We continued to see lower construction equipment activity on both the resale and auction channels in August, with resale activity down 22.1% and auction activity down 38.5% year-over-year. Average age did decline a bit compared to the previous month for both the resale and auction channels, however, was still up 12.0% for resale and 14.1% for auction compared to a year earlier. This continuing increase in average age again helps us understand why average values for construction equipment are not up more in the aggregate, with FMV up 2.7% year-over-year and FLV down 13.0% over the same period.
(Resale activity based on listings; Auction activity based on sales results.)
As we have been discussing in this report over the last few months, the decline in activity and the increases in age are directly linked right now. As fleet managers face delays in receiving new equipment, they naturally are delaying when they list their existing assets for sale. This both reduces the activity and increases the average age. If overall demand were not as strong, this may not be an issue, but as we read at the start of this report, there are many positive signs still for construction.
As average age increases have been a highlight of the last few Market Reports, we wanted to dive in a bit deeper this month to see how this has played out for several popular types of equipment. The top-line metrics quoted here each month are for the aggregate of construction equipment in the market, but some equipment types have been impacted more than others. We will be focusing in on the top five equipment types, based on market activity: four-wheel drive articulated wheel loaders, articulated rear dumps, compact track loaders, crawler mounted hydraulic excavators, and skid steer loaders.
From the chart above, we can see that increases in average age on the resale channel have been more consistent than on the auction channel, with ages increasing between 6.7% and 17.2% on resale and between 0.6% and 29.2% on auction. Of the five equipment types, skid steer loaders saw the biggest jump in average age on both the resale and auction channels, making this a compelling equipment type to focus in on further.
In the chart above we can see how the average age for skid steer loaders increased on both the resale and auction channels over the past year. For both channels we see a definite step up in age in January 2021, which is to be expected at the point between when the calendar turns over and newer model years come online. However, we do not see the age moderate and return to the previous year’s levels. Instead, we see resale stayed at that higher age throughout 2021, rising from 5.7 years in August 2020 to 6.7 years in 2021. Auction continued rising into 2021, jumping from 8.7 years in August 2020 to 11.3 years in 2021. The reasons for this upward pressure on ages is discussed in detail on pages 2 through 4 of this report.
Understanding this increase in age, we can now look at values for skid steer loaders and see how the overall averages for FLV and FMV differ from what we see for assets of a specific age. We will use a 6-year-old asset as a point of reference for FMV and a 9-year-old asset for FLV, since these were the average ages in August 2020.
The solid lines in the chart above reflect the overall values for skid steer loaders while the dotted lines reflect the values for the age-specific asset. Overall, FMV for skid steer loaders rose 1.3% year-over-year and FLV rose 19.2%. When looking at values for just specific ages of assets, however, we see much larger jumps in values. FMV for 6-year-old assets rose 10.6% and FLV for 9-year-old assets rose 43.1%.
Hopefully this dive into age and value trends for skid steer loaders helps to showcase the broader trends we are seeing in the construction equipment used market. It is as yet unclear if we will continue to see these trends continue to push age up and mask value increases. The continuation of lower activity on both the resale and auction channels would seem to point to yes, as would the lack of any big relief in the supply chains. We did see overall average age for construction equipment tick down a bit month-over-month, so we will see if that is just a blip or if we are beginning to see a plateau or reversal in the market.
*Fair Market Value (FMV) is the value of an asset sold to a single buyer under no compulsion. Forced Liquidation Value (FLV) is the value of an asset sold at a properly advertised and conducted auction in which the seller is under compulsion to sell on an as-is, where-is basis as of a specific date.
This article is brought to you through a collaboration between EquipmentWatch and World of Concrete 360. The EquipmentWatch Market Report is a monthly resource for the construction, lift/access, and agriculture industries to help equipment managers make better-informed decisions by leveraging key equipment values, market activity, age, and usage metrics. For more information about EquipmentWatch’s methodology and data, and to learn more about what it has to offer contractors, click here.