Customers can face the choice of buying used or new equipment – Dan Gilkes writes. The decision to buy either new or used equipment is almost as old as the construction plant market itself. However some of the reasons for choosing between the two might well be changing, to meet new demands from customers across the world and to cope with a changing supply base. Ever more stringent emissions legislation in Europe, the US and Japan, rapidly developing emerging markets that want the productivity of the latest
Ritchie Bros continues to grow its presence in the equipment sector
Customers can face the choice of buying used or new equipment – Dan Gilkes writes
The decision to buy either new or used equipment is almost as old as the construction plant market itself. However some of the reasons for choosing between the two might well be changing, to meet new demands from customers across the world and to cope with a changing supply base.
Ever more stringent emissions legislation in Europe, the US and Japan, rapidly developing emerging markets that want the productivity of the latest equipment, the predominance of rental in some markets that delivers increasingly young second-hand machinery onto the market and the expansion of OEMbacked remanufacturing facilities, are all playing a part in reshaping the international used equipment sector.
In addition, the global economic downturn of the last few years has made many contractors take a fresh look at the ways in which they can make the most of their finances, and indeed the finances that may or may not be available to them from banks and other lending institutions. In some cases that can mean mixing new and used equipment purchases, to provide the right fleet for a construction project or for a company’s general use.
In some cases companies may also find that incorporating rental into the ‘fleet’ offers an even more cost-effective total operating solution, not buying the equipment at all but combining ownership and rental to find an effective mix of utilisation and asset management. This is particularly true for short duration projects, or those that require an element of specialised equipment, such as asphalt pavers or milling machines with a large number of potentially expensive wear parts.
However it is not just the machinery that is being bought and sold that has been changing, but the way in which used equipment in particular is being marketed and sold. The days of plant dealers with a well-thumbed copy of Resale Weekly or Exchange and Mart stuffed into a back pocket are fast becoming a thing of the past. These days they are more likely to have a smartphone or a tablet and be operating from a warm office rather than a cold auction lot.
Increasing dependence on the internet in business has made the world a considerably smaller place, for both the dealer and the end user.
Traditionally, developed mature markets have been the main buyers of the latest new equipment and, for Europe at least, the second life of the machine is also usually within the EU. Emerging and developing countries then became the first port of call for used equipment suppliers dealing with a machine’s third life and beyond.
But that too is changing. Though emerging market buyers are in many cases keen to avoid overly-complex, highly emissions-regulated machinery, that might require specific fuels and oils to run efficiently, or need expensive modification to operate at all, they do like the productivity and performance benefits of the latest machinery. Therefore they are looking for lower regulated or deregulated versions of the same up to date models, machines that carry many of the technological and productivity advances, but without the costly and complex emissions compliant engines. As with all procurement issues, supply and demand plays its part. A contractor winning a major infrastructure project that suddenly requires a large fleet of articulated dump trucks for instance, will struggle to find many on the new market with an acceptable lead time, and may well be forced to top up the fleet with used machinery. Even on the used market they might struggle if planning has been left to the last minute, and could end up with machine makes that might not have been their first choice.
Currency fluctuation can be a thorn in the side of the international used equipment dealer. The Russian currency for instance has recently taken a big hit as sanctions continue to bite, making imported equipment an expensive choice for end users there. That said, the international used equipment business has always had to contend with currency fluctuations, differing machine configurations and varying emissions standards and has coped well in the past, adapting to the changing demands of customers and the changing supply of equipment.
The benefit for the customer is that while prices may be slightly higher from an authorised network outlet, in most cases the dealer will have carried out extensive checks on the machine before providing a manufacturerbacked warranty, offering additional peace of mind for the customer.
In the case of schemes like Volvo’s Approved Used programme for instance, the warranty can be as long as one year or 1,000 hours of operation, which could be particularly attractive to a customer. In addition the dealer has access to the manufacturer’s finance business, to provide any necessary funds and a range of purchase options. The most popular equipment within the Cat Certified Used programme includes dozers, excavators, motor graders and wheeled loaders.
