Production needs change. The layout of your lessee’s/borrower’s facility might undergo upgrades. New technology emerges that is a better fit for your client’s manufacturing strategy. These are examples of the numerous scenarios that necessitate swapping out manufacturing equipment. To help mitigate the costs associated with buying new equipment, reselling existing manufacturing equipment can help cover various costs and free up valuable floor space. However, knowing when to sell and how best to remarket equipment is critical to ensuring the highest level of profit for any manufacturer.
In this industry update, we will look at key equipment value trends, projected value outlooks, issues impacting equipment prices and effective remarketing strategies. The result is your lessee’s/borrower’s business can be better equipped to strategize around the sale of used equipment.
Equipment Value Trends
The demand being placed on manufacturing facilities around the globe is immense. To keep up with consumer demand, manufacturing facilities have been seeking new equipment to help improve productivity. As such, the demand for manufacturing equipment reached a 40-year high in January 2022.
For CNC equipment, the market proves to be strengthening. Per Revelation Machinery Data, the value of CNC equipment is up 21.2 percent year over year, and late model CNC equipment is up 19.5 percent year over year.
Conversely, fabrication equipment values are down 3.1 percent year-over-year, and late-model fabrication equipment is down 22.9 percent year over year.
The reason CNC equipment prices remain high is because they offer higher productivity when contrasted against the more manual equipment used in fabrication. Fabrication equipment pricing has also been impacted by major trend changes in lasers, which we will discuss further later in this article.
Equipment Value Outlook
Today, the manufacturing equipment market is extremely hot, and manufacturing equipment is catching premiums. With new equipment lead times still extended due to ongoing supply chain issues, we expect this trend to continue for the next six months.
At the same time, manufacturers are starting to cancel new equipment orders. This is an early indicator that businesses are beginning to express concerns about future economic conditions.
According to Brett Fox, Vice President of Sales for Revelation Machinery, “Over the next 12 months, we could see the market take a bit of a dip as more companies are forced to sell off their used equipment creating a larger supply of equipment in the market.”
As this occurs, prices will likely decrease as used equipment dealers work to remain competitive in a flooded market.
However, while there will be a small dip in equipment values over the course of the next year, we expect the market pullback to be small in magnitude. As things progress, you can anticipate that the market will adjust, and values will return to normal in two years.
Issues Impacting Equipment Values
Many of the same issues plaguing the global supply chain have impacted manufacturing equipment values. As David Marban, Vice President of CNC Sales for Revelation Machinery pointed out, “Supply chain issues have been the number one cause of current pricing increase for the past two years. Values on CNC equipment will move according to supply chain constraints and metal pricing.
The industry is also seeing major shifts in equipment values due to the rapid development of fiber lasers. Fiber lasers were originally designed with wattages peaking at around 3,000 to 4,000. Now, through the rapid progression of technology, fiber laser equipment is being developed with upwards of 30,000 watts of power.
For this reason, many buyers with lower wattage machines are looking to upgrade. The result is the used equipment market has seen a flood of fiber lasers which is causing decreasing resale prices.
Simultaneously, soft costs have been increasing due to freight, rigging, and installation labor wage increases. These increases are often up to 25 percent of the cost of the machine.
As the price to own a fiber laser decreases, it has depressed what is left of the CO2 laser market. We continue to expect those sales to decrease as the trend in manufacturing is moving to the adoption of fiber laser technology.
Effective Remarketing Strategies
With a better understanding of the manufacturing equipment industry, let’s take a look at three key remarketing strategies that should be enacted in order to optimize your borrower’s/lessee’s manufacturing floor space.
Don’t Rely on Auctions Alone
For many manufacturing facilities, equipment resale has only occurred during auctions. However, auctions do not need to be and should not be the only resale strategy. Individual equipment sales will provide a higher return than an auction sale, and this tactic provides the opportunity to buy and sell based on the borrower’s/lessee’s needs and current market values. In many cases, equipment that would not fetch a premium at an auction will do better through the individual sales market, as this allows for connecting with manufacturers actively seeking a particular equipment type.
Keep an Eye on the Market
The global economy will continue to affect the market for used manufacturing equipment. It is imperative to keep an eye on the value of equipment and pay attention to changes in remarketing values.
This can help in a few key ways. First, you can plan your remarketing strategies around the projected values of equipment. Secondly, you can run the numbers to determine whether or not holding onto equipment is going to cost you more due to the loss of floor space, or if it will net you more profit down the road by outwaiting dips in the market. Finally, this will help when you enter the market as a potential buyer.
Invest in Quality Marketing
When remarketing manufacturing equipment, one of the best ways to differentiate equipment from similar equipment on the market is to invest in quality pictures and videos. This simple step is often overlooked in the remarketing of manufacturing equipment. Snap photos and record videos of equipment while it is running are important. This will showcase the condition of the equipment and will help it stand out. Buyers will immediately place more trust in an equipment listing with photos and videos as they will have tangible proof of the condition of the equipment. The end result is the equipment will sell faster, cutting down on overhead costs.
As we continue to keep our finger on the pulse of the remarketing manufacturing equipment industry, our team at Revelation Machinery is here to help sell used machinery effectively and efficiently. Reach out today to learn more about how we can help you connect with potential buyers.