Used construction equipment inventory spiked again last month, prolonging years of depreciation.
Despite the Federal Reserve’s recent decision to reduce its target federal funds rate and the construction industry’s resilience, inventory could keep piling up in the coming months as businesses delay purchases until after November’s presidential election, Sandhills Global Equipment Lease and Finance Manager Jim Ryan told Equipment Finance News.
“Things are probably going to stay in a holding pattern for the next two months,” he said. With reduced rates, “you’re probably going to see it help more so in December and in the first quarter of 2025 than you will right now.”
High inventory dealt a significant blow to the auction market in September, with used construction equipment values falling in the heavy- and medium-duty categories, according to Sandhills Global’s monthly report on trends in the heavy-equipment industry, released Oct. 4.
Medium-duty equipment
- Used inventory rose 36.3% year over year, but fell 1.6% month over month;
- Track skid steers and wheel skid steers contributed most to the inventory surge, each rising roughly 43% YoY; and
- Auction values dropped 9.6% YoY, and asking values dropped 6.2% YoY.
Heavy-duty equipment
- Used inventory increased 21.5% YoY and 0.8% MoM;
- Auction values fell 9.5% YoY, while asking values declined 4.4% YoY; and
- Auction values for used excavators and wheel loaders each fell just more than 10%, the largest declines for all categories.
Used lifts
- Inventory was up 21.5% YoY and 5.6% MoM; and
- Auction values fell 12.6% YoY while asking values declined 8.2% YoY.
Exports linked to inventory surge
While inflation in the United States has challenged the heavy-equipment industry in recent years, inflation in other countries has also contributed to rising inventory as it hinders global demand, Joe Rexin, owner of Long Beach, Calif.-based Rexin Equipment, told EFN.
“The yen is super soft, so nothing is going to Japan. The peso is 19-to-1 [U.S. dollars], so nothing is going to Mexico,” he said. “Nothing is being put in a container and shipped to other places because our dollar is so strong. It’s all staying inside our borders.”
Generally, more equipment is exported to Mexico when $1 is equivalent to less than 16 pesos Rexin said. For the Japanese yen, the sweet spot is around 110 yen to $1, less than today’s 148, he said.
Click here for more information and to register for the free webinar “Used equipment financing in 2025 as markets normalize,” taking place on Tuesday, Oct. 22, at 11 a.m. ET.