“Europe, Africa and the Middle East, Cat used equipment sales have been increasing more than the industry at large and more than new machines sales,” said a spokesperson. “Our used equipment solutions are popular, as purchasing used equipment can be a time consuming and risky business.
“The Cat Certified Used programme provides manufacturer-backed extended coverage on machines with less than 10 years and less than 10,000 hours. Every used machine that achieves ‘certified’ status has undergone a rigorous 140-point inspection and is serviced using genuine Cat parts, fluids and filters.”
This is often a tailored solution, with the customer, dealer and manufacturer agreeing exactly which components are to be replaced, repaired or upgraded. This will usually involve a complete nut and bolt rebuild, with frame and chassis components undergoing stress tests to assess wear and tear before being rebuilt. Costs will vary depending on condition and hours, but overall the customer will pay considerably less than a new or even a young used machine for the reman product, which will come with that all-important manufacturer warranty and be ready to start a second life in virtually as-new condition.
Perhaps the most telling statistic from the firm’s results however is that 41% of gross auction proceeds within that period came from the online marketplace, with 60% of bidder registrations now internet-based. What’s more,8031 Ritchie Bros passed $1 billion year-to-date online sales by September 12 in 2014, almost a month earlier than it did in 2013.
Sales demand has not just come from the firm’s US operations either. At a sale in Romania in September the firm sold 630 pieces of heavy equipment, to buyers registered in 53 countries. Of that number, online buyers purchased 24% of the machinery.
“The selection of equipment at our auction in Romania included premium-brand wheeled loaders, dozers, dump trucks, hydraulic excavators and more,” said Nicola Nicelli, vice president of sales for Southern Europe. “Instead of selling these items at one of our own sites, we brought the auction to the seller’s location, where the equipment was situated. By offering on-site and online bidding options and a diverse selection, we attracted local and global buyers, which resulted in strong price levels across all equipment categories.” Auctioneer714 IronPlanet takes this a step further, by operating as a complete online auction facility. The seller simply makes the equipment available for inspection by IronPlanet, which then publishes the inspection reports online. Buyers can review the inspection reports and place bids in the run up to the auction.
After the auction has been completed the company then brings together the buyers with potential finance providers and shipping and transportation companies. As IronPlanet is backed in part by178 Caterpillar, 2300 Komatsu and Volvo, buyers have the assurance and confidence to bid online.
The most recent development from IronPlanet was the introduction in the summer of 2014 of allEquip, a buy-it-now online marketplace for used machinery. “IronPlanet’s allEquip offers online buyers the convenience of a ‘buy now’ marketplace for the ready-to-work equipment they need now,” said Greg Owens, ceo of IronPlanet.
“Buyers can purchase equipment online today and every day at competitive prices, with confidence, knowing the equipment was inspected and guaranteed. We are committed to making the buying and selling of equipment faster and easier.”
It is not just the auctions that have gone online either. With an increasing number of used machine sales being carried out through authorised new machinery dealers, Volvo is the latest manufacturer to introduce a mobile phone and tablet App with an Approved Used search function.
“We know that more and more customers are searching for used equipment by way of mobile devices,” said rental and remarketing director for359 Volvo CE’s EMEA region Nick Rose.
“Up to 40% of current searches for used equipment are via mobile devices, so this app puts Volvo CE and our dealers in a prime position to meet this need in relation to used equipment. The App will fundamentally change the way in which customers search for and purchase used equipment. As they will be dealing directly with the dealer, they will also potentially have access to other dealer offerings, such as finance or warranties.”
To function correctly most of these systems require ultra-low sulphur fuel, which is simply not readily available in many emerging markets. It was feared that it would therefore be difficult to export much of this machinery when it became available on the used market to these countries, as the engines would soon be damaged and unable to run correctly on higher sulphur fuels.
As an example, there are currently more than 178,000 Caterpillar Tier 4 Interim machines working in highly regulated countries. But customers in non- or less-regulated countries have been showing growing interest in this equipment on the used market. Bear in mind that is just one manufacturer.
Machinery and engine builders have of course been working hard to solve this dilemma and since December 2014, Caterpillar dealers in certain countries have been able to remove exhaust aftertreatment, modify and decertify engines under 130kW (174hp) for resale in less regulated countries (LRC) and non-regulated countries (NRC). Engines above that power output have been deemed suitable for non-regulated country use without modification.
