Supply chain tightening that is feeding the trend
The need in the industry for certain types of equipment and the resiliency of the construction industry through the pandemic has meant that the demand and trend for used heavy equipment has risen sharply. There has been a 23% year on year rise in overall equipment prices (Source: Construction News). Given the current supply challenges posed by the pandemic and Brexit, the heavy equipment industry as well as other sectors, like the automotive industry, are struggling to keep up with the demand in the market.
As a result of that, a strong need has emerged for the most well-kept and high-end used equipment available on the market. This has had a knock-on effect for used equipment auctions. The Covid pandemic has now amplified the online auction trend that previously already had great momentum. As a marker of this growth, The Europe Used Construction Machinery Market is anticipated to register a CAGR of about 3.98% during the forecast period (2020 – 2025) (Source: Mordor Intelligence).
Further, because of the expected 70% growth by 2025 in buying used machinery, companies will now need more equipment to deal with the ever-increasing demand, stretching the need within the market (Source: GoCodes). With the added benefits of broader selection and the lower depreciation value compared to new equipment, used heavy machinery is now the obvious choice for all of these reasons.
The real cost and savings of buying used equipment
The case for a growing market in used heavy equipment is clear: buying used will be, without doubt, more cost effective and the way forward for much of construction sector.
For example, both mobile and tower cranes have lengthy lifespans and retain a high value, if they are utilised and maintained well. New equipment loses 20-40% of its original value within a year of purchase, or, depreciates – that yearly figure helps to estimate how much value your machinery is losing at a yearly rate (Source: GoCodes). Equipment depreciates more in the earlier years and less as the years progress. So, in buying new equipment, you agree to a hefty depreciation in value right after purchasing, with the rate finally slowing down in the later years that follow (Source: GoCodes). Therefore, buying used, quality heavy machinery after that initial period of depreciation has passed saves the trouble of waiting out those first years and gets to the more intrinsic value of the equipment. Saving on that initial cost outlay is clearly much easier on the bottom line as well.
From the moment you purchase a piece of heavy equipment to the moment you sell it, one thing must remain at the centre of any equipment life-cycle cost analysis that is the most important calculation: Acquisition Price - Final Resale Price = True Cost.
‘You have to know the accurate value of the equipment you are using,’ according to Russ Dolezal, corporate sales specialist with Sandhills Global, an information processing company with an extensive footprint in the construction industry (Source: Municipal Sewer and Water). Dolezal says it is important to use ‘big data’ to determine accurate equipment values. As an example, Dolezal cites the 20-year depreciation rate of a crawler excavator. In looking specifically at years one to three, the typical crawler excavator depreciates 32% (Source: Municipal Sewer and Water).
Additionally, as massively scaled projects such as port extension, railway tunnels and underwater tunnel connections with major European countries, for example, are planned and will increase more significant demand and drive the entire market, the value of machinery will climb as well. This increased pressure in demand positively indicates the prospering growth of the construction market, which is only set to grow further through 2030 (Source: Mordor Intelligence). This will drive the cost of new machines ever upwards therefore making the cost of used equipment even more appealing and much more manageable within the industry.
Buying Used from Krank.com
At Krank, our aim is to offer a broad variety of the very best in used equipment. Our platform allows you to utilise your network to leverage your buying or selling power and connect with the right equipment to meet your needs. Within our platform, you can utilise the networking function where you can securely connect and engage as a buyer or seller directly, for sales today and into the future.
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