Tuesday, September 29, 2020
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Used Equipment Outlook for the First Half of 2019 by RDO

As the construction industry prepares for the first half of 2019, there’s good news and bad news – or, to better rephrase, there are going to be opportunities along with challenges.

Several 2019 forecasts have already been released so it’s not news to most that the construction industry likely isn’t going to grow as much this year as 2018. In fact, there’s good reason to believe that it may remain flat year over year – not exactly what most would hope for but, after a strong 2018, not a bad outlook.

When focusing on the used equipment outlook for the first half of the year, the market should stay strong. Supply of good used equipment is still low, and demand is high. As the broader market begins to slow the need for quality used will remain strong for the first half of the year.

Industry Factors
Two key drivers of the health of the industry and equipment are already looking a bit down in early 2019: housing starts and oil. While housing starts aren’t expected to pick back up in 2019, oil remains an area of potential – yet very cautious – optimism.

As I write this, WTI is at $46.71 a barrel. While this is up from 2018’s low price of $42.53, it’s down from the high of $76.41 we saw in October.

Oil prices are volatile, and the only thing known for sure is that there’s no way to know when the next low or high will be. If the low for 2018 is the low for 2019, we will see the oil industry continue as is and it will bring with it the equipment demand experienced in 2018, especially in key producing states like Texas and North Dakota.

The other part of the oil business is the pipeline business. With pads and roads completed, and drilling done, the next area to look at is what to do with all the oil. It must be piped out of the oil fields. With record levels of production, the need for pipelines has expanded. This need will drive the need for heavy equipment, both new and high-quality used.

One more key area that looks optimistic, and one that greatly contributes to industry and equipment livelihood is roadbuilding. Anyone who drives in this great country knows we have an issue with our roads. In November of 2018, voters approved transportation initiatives generating more than $30 billion in transportation revenue. This is a great news for this issue and for the construction equipment industry. The building of roads takes all kinds of construction equipment and, with weather and contract deadlines, the equipment must be quality.

With housing starts not looking optimistic, oil and roadbuilding will be the two areas to closely watch in 2019. Pick-up in oil and/or roadbuilding will no doubt see an increase in used machinery demand and values follow.

Labor Factors
There’s one more factor that continues to dictate the construction business, including equipment and technology needs. This one also won’t surprise anyone in the equipment industry: labor.

The continuing issue of a qualified labor shortage isn’t going anywhere this year and virtually everyone with an interest in the subject is doing their best to help address it.  

What is changing related to the shrinking workforce is the growing technology opportunities on machines. While it can’t replace workers, it can help existing teams work well with fewer people. It also can help inexperienced operators work more effectively, with less time needed for training and more forgiveness in terms of simple productivity mistakes.

Used equipment continues to show its worth when it comes to technology integration. Late model used machines present nearly the same opportunity to outfit with valuable technology, often in a more cost-effective way.

Equipment Factors
Longer lead times on new equipment is a continuing trend in 2019. 60-day waiting periods are no longer realistic for new machines; depending on the manufacturer and machine, six to nine months is now the typical lead time for a piece of new equipment.

While this is becoming the new normal, there’s still room for adjustment and adaptation from companies. Better planning and seeking out different avenues now must be part of the fleet management strategy, and dealer partners need to do their part to work with customers in addressing this challenge.

Conversely, used equipment availability looks to be better this year. Quality pre-owned machines were scarce in 2018, good news for values and those potentially looking to sell but more challenging for those interested in buying. In the latter half of 2018, more used machinery was available at auctions. The quality was still not what we have seen in past years, but it shows a trend of more used equipment being available in the market. That’s expected to hold true in 2019, great news again for those looking to invest in used machines. 

Rising interest rates are another important piece to 2019’s equipment puzzle. Whether new or used, equipment comes with a significant price tag, so a seemingly small interest rate increase can become big. And, while a challenge to both new and used, the larger cost magnifies even more with new machine purchases, which are higher this year because of 2018’s steel and aluminum tariffs.

On a related note, rental equipment prices and availability typically affect the health of used equipment. This year, rental rates look to rise along with interest rates. To better manage risk and keep assets low, rental fleet managers will continue to place high emphasis on fleet size and utilization, affecting the availability of the units needed for projects and when they’re needed. Companies that rely on rental equipment throughout the year need to prepare for the likelihood that some machines may not be as readily available and find alternate sources.

Areas of Opportunity
Even with an overall, tempered optimistic outlook for the first half of the year, there are bright spots and areas of opportunity on which smart companies can capitalize.

For those looking for a used machine, the combination of more availability and lower demand makes it a great time to pursue a purchase.

Those not looking to purchase any machinery, new or used, should consider a different kind of investment: fleet management.

Fleet management has become somewhat of a trendy topic, with areas like telematics leading the way. It can be a bit overwhelming, turning off the idea entirely to many companies.

However, at its most basic, fleet management is daily, simple steps taken to better the health of a fleet. Monitoring machines’ locations on a jobsite, tracking preventative maintenance, and watching operator productivity are simple steps that can pay off large dividends in a company’s overall efficiency.