“Because Caterpillar serves customers in all markets, we develop products to meet the needs of customers in all types of regulatory environments,” said Ramin Younessi, vice president of the firm’s Industrial Power Systems division.
“For example, all non-road equipment operated in the US, Canada, Europe and Japan must operate on ultra-low sulphur diesel fuel. When equipment developed for certain markets, like our Tier 4 equipment moves to different markets, it adds challenges for Caterpillar, our dealers and our customers. Challenges arise due to diverse emissions regulations, the need for dealer readiness training and the need to help customers understand how to operate and maintain these next generation products,” he said. “Most importantly, customers contemplating the purchase or modification of used Cat Tier 4 products need to understand and comply with their local regulatory requirements.”
“In keeping with our aggressive product migration strategy, Caterpillar identified used products and geographies as higher probability recipients of used Tier 4 Interim products,” added engineering manager Rick Jeffs. “We have therefore focused our design and development efforts for this first series of modification processes to align with those higher probabilities. Using those same priorities and probabilities, Caterpillar has also been preparing dealers to support the migration of used Tier 4 Interim products to those targeted geographies.
“Further, we know Tier 4 Final products won’t be far behind the Interim products, which is why the strategy we’ve developed focuses on a solution for today’s customers and for future customers.” Local Cat dealers in LRC and NRC territories have undergone the necessary service training to support Tier 4 products. They have also taken stock of the required parts, such as optional fuel filtration kits to ensure that machinery can be sold and run in those countries.
“When you select Cat Tier 4 products that require modification to migrate to lesserand non-regulated countries, the authorised modification processes must be done exclusively by a local Cat dealer trained to support the products,” said Mr Jeffs “Migration is a complex issue, and potential customers of popular Cat equipment will have new purchase and support factors and issues to consider. They will find their Cat dealer an invaluable resource and the safe source to consult with on whether the used equipment they are considering for purchase or sale will operate effectively in their region, and if an aftertreatment modification process is permitted or needed.”
JCB was one of the first manufacturers of engines and equipment to offer a deemissioning process for its Tier 4 Interim Ecomax engines, though it was able to work from a different starting point as none of its engines used a DPF to meet emissions regulations. It is important to state that this is complete de-emissioning though, not de-tiering to a lower emissions level. What’s more, this one-way process cannot be reversed, as it involves recalibration of the engine’s ECU and the fitting of a new engine number identification label.
It is therefore important that an international contractor doesn’t go down this route for an overseas contract thinking that they will bring the machinery back to a regulated territory once that job has finished. It won’t be possible. JCB’s Power Systems division has developed a secure recalibration for the ECU, which is time-limited and specific to that individual engine. The software shuts off the engine’s Exhaust Gas Recirculation (EGR) valve and reduces fuel injection pressures for improved durability.
There is no requirement for the dealer to remove or install any other new parts, other than a fuel lubricity filter in regions where the fuel quality does not conform to the EN590 standard. The dealer technician also removes one fuse from the machine, to prevent the ECU from testing the operation of the EGR valve prior to engine start-up.
The de-emissionised engine offers the same power and torque outputs as the standard Tier 4 Interim Ecomax and requires no additional service or maintenance work, other than changing of the lubricity filter when required. A lubricity filter helps to protect the fuel system against premature wear when fuels have poor lubrication capabilities.
It seems likely that any engine and equipment manufacturer that wants to continue to compete on the used market will have to follow suit and introduce a means to de-emission their equipment for the market in this way, allowing the transfer of modern, highly productive machinery to markets around the world.
The decision to buy either new or used equipment is almost as old as the construction plant market itself. However some of the reasons for choosing between the two might well be changing, to meet new demands from customers across the world and to cope with a changing supply base.
Ever more stringent emissions legislation in Europe, the US and Japan, rapidly developing emerging markets that want the productivity of the latest equipment, the predominance of rental in some markets that delivers increasingly young second-hand machinery onto the market and the expansion of OEMbacked remanufacturing facilities, are all playing a part in reshaping the international used equipment sector.
