Skid Steer Prices Surge Upwards

This chart illustrates the trends in average monthly price for each size class compared to their respective averages in August 2012

Key Takeaways for Decision Makers
CONTRACTOR: Recovery in the construction sector is driving up costs through higher equipment prices.

RENTER: Increased prices for used skid steers, and the increased demand that is presumably driving them, indicate there may be some scope for an increase in retail rental rates.

FINANCE/INSURANCE: Price trending, both by equipment type and by manufacturer, are critical for estimating the future value of a heavy equipment asset.

An analysis of over 200,000 equipment listings collected by EquipmentWatch, a specialist in heavy equipment prices, reveals a strong upward price trend in the online resale market for skid steer loaders. The average monthly asking price for the five most popular size classes of skid steers increased by a weighted average of 10.3% from August 2012 to August 2014, with the two most popular size classes increasing by 16% and 11% respectively. Although a modest increase in prices was witnessed between 2012 and 2013, the majority of these gains have occurred over the past year, with a notable acceleration beginning in February 2014.

These surging prices can be viewed in the context of a wider recovery in the construction sector. Construction spending is slowly approaching pre-crisis levels; total value put in place for July 2014 increased 4.1% compared to July 2013 and 10.5% compared to 2012. The Theory of Derived Demand suggests that demand for a factor of production or intermediate good (such as construction equipment) is predominantly determined by demand for the corresponding final good (construction spending). The supply of used equipment can be assumed to be mostly fixed and relatively inelastic in the short run, leading increases in equipment demand to be reflected primarily in price.

This chart shows the typical premium or discount enjoyed by each OEM’s skid steers over similarly sized models.

Breaking down the data by manufacturer yields further insights into the state of the market for used skid steers. Though it is only the seventh most represented OEM based on total postings, JCB commands the greatest premium over the size class monthly average prices used to create the indices described above, with individual models listed on average at a price 20% greater than the typical model in their size class. Though there were not enough listings for it to be included in the following charts, Terex was notable as the only other OEM in the sample with a similarly high price premium. Gehl and New Holland are the most modestly priced of the seven top makes, with prices that average 93.7% and 89.5% respectively of similarly sized models. The data indicate that Bobcat machines have been the most prevalent in the online resale market over the past two years, representing 24.6% of total postings, and have been the most standardly priced relative to comparable models throughout the sample window.

This chart shows the market share held by each OEM in the various size classes.

The price premiums or discounts commanded by the most common makes have for the most part remained stable over the past two years, with the notable exceptions of Caterpillar and Deere. Deere has seen a modest but steady increase in price relative to comparable models, going from a 5-10% discount in late 2012 to fluctuating around par since the end of 2013. Caterpillar has by contrast seen its price premium steadily erode over the past two years, falling from a peak of 115.9% in September 2012 to only 104.5% in August 2014. This may in part explain the lagging price index for the 1351-1600 lbs. size class, which is the only size in the sample for which Caterpillar is the most prevalent manufacturer.