Excavator Lines with High Residual Valuations Also Exhibit High Annual Usage, Age on Market

Volvo EC 210 Top in all Three Metrics

[su_box title=”The Caterpillar 320 Series is by far the most common on the resale market, but important differences exist in the distribution of age on market.” box_color=”#ddd” title_color=”#000000″][/su_box]

Key Takeaways for Decision Makers

CONTRACTOR: It is important to consider benchmarks for age on market and usage when making asset purchase and life cycling decisions

FINANCE: The strong value retention observed earlier for the Volvo EC210 is not driven by relatively less usage, and its owners seem to hold onto the machine longer before selling. This provides some evidence that its high residual valuation is driven primarily by quality.

We recently published an article evaluating the residual valuations and lifecycle price variance of the predominant 21.1-24 Mton excavator line produced by each of the 5 largest OEMs in the product category. In this article, we consider some of the non-price characteristics of these lines so as to explore possible explanations for the price trends observed as well as their possible implications.

We first looked at a breakdown of all unique assets observed in the resale market for these 5 excavator lines thus far in 2015. Unsurprisingly the Cat 320 series is the most prevalent, comprising 3500 of the nearly 6700 total assets observed in the sample, followed by the Deere 200 and Komatsu PC200 making up just over 1000 assets each. Looking at these aggregated numbers alone however obscures important differences in the age distribution across these five product lines. For instance the Case CX210 series tended to be the youngest at time of listing, with over 50% of its observed assets under 5 years of age. At the other end of the spectrum, the Volvo EC210 series tended to have the highest age on market, with over half of its assets on the resale market between 7 and 10 years old. In our previous article on these excavators, we noted that the EC210 performed best in terms of residual value retained while the CX210 performed worst. These two results combined suggest that owners tend to hold on longer to assets that hold their value better.

[su_box title=”The Volvo EC210 has the highest age on market, while the Case CX210 has the lowest. Click the series names below to select which lines to compare.” box_color=”#ddd” title_color=”#000000″][/su_box]

In addition to age on market, we also studied the average hour meter reads over the lifecycle of these 5 excavator series. Average lifetime annual usage was approximately 725 hours overall and peaked at 5 years old, with an average usage of 916 hours/year. The Case CX210 was on average the least heavily used, at 653 hours/year, while the Volvo EC210 was the most rigorously used series in the sample with an average of 836 hours/year. A surface-level reading of lifecycle theory suggests more heavily used assets should depreciate faster, but amongst these excavators the opposite seems to be true: the 5 product lines examined ranked identically in both five year value retained and average annual usage. A likely alternate explanation is that a third and less easily observed factor such as machine durability is driving both trends.

[su_box title=”The Volvo EC210 has the highest average annual usage, while the Case CX210 has the lowest. Click the series names below to select which lines to compare.” box_color=”#ddd” title_color=”#000000″][/su_box]

Amongst the excavator lines treated here, those that tended to retain their value well on the resale market also tended to be used more heavily and appear on the market with an older age. This can be taken as evidence that all three measures are driven by a common factor: the machine’s durability, whether perceived or real. Further research is required to discern whether this trend applies to all equipment types or even all excavators, but the results presented here suggest that these three important metrics may be related, and are best analyzed together to help give decision makers a sense of how well an individual asset will age.

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