In addition, the global economic downturn of the last few years has made many contractors take a fresh look at the ways in which they can make the most of their finances, and indeed the finances that may or may not be available to them from banks and other lending institutions. In some cases that can mean mixing new and used equipment purchases, to provide the right fleet for a construction project or for a company’s general use.
In some cases companies may also find that incorporating rental into the ‘fleet’ offers an even more cost-effective total operating solution, not buying the equipment at all but combining ownership and rental to find an effective mix of utilisation and asset management. This is particularly true for short duration projects, or those that require an element of specialised equipment, such as asphalt pavers or milling machines with a large number of potentially expensive wear parts.
However it is not just the machinery that is being bought and sold that has been changing, but the way in which used equipment in particular is being marketed and sold. The days of plant dealers with a well-thumbed copy of Resale Weekly or Exchange and Mart stuffed into a back pocket are fast becoming a thing of the past. These days they are more likely to have a smartphone or a tablet and be operating from a warm office rather than a cold auction lot.
Increasing dependence on the internet in business has made the world a considerably smaller place, for both the dealer and the end user.
Traditionally, developed mature markets have been the main buyers of the latest new equipment and, for Europe at least, the second life of the machine is also usually within the EU. Emerging and developing countries then became the first port of call for used equipment suppliers dealing with a machine’s third life and beyond.
But that too is changing. Though emerging market buyers are in many cases keen to avoid overly-complex, highly emissions-regulated machinery, that might require specific fuels and oils to run efficiently, or need expensive modification to operate at all, they do like the productivity and performance benefits of the latest machinery. Therefore they are looking for lower regulated or deregulated versions of the same up to date models, machines that carry many of the technological and productivity advances, but without the costly and complex emissions compliant engines. As with all procurement issues, supply and demand plays its part. A contractor winning a major infrastructure project that suddenly requires a large fleet of articulated dump trucks for instance, will struggle to find many on the new market with an acceptable lead time, and may well be forced to top up the fleet with used machinery. Even on the used market they might struggle if planning has been left to the last minute, and could end up with machine makes that might not have been their first choice.
Currency fluctuation can be a thorn in the side of the international used equipment dealer. The Russian currency for instance has recently taken a big hit as sanctions continue to bite, making imported equipment an expensive choice for end users there. That said, the international used equipment business has always had to contend with currency fluctuations, differing machine configurations and varying emissions standards and has coped well in the past, adapting to the changing demands of customers and the changing supply of equipment.
IN-HOUSE REMARKETING
One of the biggest challenges for those traditional used equipment dealers has, for some time now, come from the OEM manufacturers and their dedicated dealer networks, with approved used machinery programmes becoming an increasingly popular sector of the business. By marketing used equipment alongside new, those dealers have a greater business opportunity for a wider buying audience. More importantly, by marketing used equipment alongside new, they can attempt to retain the profitable service and maintenance aspect of machine ownership, through the second and even the third life of the equipment.The benefit for the customer is that while prices may be slightly higher from an authorised network outlet, in most cases the dealer will have carried out extensive checks on the machine before providing a manufacturerbacked warranty, offering additional peace of mind for the customer.
In the case of schemes like Volvo’s Approved Used programme for instance, the warranty can be as long as one year or 1,000 hours of operation, which could be particularly attractive to a customer. In addition the dealer has access to the manufacturer’s finance business, to provide any necessary funds and a range of purchase options. The most popular equipment within the Cat Certified Used programme includes dozers, excavators, motor graders and wheeled loaders.
“Europe, Africa and the Middle East, Cat used equipment sales have been increasing more than the industry at large and more than new machines sales,” said a spokesperson. “Our used equipment solutions are popular, as purchasing used equipment can be a time consuming and risky business.
“The Cat Certified Used programme provides manufacturer-backed extended coverage on machines with less than 10 years and less than 10,000 hours. Every used machine that achieves ‘certified’ status has undergone a rigorous 140-point inspection and is serviced using genuine Cat parts, fluids and filters.”
