Industry Update

The present economic woes are having a negative impact on equipment values all over the country.  Two of the more prominent equipment segments affected are; construction and trucking.  This is an outline of what I see so far.

Construction

The recent slowdown in the economy, especially in the new construction of both residential and commercial properties plus the increases in high fuel costs is causing a severe drop in the overall value of construction equipment over the last few months.  Experts estimate this drop in value to be between 25%-35% and has hit the earth moving segment the worst, affecting such equipment as; crawlers, wheel loaders, graders, scrappers and related equipment including; tower cranes, concrete pumpers and mixers.   

On top of all this, new environmental issues must also be addressed including new emission standards in California and other states.  Operators in California will be equally hard pressed given that no construction equipment produced before 1995 will be allowed after March 2009.  All existing older equipment must be updated to the new EPA standards which is likely cost prohibitive to most smaller operators.

Trucking

The overall value of trucks and trailers has been seriously affected by both the economic slowdown and ever rising fuel costs.  The value of these units has been estimated to have dropped by 25% over the last few months.  Operators of all sizes have been dealing with lower demand for product transport.  This industry is also expecting new emission standards to be proposed by the EPA which would go into effect within a few years.   New emission standards would require operators to update engine and exhaust systems on all existing vehicles or acquire newer units.

Obviously, there are serious issues relating to both these equipment types that will directly impact current and future values.  I highly recommend any asset appraisals of both construction equipment and trucking older than 4-6 months be updated as soon as possible.   This applies to new loan requests, refinances, loan workouts or foreclosures. 

I will update and make further comment regarding these issues as we proceed through the current economic situation.