Construction & Agriculture Equipment Price Status – Nov. 2024
As we head deeper into 2024, the construction equipment market is facing dynamic shifts, influenced by global economic conditions, supply chain disruptions, and increased demand across various industries. The past year, the pricing trends for both new and used construction equipment have revealed interesting patterns that buyers, sellers, and industry professionals should be aware of. In this article, we’ll explore the main factors impacting the pricing of construction machinery, as well as key trends.
1. Construction and Ag Equipment Summaries
(from EquipmentWatch Oct 2024 Market Report)
a. Construction Equipment
Nonresidential construction spending rose slightly in August, driven entirely by public infrastructure projects, which have increased nearly 8% over the past year, significantly surpassing privately funded projects.1 While interest rates are expected to fall, their impact on privately financed projects may not be felt for several quarters.
· FMV: Decreased by 1.1% over two years and 0.6% year-over-year.
· FLV: Dropped significantly by 19.3% over two years and 7.1% year-over-year.
b. Agriculture Equipment
At a recent event, former President Trump threatened to impose a 200% tariff on Deere if production moves to Mexico, a strategy that could further complicate an already volatile market.4 Economists warn such tariffs may lead to higher inflation, yet FMV for ag equipment remains strong.
· FMV: Increased by 10.4% over two years and 3.9% year-over-year, reflecting steady demand.
· FLV: Month-over-month gains of 18.6% in age and 23.1% in usage suggest a higher turnover rate and more frequent asset cycling.
2. New Construction Equipment: Supply Chain Stabilization
a. Price Increases Moderating
The early months of 2024 have seen a stabilization in the price of new construction equipment, following significant price surges in the previous two years. From 2020 to mid-2023, the industry grappled with severe supply chain challenges, material shortages, and inflated shipping costs, all of which led to sharp price hikes. However, with supply chains beginning to stabilize and manufacturers ramping up production, price increases for new equipment have become more moderate.
The average price of new heavy machinery, such as excavators, loaders, and cranes, has only seen slight increases of around 2% to 3% since January 2024. This modest rise can be attributed to a better balance between supply and demand, as manufacturers have managed to mitigate previous backlogs, and key material shortages have eased.
b. Focus on Sustainability and Technology
One trend driving up the cost of new equipment, however, is the incorporation of advanced technology and sustainability features. Buyers are increasingly seeking machinery with better fuel efficiency, hybrid or electric power systems, and enhanced automation features. These innovations are pushing the prices of certain models upward, especially in the medium and heavy machinery segments. While these features promise long-term cost savings for contractors through reduced fuel and maintenance expenses, the upfront cost can be significantly higher.
3. Used Construction Equipment: High Demand and Competitive Pricing
a. Tight Market for Used Equipment
The market for used construction equipment continues to be competitive, with demand outpacing supply in certain categories. This trend has been consistent since 2022, as contractors and construction firms look for cost-effective ways to expand their fleets without paying the premium for new machinery. Used equipment prices, as a result, have seen a noticeable uptick in 2024, with popular items like backhoes, skid steers, and bulldozers experiencing price jumps between 5% and 10% compared to the same period last year.
Several factors are contributing to this demand. First, many smaller construction firms that faced delayed or canceled projects during the COVID-19 pandemic are now seeing a surge in activity, and they are opting for used machinery to quickly scale operations. Additionally, some larger contractors are choosing to invest in well-maintained used equipment as a way to manage capital expenditures amid economic uncertainty.
b. Pricing Influences: Age, Condition, and Technology
The price of used equipment in 2024 is heavily dependent on factors like age, condition, and the inclusion of modern technologies. Older machinery with high hours of use or requiring major repairs tends to be priced lower but is less desirable in today’s market. On the other hand, newer used models that have integrated telematics, GPS systems, or enhanced safety features are commanding higher prices, sometimes nearing the cost of new equipment.
Buyers are particularly interested in used machinery that has been well-maintained and comes with a strong service history, further driving up the price for high-quality items. With rental demand also rising, some used equipment is being diverted into rental fleets, which has tightened the supply for direct purchases.
4. Future Outlook: What to Expect in 2024
a. Gradual Price Corrections Possible
While prices for both new and used construction equipment have increased since the start of the year, the rate of growth is expected to slow as supply chains continue to recover and more equipment becomes available on the market. Economists predict that inflationary pressures will ease in the latter half of 2024, which could result in more competitive pricing for both new and used machinery. However, any significant economic disruptions, such as interest rate changes or geopolitical tensions, could alter this outlook.
b. Continued Demand for Used Equipment
The demand for used construction equipment is likely to remain strong through 2024, particularly among small and medium-sized contractors looking for value. Sellers who can offer well-maintained, high-quality equipment will continue to benefit from strong pricing power in this market, while buyers may need to be prepared for longer search times to find the right machinery at the right price.
Conclusion
The construction equipment market in 2024 has shown resilience, with prices for both new and used machinery rising, albeit at a more moderate pace compared to previous years. For those in the market for new equipment, the focus is on finding the balance between technological advancements and upfront costs. For used equipment buyers, competition remains stiff, with prices reflecting high demand and limited availability.
As the year closes, we’ll keep a close eye on economic trends, interest rate reductions, and a new U.S. administration, to see the impact on equipment value in 2025.
Reliant Advantage, LLC is active in the marketplace and our USPAP compliant equipment appraisals bring values you can trust. Asset-based lending, insurance valuations, and merger/acquisition appraisals are just a few of our offerings.
William J. Fischer, CAI GPPA
646-565-9847