A glut of second hand construction equipment on the US market is undermining prices of new equipment says a report report in the Wall Street Journal.
Manufacturers such as Caterpillar, John Deere and Volvo are suffering a drop in new equipment sales as a result.
With the price of used machinery down 10% on last year, Caterpillar says its dealers are being put under pressure to offer hefty discounts.
Along with this downward pressure, the rental market is booming, with around half of new equipment sales currently going to rental businesses – a number which some believe could rise to 60% in the next five years.
Contractors are also turning to leasing new equipment. Frank Fowler, senior VP of used equipment at Caterpillar dealer Ring Power, said, “A guy can lease a machine for a year or two and pay as little as one-third of what he could get it for as a rental.”
The report says with leasing on the rise, competition for new models could grow, ultimately increasing the glut in the used equipment market.