Those who operate John Deere construction equipment, learn how to maximize JDLink for your heavy equipment fleet.

Final Thoughts
Whether it means devoting more time building a fleet management program or training on new technology, companies need to make the best out of a potentially slower time and create opportunities to better position themselves for the future. 2018 was a great year for the used equipment industry especially for those who had inventory to sell. In 2019, new equipment availability will improve, and the market will stabilize, making it a good year for used equipment industry. 

The construction industry is a great industry and 2019 will be another exciting year full of opportunities.

VOLVO APPROVED USED MACHINES JUST AS RELIABLE AS NEW

Anders Sjöström, used equipment manager for Volvo CE Sales Region EMEA, explains how choosing Volvo Approved Used machines are as beneficial for a fleet as brand new machines.

WHY MIGHT SOMEONE CONSIDER BUYING A PREMIUM USED MACHINE INSTEAD OF A NEW VALUE MACHINE?

It’s circumstantial for our customers. For example, a small contractor who has just started their business perhaps couldn’t afford to buy a fleet of new Volvo machines. Instead, they can purchase premium used Volvo machines that have been serviced and inspected by our dealers and sold with a Volvo Approved Used (VAU) warranty. It’s a great investment, because the VAU warranty allows the customer trust in the product and peace of mind to know the full-service history of the machine has been checked by our dealers before delivery.

HOW WELL DO VOLVO MACHINES MAINTAIN THEIR VALUE?

Used machines are always meticulously inspected and refurbished for another full life before they are put back on the market. To prepare the machine for its second life, the inspection process starts with a clean, then check, and on to a full inspection. The inspection comprises 150 different check points carried out by expert dealer inspection personnel. If there are machine parts that fall below 50% remaining wear, these parts will be changed to fulfil the VAU warranty criteria. It’s important to have a service agreement with your local Volvo dealer, in combination with a VAU warranty, to ensure high value. When you purchase a VAU machine, you can be sure you are receiving equipment of the highest standard.

WHY IS BUYING A USED VOLVO MACHINE A GOOD INVESTMENT FOR THE CUSTOMER?

They are just as reliable as a new Volvo machine however challenging the application. Customers are seeking to lower their total cost of ownership so the demand for used equipment is on the rise. Our used equipment offers spans a variety of product lines, there are several types of machines available to customers from wheel loaders to articulated haulers to excavators and so on.

ARE THERE ANY MAINTENANCE IMPLICATIONS WHEN IT COMES TO BUYING A USED MACHINE?

If you buy a fully inspected and checked Volvo used machine from one of our authorised Volvo dealers in EMEA and you agree to include a VAU warranty, you fully know what you as an end customer will be receiving without any risk. We have worked hard to create a foolproof warranty plan to put our customers’ minds at ease. 

DOES VOLVO STILL OFFER CARETRACK FOR USED MACHINES AND IF SO, WHY IS THIS VALUABLE?

We do but it’s up to our dealers whether they’d like to offer this to the customer. When selling the used machine, CareTrack is important so dealers can advise customers when it’s time to perform service or special repairs and also for the customer’s own technicians to be able to keep full control on location and operations for machines – the same as a new Volvo machine.

CAN YOU EXPLAIN MORE ABOUT THE VOLVO APPROVED USED APP?

The app mirrors dealer stock. It’s a handy option to get fast information on available VAU used machines that are in stock in local dealerships. The app also provides machine reports, quality pictures and dealership contact details.

How to Purchase with Peace of Mind at Online Auctions

Use guaranteed equipment inspection reports when buying through this route

It’s every used heavy equipment buyer’s worst nightmare—purchasing a machine and realizing that it’s a lemon. Although many equipment owners properly maintain their investments over time, a buyer wants the peace of mind that a machine will operate the way it has been advertised. Unfortunately, what you see is not always what you get.

At a physical auction, buyers don’t always have the opportunity to inspect equipment, operate it and review fluid analysis results. Additionally, the information provided during the sale may be inaccurate or incomplete. This can create reservations about purchasing used heavy equipment at an auction. Buyers looking to acquire used heavy equipment via the Internet may be apprehensive because they can’t run the machines before purchasing them.

Thankfully, buyers using an online marketplace can ensure that the used equipment they’re purchasing is in good condition. The solution: guaranteed inspection reports.

Creating the Inspection Report

An inspection report provides proof that a piece of equipment has been thoroughly reviewed and operated. It includes all the information buyers would look for if they were inspecting the equipment themselves, including descriptions of the item’s features and condition. The mechanical, structural and cosmetic aspects of the equipment should be inspected, as well as the features and wheels.

Inspection reports are higher in quality when they are created by unbiased and experienced individuals. Some auction companies employ inspectors in-house, while others hire independent contractors to complete inspections. To reduce the cost for sellers, it is ideal when inspectors conduct the inspection at the seller’s site so that the owner does not have to move the equipment until the transaction with the buyer is complete.

