Predicting Future Value of Used Tier 4 Heavy Machinery
The Environmental Protection Agency (EPA) Tier 4 mandate has driven up the costs of new machines. The switch from mechanical engines to what’s on new machines comes at a substantial cost to manufacturers and contractors buying new equipment.
The hope for anyone buying new Tier 4 machines is that the additional expenses will be worth it when they decide to sell or trade these units in the future. However, potential changes being made to many EPA regulations makes predicting the future for Tier 4 machines more challenging.
IEDA members weigh in
In a recent survey, IEDA members were asked to share their thoughts about the residual values of Tier 4 equipment. All that responded to the survey agreed that it’s too soon to know exactly how well these machines will hold their value because there are just not enough units in the market.
“We’re just beginning to see Tier 4 Interim enter the used equipment market for large equipment categories,” says Drew Van Brunt, past IEDA President and Owner of Global Tractor Company in Colleyville, TX. “These machines came after Tier 3 units but before Tier 4 Final models. I think buyers are accepting of those machines and understand why they are paying more for them. It’s a positive indication of things to come, but until buyers are confident that manufacturers have worked out all the ‘bugs’ many contractors will continue to delay buying those machines.”
A few industry-wide Tier 4-related concerns shared between dealers and contractors is the lack of information and training about how these machines work, as well as how to service them when something goes wrong. Most larger Tier 4 equipment requires the machine to perform a regeneration cycle where additional pollutants are burned off. During that period, machine operation is halted. However, if something goes wrong during this cycle, an error code is often tripped that requires a trained service person from the manufacturer or dealer to reset. This, of course, means downtime for contractors and added expense to reset a sensor.
“To gain wide acceptance, manufacturers need to do more to educate their customers about these new machine behaviors, as well as make training and tools available so contractors can perform the work themselves,” says Van Brunt.
Value over a lifetime
The value of used Tier 4 machines will also be impacted by how well these machines resell over a lifetime. “The lifecycle of large machinery includes being bought and sold several times,” explains Van Burnt. “After these machines accumulate more hours than contractors in the United States are comfortable with, large equipment often find new homes in developing countries. This lifecycle may not hold true for Tier 4 machines. These units require low-sulfur diesel, which isn’t widely available in developing countries. The lack of a clean fuel source will damage the engine and aftertreatment system. To sell Tier 4 machines into these markets, the seller must pay to have some type of conversion kit added to the machine — once again affecting the potential residual value.”
These factors make it difficult to predict how Tier 4 machines will hold their value in the future. However, at some point, everyone must embrace the changes in the market. Tier 4 machines have several advantages over older units and are more environmentally friendly.
What to buy now
Many new machines require a bit of a break-in period to get all the “kinks” worked out, and that holds true for Tier 4 machines too. While service and repairs are covered by the manufacturer’s warranty, it’s still an annoyance for owners. With slightly used machines, the previous owner has likely worked those issues out. So, if you’re in the market today for equipment, buying quality used machines from an IEDA member is a great option.