NEW LIFE OPTIONS
Many dealers have a third option available to them, in the form of remanufacturing. Initially reman programmes were designed for individual components, with customers able to exchange engines, transmissions and other major components for remanufactured items that had been completely rebuilt, incorporating any technology upgrades and then warrantied. However the remanufacturing business has expanded to include complete machine rebuilds from some manufacturers. Customers can either bring their own used equipment in to be remanufactured, or look at used machinery from the dealer that would benefit from a thorough overhaul prior to purchase. Indeed in larger quarrying and mining operations planned rebuilding and remanufacturing have become part of the regular preventative maintenance programme, ensuring longer service life, with less chance of costly and time-consuming breakdowns.This is often a tailored solution, with the customer, dealer and manufacturer agreeing exactly which components are to be replaced, repaired or upgraded. This will usually involve a complete nut and bolt rebuild, with frame and chassis components undergoing stress tests to assess wear and tear before being rebuilt. Costs will vary depending on condition and hours, but overall the customer will pay considerably less than a new or even a young used machine for the reman product, which will come with that all-important manufacturer warranty and be ready to start a second life in virtually as-new condition.
ONLINE EXPANSION
There has been no let-up in the used equipment market as far as the big auction companies are concerned. US firm Ritchie Brothers is perhaps the best known of the international auction organisations. It sold $1.2bn of equipment in the first nine months of 2014, a 16% rise on the same period the year before.Perhaps the most telling statistic from the firm’s results however is that 41% of gross auction proceeds within that period came from the online marketplace, with 60% of bidder registrations now internet-based. What’s more,
Sales demand has not just come from the firm’s US operations either. At a sale in Romania in September the firm sold 630 pieces of heavy equipment, to buyers registered in 53 countries. Of that number, online buyers purchased 24% of the machinery.
“The selection of equipment at our auction in Romania included premium-brand wheeled loaders, dozers, dump trucks, hydraulic excavators and more,” said Nicola Nicelli, vice president of sales for Southern Europe. “Instead of selling these items at one of our own sites, we brought the auction to the seller’s location, where the equipment was situated. By offering on-site and online bidding options and a diverse selection, we attracted local and global buyers, which resulted in strong price levels across all equipment categories.” Auctioneer
After the auction has been completed the company then brings together the buyers with potential finance providers and shipping and transportation companies. As IronPlanet is backed in part by
The most recent development from IronPlanet was the introduction in the summer of 2014 of allEquip, a buy-it-now online marketplace for used machinery. “IronPlanet’s allEquip offers online buyers the convenience of a ‘buy now’ marketplace for the ready-to-work equipment they need now,” said Greg Owens, ceo of IronPlanet.
“Buyers can purchase equipment online today and every day at competitive prices, with confidence, knowing the equipment was inspected and guaranteed. We are committed to making the buying and selling of equipment faster and easier.”
It is not just the auctions that have gone online either. With an increasing number of used machine sales being carried out through authorised new machinery dealers, Volvo is the latest manufacturer to introduce a mobile phone and tablet App with an Approved Used search function.
“We know that more and more customers are searching for used equipment by way of mobile devices,” said rental and remarketing director for
“Up to 40% of current searches for used equipment are via mobile devices, so this app puts Volvo CE and our dealers in a prime position to meet this need in relation to used equipment. The App will fundamentally change the way in which customers search for and purchase used equipment. As they will be dealing directly with the dealer, they will also potentially have access to other dealer offerings, such as finance or warranties.”
EMISSIONS RESTRICTIONS
As new machinery in North America and in Europe has had to comply with ever more stringent emissions regulation, there has been a growing concern in the used equipment sector that problems lay ahead. Many engines that conform to US EPA Tier 4 Interim/EU Stage IIIB standards are equipped with ultra-high fuel injection pressures and common rail injection systems, often with diesel particulate filters (DPF) and diesel oxidation catalysts (DOC) or with exhaust aftertreatment such as selective catalytic reduction (SCR) and exhaust additive fluids.To function correctly most of these systems require ultra-low sulphur fuel, which is simply not readily available in many emerging markets. It was feared that it would therefore be difficult to export much of this machinery when it became available on the used market to these countries, as the engines would soon be damaged and unable to run correctly on higher sulphur fuels.
