Heavy Equipment – Why you should consider buying before the snow starts flying.
It’s summertime, and to paraphrase Ella Fitzgerald, the livin’ is easy.
Unless, of course, you need to purchase heavy equipment for your business to get through the winter. If you’re in a business that requires machinery such as snowblowers, wood splitters, plows, trucks, dump beds, and the like – you might be better served to get your orders in for that equipment NOW.
We’re not trying to be alarmists, but there have been a series of strong indicators from the heavy equipment industry that signal an inventory shortage is on the horizon. Those who put off purchasing equipment today might be out of luck tomorrow.
Take, for instance, the statement from AB Volvo in late July that warned of additional production disruptions and stoppages due to a global shortage of semiconductors.
“There will be further disruptions and stoppages in both truck production and other parts of the group in the second half of the year,” CEO Martin Lundstedt said in a statement. According to a Reuters report, Lundstedt went on to say that Volvo would seek to boost capacity in the second half, but he cautioned supplies of components would set the limits.
The statement by Volvo’s CEO echoes comments from Ralph Petta, President and CEO of the Equipment Leasing and Finance Association, in a story that appeared in June in Snow Magazine Online.
“As each country in the world is on a distinct schedule for COVID-19 lockdown, or in various stages of re-opening and at various speeds, this has impacted the availability of parts for new heavy machinery manufacturing,” Petta said in a story by Snow Magazine editor Mike Zawacki. “This includes the United States where a shortage of lower-skilled employees may result in some parts manufacturers reducing output or having closed in the past.”
Petta continued: “There are also indications that rental fleet operators are being impacted by the shortage, insofar as they are holding onto existing equipment longer due to continued strong demand and an inability to replace it with new. One could conclude that prices for new equipment will rise in response to this situation and that the increase will likely be permanent going forward.”
And while manufacturers struggle to produce new equipment, residential consumers are having an impact on the commercial market as well. Across the country, lawn and garden equipment dealers are noting low inventory levels of compact tractors, chainsaws, and plows as consumers invested in personal landscaping and snow removal equipment.
It’s not all bad news
The good news is that if you find that new equipment inventory is running low at your favorite equipment dealer, you still have the option of purchasing used equipment – and North Star Leasing happens to finance those as well. Additional good news: a Sandhills Global Market Report released in June showed signs that inventory of used equipment in the farm machinery, construction equipment, and heavy-duty truck markets are starting to stabilize across the United States.
All things considered, if you’re in the market for equipment that your business will need this winter, here’s a gentle reminder to start shopping now. Don’t take that message as one of being coerced into dipping into your wallet when you haven’t budgeted for it. You can always grab the equipment you need NOW and finance it over time. There are also numerous financial advantages to financing beyond being budget-friendly, such as taking advantage of the Section 179 tax deduction, which allows you to deduct 100% of the sticker price for your purchase.
Want to learn more? Contact one of our expert leasing professionals!