are looking at possibly using the rental route rather than dumping and selling equipment,” he said. “I do think you’ll see some of this excess inventory that dealers turn into some rental units as a source of profitability for them, and not just a dump of a loss.”
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