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March 03, 2011 |

Special Reports

Backhoes

By Tom Jackson, executive editor, Equipment World

Contractors extend trade-in times, rely on used equipment

As with just about every other category of equipment, the sales of both new and used backhoes plunged between 2006 and 2010.

What’s a little less obvious until you do the math is the ratio of new to used financed sales. In most other times the percentage new to used was 25/75, according to Equipment Data Associates. Some OEMs cite a 40/60 split in their own figures that includes all types of sales. But by 2010, new backhoes comprised only 15 percent of financed sales while used made up 85 percent.

The new normal

As the economy returns expect movement back towards more traditional sales ratios. This could be accelerated by a decreasing pool of good used machines, as customers keep their machines longer, and fewer new machines enter the market. South America is in a business cycle upturn and according to sources the region is a huge consumer of used North American backhoes.

When the demand for used equipment goes up, the population of available used equipment shrinks and the price will increase. At the same time, customers are savvy about the relative value of used and new equipment, and they are finding favorable deals for both types of machines.

The trend in backhoe inventories has been similar to any other product. In general there are fewer products in the entire supply chain, from component supplier, through manufacturer, dealer/retailer, and even the end user’s inventory. In recent months manufacturers are reporting a slight increase in demand, but remain cautious in their optimism.

Vocational segments

While all segments are down, those related to governmental and commercial contracts seem to be the healthiest currently, as those tend to have some funding. Those segments tied to residential construction continue to face difficulty in the current slow housing market. This trend has also driven many contractors to broaden the segments they serve, or shift segment focus in order to maintain income and keep their employees.

A large portion of sales are driven by federal stimulus-funded projects, most of which are road improvement projects, and road building has been and continues to be the bright spot in the market. But municipal and state government budgets are lagging. Some manufacturers report strength among some of the smaller segments such as land improvement contractors.

Trade-in points