New or Used Construction Equipment - The Return on Investment Decision

It has always been a debate whether to buy new or used construction equipment. Smaller fleets prefer to buy used construction equipment as they attract less capital investments. Another reason for people to opt for used construction equipment is that they are sometimes as good as new and come at a very heavy discounted price as compared to that offered at the showrooms.

Moreover, Associated Equipment Distributors (AED) and TradeYard, Inc, have jointly announced an alliance that shall provide certified inspection of used construction equipment that can also be sold online. This has been done to boost the business-to-business sales via online medium. It gives better promotion to the sale of used construction equipment and buyers to be confident about their purchase. Usually buyers buy the used construction equipment only upon the preliminary inspection done by the technical agent from either the buyer or the seller side. Since a neutral and unbiased inspection report shall be available it would lead to increased sales and more profitable bargains to small investors. Small fleet owners usually opt for used construction equipment sold from earlier projects. Large construction companies that carry huge fleet of construction equipment can also strike a good bargain at onsite purchase of such certified used construction equipment.

There had always been a skeptical attitude towards the economies in the Indian sub-continent, Russia or Latin America. But over the past years these economies have shown a constant and steady growth. The demand to construct new projects or to renew the old ones has been always in demand. Since these countries are not as cash rich and affluent, they usually have constructors who have smaller fleet. Moreover, they also do not have enough capital to be invested in developing a large fleet. They are always on a look out for used construction equipments. Along with this these constructors take on projects in the neighboring countries and shifting heavy and used construction equipment is also not feasible. Thus sales of such equipments is constantly in demand

Apart from the projects in these countries, bigger companies take up their projects in the continent of Africa and also the Gulf countries. Thus they opt to buy used construction equipments available locally from the companies or constructors who wish dispose off their fleet. The used construction equipments are also on the sale due to the feasibility reasons that lie on the seller’s side as well. The construction companies who have finished off their projects in foreign lands and take up projects in other countries, for such large companies it is more feasible to dispose off their used construction equipment and assemble a new fleet at the onsite location rather than carry them to the new land. This is due to the reason that various countries have different rules for export and import of heavy equipment required for infrastructure development.

Some countries impose heavy taxes and import duties to restrict import of used construction equipment. This is done to prevent the domestic markets and small construction companies with limited resources. Further, export of such used construction equipment requires various documentation procedure, inspections and other legal formalities. All such activities are not only tedious but also time consuming. These formalities also require lot of duty fulfillment at both the ends. Moreover clearance at the ports and damage caused in handling and shifiting these equipments is also very tedious job.

Thus construction companies prefer to buy new or used construction equipment locally. Only Large construction companies or companies who have strategic partnerships in the local market for a company prefer to import a part of their used construction equipment for their ongoing projects.

Estimating the Market for Construction Equipment Sales

Heavy construction equipments are required in all parts of the world. Their demand has increased all the more after the growing economy in the Indian sub-continent, Middle East, Far East and Oriental nations as well.

Countries like China, Singapore, etc. are developing at an exponential rate in the area of infrastructure development. Chinese infrastructure has become so strong in the recent past that even the interior cities and remote areas are also well laid with clean broad roads, buildings, shopping malls, bridges, etc. All this growth has let to increase in the construction equipment sales.

Construction equipment sales had been most in the western regions in the decades of sixties to mid-eighties. But in past twenty years the economical growth in the eastern part of the globe had been exponential. The rise in the middle class and better earning resources has led to the growth of the economy. This growth has called for more development of residential and commercial outlets, etc. The increase in the development of such outlets has led to increase in the construction job works. These job works have adapted to the changing developmental pattern thus construction equipment sales have gathered pace equivocally.

More and more builders and architects have come together and large construction companies have built boulders all along the economical growth. Huge towers, shopping malls, big broad roads, expressways, highways, bridges, flyovers, etc. have led to the increase in construction equipment sales. Since all this development work calls for larger companies to shoulder all kinds of job works, many companies have made strategic partnerships, joint ventures, governmental bodings and alliances with the domestic counterpart for better growth. All these large companies have built up their own construction fleet along with the construction specific manpower.

These construction equipment sales are usually related to the iron and steel prices. Since there have been more excavations for the iron ores and new outlets, iron and steel market has grown at a healthy pace in these developmental decades. The large projects require heavy capital investments. In developing countries the cyclic rotation of capital is more regulated and strategic. Thus the investors are able to opt for large borrowings and generate their own capital for purchase of heavy construction equipments. Thus the heavy equipment sales in these countries are more properly funded and less prone to financial risks.

In case of construction equipment sales pricing is also an important factor. It determines the extent of sales or whether the constructor would prefer to go in for rental equipment. Pricing also acts as a determinant of demand in the market. Demand is led as per the specific country, availability of these equipments in the region, prices of iron and steel, etc. moreover, for the construction equipment sales financing of the purchase of the construction equipment acts as an added advantage and gives a competitive edge in selling the equipments. Financing the purchase leads to increase in the construction equipment sales of the manufacturers.

Thus construction equipment sales are more or less directly dependent on the pricing structure and financing available, as it gets included in the project cost. These sales are more prevalent in the growing economies where more infrastructure developments regularly take place.