In the market: a tepid construction scene frees up heavy equipment inventories for other buyers

Recycling Today, Nov, 2003 by Curt Harler

"I expect a slightly better year next year than this year," says Sennebogen's Lannes. He credits his optimism to a mix of general market improvement and the tax incentives available to buyers. "The market is getting better," Lannes says.

"There were some bargains last year, but right now it seems prices are heating up, says McAvoy. He notes that the current tax incentives are a huge motivator to buy equipment.

"If you anticipate making a profit next year, the tax incentives make it a good time to buy machinery," McAvoy says.

Erickson of Michigan Cat sees a number of his customers thinking the same way. "People are busy. With the low interest rates and the new depreciation tax credit laws, people are looking at buying again," he says. His crystal ball is cloudy, but Erickson says he hopes 2004 will provide a continuation of the upswing in Q4 of 2003.

Scrap prices and the health of the market will dictate where equipment sales continue to grow. Erickson says his region lives and dies on heavy manufacturing. "Scrap markets have a lot to do with the economy, and the economy has a lot to do with politics," he says.

Recyclers look at it from the other side of the coin, of course. They want to buy while equipment dealers are hungry and before the manufacturers kick in price hikes.

"It will be 2005 before we see some real price increases," Yengst predicts. Although he expects modest increases in 2004, he expects manufacturers will do whatever it takes to make pricing palatable and help their local dealers move equipment.

"Cat will raise prices 1.5 percent or 2 percent no matter what," Yengst continues. "The question is whether those increases will stick. I think they will give it up to their dealers."

Yengst looks for 2004 to be a better sales year both for small and large capacity wheel loaders. "Sales will be up 8 [percent] to 10 percent both in small and large units," he says, but adds, "That is not a whole lot of change."

Still he expects a fair amount of pent-up demand from a market where things have not been too prosperous lately. Yengst says he expects the overall economy to improve in the next 12 to 18 months, giving equipment sales a second wind.

Skodack says all sales come with the usual negotiation. "But we're not getting our throats cut. The bargaining is under control."

The bottom line: buyers probably have a window of several months to get a bargain in heavy equipment. The used market is active and cheap. But do your buying before the latter part of 2004. When the economy does turn around, manufacturers will look to make up lost ground, and prices could bounce back from the mat just like Rocky.

SEARCH FUNCTION

John Deere Construction & Forestry Co., Moline, Ill., has recently upgraded its used equipment Web site (www.usedconnection.com) to provide access to the used equipment inventory of every John Deere dealership.

Search functions at the site have been upgraded to find machines (as well as attachments) based on specific categories. In addition to equipment and model number, shoppers can search by age, hours and condition.