Buyers want the inspection report to act as their eyes and ears. But they need to make sure that the information in the report is not simply opinion. Ideally, an inspector would use a standardized process to evaluate the equipment so that reports are reliable and consistent from machine to machine. Auction companies that utilize advanced technology in order to conduct inspections can provide more detailed reports with higher quality images and more thorough content. For instance, reports can be created using a mobile application that guides inspectors through the process to ensure all of the correct data is included in the report. This approach reduces error, making the reports more reliable and comprehensive than handwritten reports.

What should an inspection report include?

Because buyers using online auctions will not be on-site to see the equipment, the inspection report must be comprehensive in every aspect.

The ideal report should include the following:

  • Equipment Verification – The report should confirm the equipment’s make, model, serial number and age.
  • In-depth Analysis – The guaranteed inspection report should have multiple sections and include line-item ratings and comments from the inspector to emphasize the condition of specific subsystems and components. Here, the inspector can call attention to potential issues or damage, providing expert opinion for each part of the machine.
  • Photographs – Photographs should show details of the exterior and interior of the equipment. The pictures should also highlight the machine’s general appearance and any special conditions such as oil leaks, blowby and welds.
  • Lab Results – Oil and fluid analyses give an inside look at how the equipment has been maintained. This data can provide important information about oil and coolant conditions, component wear and more.

The Impact

Guaranteed inspection reports are becoming increasingly important as more buyers are using online marketplaces to purchase used heavy equipment. The reports benefit both buyers and sellers because they build confidence between both parties, enabling a successful transaction.

When a listing is accompanied by a guaranteed inspection report, buyers have all the information they need to make a smart decision, from the number of hours on the machine to its features and location. They can also purchase with confidence because the report is guaranteed. Gone are the days of blindly purchasing a machine without fully understanding its true condition. With a guaranteed inspection report, buyers have more information than they would have if they were to visit the equipment at a physical auction. If equipment is damaged, dented or missing specific components or attachments, the buyer will be aware of this before bidding begins.

How do buyers know that the inspection report is a true representation of the condition of the equipment? They should look for an auction company that provides guaranteed inspection reports to make them more confident in their purchase. If the buyer sees any discrepancies between the equipment and the report, the auction marketplace should work with the buyer to reach a resolution.

Going Global

Today, buyers in South America, Europe and the Middle East are dealing with sellers in Canada, Australia, the U.S. and other parts of the world. No longer is equipment buying and selling a localized transaction. Guaranteed inspection reports are especially helpful when dealing with international sellers. Even with language barriers between buyer and seller, the inspection report serves as concrete proof that the equipment has been reviewed and that the buyer will receive what is outlined in the report. Buyers can also avoid traveling great distances for the right piece of equipment.

When international buyers trust the online auction model and the inspection process, they tend to be more comfortable bidding on equipment via the Internet. This allows sellers to generate greater interest in their items through a global audience and potentially drive the final selling price higher, sometimes above market value. Smooth transactions keep sellers happy and returning with their inventory, enabling buyers to bid on a steady supply of equipment.

Safeguarding Online Transactions

Online equipment auctions are here to stay. They make equipment buying and selling convenient and efficient because neither party has to travel in order to acquire or dispose of equipment. Additionally, they connect buyers and sellers around the world, delivering buyers the used equipment they want and providing sellers faster time to cash. However, some buyers may be hesitant to purchase heavy equipment without seeing it in person. Guaranteed inspection reports play a major role in increasing buyer confidence, helping sellers achieve a satisfactory price for their equipment. Buyers should understand how inspections are conducted and what they should include and confirm that they are backed by a buyer protection program. With these details in mind, buyers and sellers can more easily engage in a stress-free transaction.


Paul Hendrix is an equipment pricing analyst with IronPlanet, an online marketplace for used heavy equipment buying and selling. For more information, visit ironplanet.com or contact Hendrix at phendrix@ironplanet.com.

Used equipment in 2020 and how to handle the new times.

Its going to be a challeging year in the used equipment business. After a big demand over the last coupel of years but less supply things are starting to turn. End users have stocked up on machines for a while and didnt give alot of good used machines up for sale. This year we see the demand for new machines alot lower and more used machines will come up for sale.

How to handle the new situation

Depending on the area you sell your machnes this can be challenging. As more and more Tier 4 machines with considerable hours hit the used market the question is what to do with them. They cannot be exported to lots of countries because of clean diesel needed and dietiering is also challenging and comes with its own difficulties.

Some unexpexted results of dietiering are showing up (read more here) but still in alot of territorries the Tier4 machines are hard to deal with for the local mechanics. Dont know what to write here but need the space for better looks on the website.

Depending on the area you sell your machnes this can be challenging. As more and more Tier 4 machines with considerable hours hit the used market the question is what to do with them. They cannot be exported to lots of countries because of clean diesel needed and dietiering is also challenging and comes with its own difficulties. Some unexpexted results of dietiering are showing up (read more here) but still in alot of territorries the Tier4 machines are hard to deal with for the local mechanics.