2008 Trends in the Acquisition of Construction Equipment

According to the 2008 Wells Fargo Construction Industry Forecast, even with signs of a slowing economy American contractors are looking this year to buy, lease, and rent additional construction equipment. The forecast, which was conducted last fall, was based on more than 1,150 telephone surveys with executives of construction contracting companies and construction equipment distributor firms throughout America and Canada. According to those surveyed, 37% of contractors expect to make equipment purchases in 2008, which is only 5% fewer than the previous year’s forecast.

What are contractors buying?

A third of contractors who plan to buy construction equipment are considering both new and used equipment, up from 19% with similar plans a year ago. Almost half of contractors plan to buy only new equipment in 2008, while 20% are looking to purchase only used machinery.

Thirty-eight percent of the contractors who plan to invest in equipment in 2008 expect to purchase at least one highway truck. The most common expected purchases among contractors include: hydraulic excavators, rubber-tire backhoe loaders, wheel loaders and crawler dozers.

Trends in leasing and renting

According to the industry forecast, the percentage of contractors looking to rent or lease equipment in 2008 is expected to rise to 19%. Just over half of contractors find renting or leasing a good alternative to purchasing construction equipment, especially for equipment that is not often used. One-third said they rent to meet unexpected needs, and 21% said lower cost makes renting an attractive option.

Contractors rent or lease a wide range of equipment including: loaders, backhoes, dozers, forklifts and fork trucks

Finance issues

Over half of contractors (55%) and almost half of distributors (49%), said cash flow was one of the construction industry’s most serious problems for 2008. More than half of each group also considers profit margins and cost of capital to be serious issues.

When determining the right financial services provider, several factors are considered important. Top on the list was personal experience with the provider (89%), followed by construction industry reputation (81%), and interest rates (79%).