Why are values dropping in the Used Equipment market

In just a six-week period from its auction on the 29th of March to the last auction on 10th of May 2023, Ritchie Bros. UK has seen a softening of used equipment selling prices at its Maltby auction, with some like-for-like equipment dropping by 15%.

Rupert Craven, Sales Director UK & Ireland, explains: "It's a decrease we’ve been anticipating at some point in 2023, following the changes in supply and demand of new and used equipment. Over the first quarter it held up well, however it was inevitable that we would start seeing a correction this year.”

"When you see equipment values dropping across the board as we did in the last auction, you are not just looking at a market reacting to a high level of availability in a machine category type. It’s also a sign of what businesses are willing to pay for machinery in today’s market.”

Machinery auctions can be seen as a barometer for the ups and downs in the market. For example, if you just looked at the slowdown in housebuilding, you might expect a change in the value of equipment like telehandlers. But the most recent auction in Maltby shows a relatively consistent drop of around 10-15% across most machinery categories.

"To put this in context, anyone can look at Auction Results on our website, which equipment sales values are loaded into after each auction, to see the normalization. Compare this to previous years, and bar a small anomaly for one month in the pandemic, the UK has seen strong price performance since Brexit in 2016. This is thanks in part to the drop in the pound and the strength of the general construction and housebuilding market.

Throughout this period, fleet sizes grew dramatically, even with significant OEM new equipment price increases post-pandemic. This in turn had a knock-on effect of raising used equipment values, particularly with new supply challenges that have now mostly been solved.

Looking at more recent figures and record-breaking number of lots sold at Ritchie Bros. in the UK, it has been clear that the UK plant sector has been reducing its fleet. This is reflected in the 70% of used equipment sold at Ritchie Bros. UK auctions being exported across Europe, with Poland, Spain, Ireland and the Netherlands consistently in the top five locations. 

"Buyers from abroad and those in our home market compete against each other at our auctions and have now collectively decided that values have to come down. Signs of a turning market are significant for equipment owners. Auctions play a key role in the asset lifecycle chain in the UK, helping to make funds available to support purchases of new equipment from yards that are now quite full.”

Add this to the increased interest rates on finance and the growth in maintenance cost, and you really have to take a closer look at existing fleet choices now to realise the best value in each asset. For some businesses, that has already led to large fleet renewals and disposals, with others choosing to reduce fleet sizes and a few even selling up to retire.

“Our team works closely with businesses to help through periods of change and support their fleet adjustments. We use data to advise them on the best ways to remarket machinery and offer multiple methods to sell machinery, auctions being just one of them.”

Looking ahead, it will be important to see the impact of delayed projects in the UK and in particular, what housebuilders choose to do next. Doing the sums based on finance, maintenance, running costs and revenue generation against a normalization in used equipment values, will certainly be important.