Construction Equipment Resale Value: Key Factors in a Dynamic Market

Understanding construction equipment resale value is crucial for construction companies and equipment owners navigating the dynamic landscape of the used equipment market. This knowledge empowers informed decision-making when buying, selling, or upgrading a fleet.

The construction industry relies heavily on a vast array of equipment to complete projects efficiently. From earthmoving behemoths like excavators to precise pavers laying asphalt, these machines are crucial for building our infrastructure and shaping our world. However, construction equipment is a significant investment, and when the time comes to upgrade or replace it, understanding construction equipment resale value becomes critical.

This blog post delves into the key factors that significantly impact the resale value of construction equipment, empowering you to make informed decisions when buying or selling used machinery.

The Inevitable Depreciation:

Like any other asset, construction equipment loses value over time due to depreciation. The rate of depreciation varies depending on the equipment type, usage patterns, and overall maintenance. For instance, a typical crawler excavator might experience a depreciation of 32% in the first three years and an additional 23% in the following four years.

Market Demand: A Crucial Influence

The construction equipment market is a dynamic landscape, currently valued at a staggering USD 185.7 billion and projected to grow steadily at a rate of 4.48% by 2029. This growth is fueled by increased demand for new residential, commercial, and infrastructure projects worldwide [4]. However, the rising popularity of equipment rental services presents both challenges and opportunities in terms of construction equipment resale value. While renting offers a lower upfront cost for contractors, the increased demand for specific equipment types, particularly in a booming construction market, can drive up resale prices for those models.

Brand Reputation: Reliability Matters

The reputation of the equipment manufacturer significantly influences its resale value. Brands consistently ranking among the top in sales figures and revenue, like Caterpillar, Komatsu, Deere & Co., and others, have established themselves as leaders in the industry [1, 2]. These brands are known for their commitment to quality, reliability, and robust after-sales service, factors that contribute to their equipment holding its value better compared to lesser-known manufacturers. Construction companies prioritizing documentation and delegation, specializing in a niche, and recognized as leaders in that space are more likely to command higher valuations for their equipment.

Caterpillar (U.S.): Caterpillar is the world’s largest construction equipment manufacturer with sales of $32 billion in 2021, accounting for 13.8% of the total amount.

Komatsu (Japan): Komatsu is the second largest supplier of construction and mining equipment with sales of $25.3 billion, showing a strong increase from the previous year.

XCMG (China): Xuzhou Construction Machinery Group (XCMG) is the largest construction equipment supplier in China, with sales of $18.1 billion in 2021.

Sany (China): Sany Heavy Industry Co., Ltd. is another prominent Chinese company in the top 10, with sales of $16 billion.

John Deere (U.S.): Deere & Co. climbed the rankings with sales of $11.3 billion, offering a wide range of agricultural, construction, and forestry machinery under the John Deere brand.

Source:

World’s top 10 construction equipment manufacturers

World’s top 5 construction equipment manufacturers – 2023 edition

Maintenance Costs: A Balancing Act

Regular and documented maintenance is crucial for maintaining the performance and lifespan of construction equipment. However, these maintenance costs contribute to the overall ownership cost, which needs to be factored into the construction equipment resale value. While well-maintained equipment fetches a higher price, neglecting proper maintenance diminishes its value significantly.

The Ever-Present Threat of Theft

Unfortunately, construction sites are prime targets for theft, with tools and equipment being the most common stolen items. Theft can lead to significant financial losses, project delays, increased insurance costs, and reputational damage, all of which negatively impact the resale value of construction equipment.

Beyond Depreciation: Degradation and Deterioration

While depreciation is an inevitable process, several factors can accelerate the degradation and deterioration of construction equipment, further impacting its resale value.

• Improper Use and Operation: Exceeding equipment capacity, overloading, and neglecting proper operating procedures can lead to premature wear and tear. Following manufacturer guidelines and training operators is crucial for maximizing equipment life.

• Lack of Preventive Maintenance: Regular maintenance is essential to prevent breakdowns and extend the lifespan of construction equipment. This includes routine oil changes, filter replacements, and adhering to the manufacturer’s recommended maintenance schedule.

• Harsh Operating Environments: Extreme weather conditions like dust storms and scorching heat can accelerate the wear and tear of construction equipment. Implementing appropriate mitigation strategies like regular cleaning and using protective measures can minimize these effects.

• Age and Hours of Operation: As construction equipment ages and accumulates running hours, its overall performance naturally declines. It’s important to consider both the chronological age of the equipment and the total hours of operation when evaluating its resale value.

Minimizing Degradation for Optimal Resale Value

By implementing proactive measures, construction companies can significantly minimize the degradation of their equipment and maximize its resale value:

• Prioritize Preventive Maintenance: Developing and adhering to a comprehensive preventive maintenance schedule is critical.
• Invest in Operator Training: Proper training empowers operators to handle equipment efficiently and minimize the risk of misuse.
• Maintain Detailed Records: Documenting all maintenance work performed on the equipment creates a valuable record for potential buyers and reinforces its resale value.

Additional Considerations

Beyond the factors discussed above, other considerations can influence construction equipment resale value:

Brand Reputation:

• Positive: Established brands like Caterpillar, Komatsu, Volvo, and John Deere are known for their reliability, durability, and performance, leading to higher resale value.
• Negative: Lesser-known brands may have lower resale values due to a lack of established reputation.

Technology and Innovation:

• Positive: Equipment with cutting-edge features, fuel efficiency, and advanced monitoring systems (like Komatsu’s KOMTRAX) can attract buyers and command a higher price.
• Negative: Older models lacking advanced features might fetch a lower resale value.

Maintenance and Parts Availability:

• Positive: Brands with readily available replacement parts and strong dealer networks (like John Deere) for maintenance and repairs ease ownership and potentially increase resale value.
• Negative: Difficulty in obtaining parts or limited dealer presence can decrease resale value.

Initial Cost:

• Positive: While high upfront costs might be a barrier to entry (Caterpillar), their reputation for durability can translate to strong resale value in the long run.

Specialization:

• Positive: Brands specializing in specific equipment types (like Hitachi with excavators) may hold higher resale value in that particular market segment.

Safety and Operator Comfort:

• Positive: Equipment prioritizing safety features and operator comfort (like Volvo) can attract buyers, potentially influencing resale value.

Customer Service

• Positive: strong after-sales support from the manufacturer provides peace of mind to potential buyers, potentially increasing the equipment’s resale value.

Considering these positive and negative factors, construction companies can make informed decisions when choosing equipment brands that will retain value over time.

Conclusion

By understanding the various factors impacting construction equipment resale value, construction companies and equipment owners can make informed decisions when buying, selling, or upgrading their fleets. Considering factors like depreciation, market demand, brand reputation, maintenance costs, and potential degradation allows for a more strategic approach to equipment management.

Implementing proactive measures like preventive maintenance, operator training, and detailed recordkeeping can significantly enhance the resale value of your construction equipment.

Consulting with a qualified equipment appraiser can provide valuable insights into the specific resale value of your equipment in the current market.