What Drives Pricing for Used Construction Equipment
Whether you’re looking to buy or sell construction or mining machinery, you probably have a few questions about what drives used equipment pricing for the industry. Similar to the automotive industry, the average price you can expect to receive when selling or what you can expect to pay when buying is dependent on a range of factors. And since there is a much smaller group of buyers and sellers in the industry, you can expect to see more dramatic shifts in pricing depending on the type of equipment, along with several economic factors.
Supply & Demand
To begin, supply-and-demand are the biggest drivers for used equipment pricing. When supply is low, prices are high, and when there is a high supply of a particular type of equipment, prices will be lower. It’s pretty straightforward, but there are a lot of additional factors that determine the supply side and the demand side of the equation.
Fueling the law of supply-and-demand is the economy. In today’s global economy, there have been dramatic shifts that have played a major role in construction and mining work around the globe. For example, a few short years ago, the price of oil meant a major boom in the Canada for oil sands, as well as in North Dakota where fracking brought in equipment and workers by the truckload. When the price of oil dropped, those operations became no longer profitable — leaving a lot of equipment sitting idle. Mining around the globe has also experienced a decrease in demand.
Specialty equipment pricing tends to be more impacted by economic condition than general equipment. This is because general equipment can be resold to other sectors of the industry that are still going strong. Of course, when those niche sectors begin growing again, so does the value of the specialty equipment.
Brand names like CAT, Deere, Case, Komatsu, Bobcat and others in the industry also have a large influence on pricing. These top brands have built a reputation of providing quality equipment and have a distribution network that ensures widespread parts availability. Buyers are willing to pay more for that peace of mind, and that translates to brand-name machines holding their value better and longer than others.
Make and Year
In addition to looking for a particular brand, used equipment buyers are also likely looking for a certain model and, in some cases, year of a particular equipment. While it’s a large industry, if a manufacturer has a few quality issues with a machine, you can bet contractors know it and do their best to avoid buying that machine, lowering its residual value.
The model number also reveals a lot of details about what added features a machine has. As we mentioned earlier, the more specialized a machine is the pricing can fluctuate — the same rule applies to machines with a lot of additional and/or special features.
Equipment Condition and Appearance
Probably more important than the year a machine was built is how well it has been maintained and how clean it is. A fresh coat of paint, a detailed cleaning job and historical maintenance and repair records can mean the difference between a machine sitting for a long time and selling it quickly.
While a fresh set of paint and cleaning will go a long way, it can’t cover-up machine hours. High hours do not necessarily give any indication how a machine was cared for; it just means it was used a lot and has a greater risk of costing a buyer money sooner or later. Many used equipment buyers are looking for machines between a certain range of hours. Too few of hours can make the price too high, while too many hours can translate to more downtime.
Trust needs to be earned. And, the most recognized used equipment sellers have done that because they don’t sell junk. In order for used equipment sellers to avoid selling unreliable equipment, they have to first know what to look for when they acquire equipment, perform detailed inspections and repair or replace anything wrong with a machine. Those are costs that have to be recouped. That means, quality used equipment sellers pricing will be higher on average, but there will be better peace-of-mind for buyers, which can help save them time and money down the road.
Where to Check Used Equipment Pricing
If you have a question about what a fair price is for a particular piece of equipment you can do a bit of online research to determine what others are charging for a similar machine. Auction sites will also publish what their machines sold for.
Understanding the key drivers of construction and mining equipment pricing can help you save money on your next purchase, and it can give you the heads up that a deal may be too good to be true.