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2017: Year in Review

No January is complete without a retrospective, so EquipmentWatch and Price Digests are here to help you with that!

Every year, we ask all of our contributors from the EquipmentWatch and Price Digests analyst teams to share their thoughts on what they thought was the most meaningful trend or event of the previous 12 months. And whether you’re a regular reader of our Market Report, come to use for insights on new ways to calculate ownership and operating costs, or follow our analysts to keep an eye on equipment values and rental rates, we’re sure you’ll agree that 2017 was a big year for the used equipment industry.

Read on below for unique reflections from our top analysts, and we hope you continue to visit us for more insights as we progress through 2018. Happy New Years!

Market Data

Regarding market activity volume, resale volume has been pretty consistent throughout the year with 10.76% month over month change at the highest. Looking at the year over year change, the volume from January to November has increased from the same period in 2016 by 5.58%. It is the second year in a row that we see a growth in volume and it is expected to grow in 2018.

Auction volume also had a consistent increase in volume for four years in a row and is expected to continue to grow in 2018. For auction, the volume is not as consistent as resale but fluctuates during the year. Auction volume and seasonality will be further discussed in an upcoming article but usually at the end of each quarter is when there is a spike in auction volume in addition to February in which there is a series of mega auction takes place in Florida.

Brian Lee, Data Analyst
Market Data & Serial Number Guide

Cost Recovery

The construction industry has always struggled to find an industry standard for standby and idling rates. This year, in one of the biggest innovations to the Cost Recovery Product since its birth, EquipmentWatch took a huge step in removing the guesswork and confusion by launching standard standby and idling rates. Clearly defining and understanding standby rates makes bid estimation easier and makes the cost recovery process smoother and faster. Furthermore, the addition of idling rates has a huge impact on equipment managers, as they can now easily understand and effectively communicate the true cost of idling equipment to their team and higher-ups. Overall, standby and idling rates provide contractors and equipment owners with yet another data point they need to make better decisions about heavy equipment and the operation of their businesses.

Elise Gregory, Senior Industry Analyst
Cost Recovery and Internal Charge Rates

Market Values

From the third quarter of 2013 to the first quarter of 2016 private sector construction expenditures rose at a consistent, fast pace. During the same period, average meter reads in the used construction resale market rose at a similar pace. Construction expenditures have since tapered off and we see a similar trend in average meter reads. In 2018, we expect the trend for average meter reads to remain relatively constant.

Daniel Rosales, Industry Analyst
Values

Retail Rental Rates

2017 was another huge year for the equipment rental industry. With the devastating losses suffered in Texas and Florida in August and September, equipment rental was in large demand in the effort to start rebuilding. Rental revenues skyrocketed in the second half of the year due to this high demand. Merger and acquisition activity was one of the main stories in 2017, with such acquisitions as United acquiring NES Rentals, Cummins Power Equipment, and Neff Rental, as well as Sunbelt acquiring Pride Equipment, Noble Rents, and Contractors Rental Supply. The national rental companies moved away from the larger equipment types due to their smaller margins and it showed on the back end. The anticipation of increased infrastructure spending brought high hopes for 2017, but was put on hold until likely 2018 or 2019. We expect 2018 to be another big year for equipment rental, with the anticipated increase in public education construction.

Michael Quinlan Jr., Industry Analyst
Values & Retail Rental

Equipment Equity

This year with the new changes to corporate tax we can expect a lot of investment in equipment. With tax rate being cut to 20% and immediate write off for equipment, this will most likely inspire businesses to want to purchase. Under the new US accounting rules equipment leasers will find that they now must report operating lease assets and liabilities for leases with terms more than 12 months on the balance sheet. For companies with a lot of leases this will heavily inflate their balance sheet, and in some cases, may not impact equity. With this visibility some companies might consider companies with a lot of leases on the balance sheet not effective of utilizing capital and creating equity, which would make it harder for companies who lease a lot to receive financing. Companies still need to look at the strategy best for them when acquiring new assets.

Imani Brimah, Data Analyst
Cost Recovery & Internal Charge Rates

Disaster Impact

2017 has been marked by extreme weather events creating extra work for contractors. Between Hurricanes, Harvey, Irma, and Maria hundreds of billions of dollars of damage in Texas, Florida, and Puerto Rico were left in the wake. Aside from residential damage, infrastructure was hit hard in the affected areas prompting DOT’s to contract for additional projects to get roads and bridges back in shape. The recovery efforts may take years to complete and are sure to keep contractors knee deep in project requests going forward into 2018.

Emilio Rodriguez, Industry Analyst
Cost Recovery & Internal Charge Rates

Vehicle Market Values

2017 shaped up to be great year for sustained value within the used vehicle market as leaps towards increased fuel efficiency and added safety features remain the consumer’s top asks. 4 cylinder turbo and hybrid engines have officially taken over the market making it no longer surprising to see some Crossovers and SUVs outperforming cars in MPG, and with a more impressive price tag. Though total sales have declined across all vehicle types, SUVs and Light Trucks have maintained their value while sedans, coupes and convertibles have declined in value more rapidly and sat on used car lots longer. Perhaps their saving grace, an increase in standard safety features have provided a jolt in value for some very popular Sedans.

Kurt Wilson, Data Analyst
Price Digests

Commercial Truck Values

During 2017, the heavy duty conventional cab & chassis decreased at an expected rate with the largest depreciation on the 2017’s which was primarily in the first and second quarters of the year. After Q2 drops on model years 2013-2008, there were slight increases during both the second and third quarters resulting in minimal changes for the full year.

As seen in the Market Report throughout the year, medium duty trucks were holding their values at a much higher rate than the heavy duty commercial trucks. The largest drop for the year was within the first quarter with heavy drops in 2017 values specifically due to the initial depreciation of the first year of usage. Drops in pricing decrease significantly for older models in Q4.

Sleeper tractors have recently shown the greatest amount of depreciation with drops continuing throughout the entire year focusing especially on the models within their first ten years of depreciation.

Overall, commercial trucks showed their standard yearly depreciation with a greater drop in heavy duty class 7 and 8 than the medium duty cab & chassis despite average age of medium duty trucks on the market increasing while the heavy duty truck’s average age dropped across every subtype.

Jessica Carr, Senior Industry Analyst
Price Digests