As an example, there are currently more than 178,000 Caterpillar Tier 4 Interim machines working in highly regulated countries. But customers in non- or less-regulated countries have been showing growing interest in this equipment on the used market. Bear in mind that is just one manufacturer.
Machinery and engine builders have of course been working hard to solve this dilemma and since December 2014, Caterpillar dealers in certain countries have been able to remove exhaust aftertreatment, modify and decertify engines under 130kW (174hp) for resale in less regulated countries (LRC) and non-regulated countries (NRC). Engines above that power output have been deemed suitable for non-regulated country use without modification.
“Because Caterpillar serves customers in all markets, we develop products to meet the needs of customers in all types of regulatory environments,” said Ramin Younessi, vice president of the firm’s Industrial Power Systems division.
“For example, all non-road equipment operated in the US, Canada, Europe and Japan must operate on ultra-low sulphur diesel fuel. When equipment developed for certain markets, like our Tier 4 equipment moves to different markets, it adds challenges for Caterpillar, our dealers and our customers. Challenges arise due to diverse emissions regulations, the need for dealer readiness training and the need to help customers understand how to operate and maintain these next generation products,” he said. “Most importantly, customers contemplating the purchase or modification of used Cat Tier 4 products need to understand and comply with their local regulatory requirements.”
“In keeping with our aggressive product migration strategy, Caterpillar identified used products and geographies as higher probability recipients of used Tier 4 Interim products,” added engineering manager Rick Jeffs. “We have therefore focused our design and development efforts for this first series of modification processes to align with those higher probabilities. Using those same priorities and probabilities, Caterpillar has also been preparing dealers to support the migration of used Tier 4 Interim products to those targeted geographies.
“Further, we know Tier 4 Final products won’t be far behind the Interim products, which is why the strategy we’ve developed focuses on a solution for today’s customers and for future customers.” Local Cat dealers in LRC and NRC territories have undergone the necessary service training to support Tier 4 products. They have also taken stock of the required parts, such as optional fuel filtration kits to ensure that machinery can be sold and run in those countries.
“When you select Cat Tier 4 products that require modification to migrate to lesserand non-regulated countries, the authorised modification processes must be done exclusively by a local Cat dealer trained to support the products,” said Mr Jeffs “Migration is a complex issue, and potential customers of popular Cat equipment will have new purchase and support factors and issues to consider. They will find their Cat dealer an invaluable resource and the safe source to consult with on whether the used equipment they are considering for purchase or sale will operate effectively in their region, and if an aftertreatment modification process is permitted or needed.”
JCB was one of the first manufacturers of engines and equipment to offer a deemissioning process for its Tier 4 Interim Ecomax engines, though it was able to work from a different starting point as none of its engines used a DPF to meet emissions regulations. It is important to state that this is complete de-emissioning though, not de-tiering to a lower emissions level. What’s more, this one-way process cannot be reversed, as it involves recalibration of the engine’s ECU and the fitting of a new engine number identification label.
It is therefore important that an international contractor doesn’t go down this route for an overseas contract thinking that they will bring the machinery back to a regulated territory once that job has finished. It won’t be possible. JCB’s Power Systems division has developed a secure recalibration for the ECU, which is time-limited and specific to that individual engine. The software shuts off the engine’s Exhaust Gas Recirculation (EGR) valve and reduces fuel injection pressures for improved durability.
There is no requirement for the dealer to remove or install any other new parts, other than a fuel lubricity filter in regions where the fuel quality does not conform to the EN590 standard. The dealer technician also removes one fuse from the machine, to prevent the ECU from testing the operation of the EGR valve prior to engine start-up.
The de-emissionised engine offers the same power and torque outputs as the standard Tier 4 Interim Ecomax and requires no additional service or maintenance work, other than changing of the lubricity filter when required. A lubricity filter helps to protect the fuel system against premature wear when fuels have poor lubrication capabilities.
It seems likely that any engine and equipment manufacturer that wants to continue to compete on the used market will have to follow suit and introduce a means to de-emission their equipment for the market in this way, allowing the transfer of modern, highly productive machinery to markets around the world.
