If you are buying machinery right now – you are probably a 40 year old man, running a small business, spending a lot of time on the internet.
So, something like 50,000 used machines are sold a year, totalling about $3 billion in assets traded, and the majority of this is done online now (around 55%-60%). Almost all of these buyers are small businesses and most people conduct a whopping 6 months of online research into their purchase decision.
Below are some cool, unknown and unexpected facts about buying, selling and financing used construction equipment that most people don’t know.
After five hours searching on his wife's laptop, Barry scored an 815 compactor for $20k below asking price.
Who is buying what?
Well, for starters, Australia’s economy is made up of about 2.5 million active businesses – most of them SMEs. 27.6% of these businesses are involved with, or require construction, farming, forestry and earthmoving equipment – these are companies in agriculture, construction, manufacturing, mining, transport, postal and warehousing. So that is about 700,000 companies all up (which suddenly gives me great comfort that my line of work, online plant hire, is right on-the-money).
Not surprisingly – most of the purchasers of this kind of equipment could be considered SMEs, and most of the people buying equipment are men, between the ages of 22 and 55. They own businesses that have turnover of under $500K.
Excavators represent about 46.2% of all construction equipment traded, trucks and skiddies second and third most popular – with 35.7% and 28.0% of the sales respectively.
After deciding to buy the machine, they often ‘bundle’ in other things to the purchase – such as insurance, attachments, buckets, consumables, lubes and tyres. So that means, once these middle-aged men are in the mood to drop some cash, they drop a lot.
They often consider three brands within their purchase for each machine, slowly whittling down the decision to the right machine and will likely make a speedy decision once they find precisely what they are looking for. These purchase decisions happen after extensive online research, visits to trade shows, review of magazines and dealer’s lots.
What does matter when buying a machine?
Quality and condition of the machine matters more than brand. Which I found to be an unexpected factoid – considering a lot of earthmoving companies we know are brand loyal and have strong views on what machines they will and won’t run in their fleet. This does largely come down to their knowledge of, and expense in servicing requirements, in our experience.
Below is the order of things people consider:
- Price – 71%
- Overall Condition – 67%
- Reliability / Durability – 45.5%
- Mileage / Hours – 34.3%
- Brand – 25%
What doesn’t matter to people when they are buying a machine?
It doesn’t really matter to most buyers if the machine is new or used – it comes down to condition and price principally. It also doesn’t really matter to most buyers if they purchase from a dealer, or via private sale (although most dealers will definitely swear black and blue that it does). People don’t seem to care where a machine is when they buy it either – just that its fit for purpose and meets their requirements and budget, so they are often happy to float from far flung places around Australia.
How are they paying for it?
According to APRA - almost $9 billion per year is committed to equipment financing of construction, farming, forestry and earthmoving equipment each year. Most people are using capital expenditure, either via existing funds or pre-arranged lending with a trade-in or chattel mortgages to buy their big machines.
That means that most of us in plant hire are shuffling a substantial bunch of ‘gorillas’ to our banks every month to service our debt, with a noose around our necks, and we can’t often scale up quickly - as many of us have significant cash flow challenges given the incredibly slowness with which our beloved construction companies, bless their hearts, pay their invoices (90 days after delivery, in a lot of cases).
Long-term hire is often disregarded as an option because of the premium you pay to cross-hire, so if you need a machine quickly – there are limited finance options. The legends over at GoGetta, who snuck me a copy of the research paper where I got all my cool stats above – have a finance product that isn’t a lease, isn’t a loan and isn’t a chattel mortgage.
It’s a rent-to-own deal, only a year long, where you pay to hire the machine off them for a year, then you can pay out what you owe if you want, or return the asset if you no longer need it. It’s very low risk, cheap, quick to get off the ground and their flexible lending means they can approve you even when traditional lenders won’t. You can hit them up here:
Image Source: Ritchie Bros. Auctioneers