Fleets Boost 2024 Budgets in Response to Inflation, Supply

Oct. 24, 2023
Acquisition budgets will grow in 2024 for 21% of fleets, according to exclusive research.

One in five managers (20.6%) of construction equipment fleets have increased their acquisition budgets for 2024, according to exclusive research conducted by Construction Equipment.

Slightly more (26.0%) said that their total budget has not increased to keep pace with rising costs.

Construction equipment prices in September were up 6.1% compared to September 2022, according to Associated Builders and Contractors. Compared to pre-pandemic prices, the cost of construction equipment has jumped 26.8%, the group said. Overall construction inflation was 0.3% compared to 2022, and prices are up 41.0% since February 2020.

Larger fleets were more likely to respond to inflation, according to the survey. Among fleets with estimated replacement values (ERV) greater than $10 million, 35.7% said that they had increased their acquisition budgets for 2024. On the other hand, only 7.1% of managers of fleets with ERV less than $500,000 noted increased budgets.

Fleet size did not affect the responses for those responding that their budgets would not increase in 2024.

Maintenance budgets, however, continue to be an area where fleets are increasing their spending. In response to inflation, 40.2% of fleet managers said that their organization was increasing maintenance budgets to extend useful life of equipment.

How fleets respond to supply chain constraints

Respondents also noted a similar response to ongoing supply disruptions: 41.4% said that they are increasing maintenance budgets to extend useful life. Responses varied by fleet size. Among the largest fleets, with ERV greater than $10 million, 60.7% of respondents cited an increase in maintenance budgets. Among fleets with ERV less than $500,000, some 26.8% said that they had increased maintenance spending.

One in four (24.1%) said that they are increasing in-house stock of key parts.

One in five (21.2%) fleet managers said that they have accelerated purchasing plans to ensure that they have equipment when it's needed in light of supply chain disruptions. Fleet size again affected responses. Among smaller fleets, 7.1% are accelerating purchasing plans; among larger fleets, 35.7% are able to buy equipment more quickly.

Read more: Buckle up for 2023

Equipment managers also are looking at alternative forms of acquisition in the face of inflation and supply issues. One in five (19.2%) said that they expect to rent more equipment rather than buy as a response to supply chain problems. Some 15.7% will do the same in response to inflation.

In its October index for the equipment finance industry (MCI-EFI), the Equipment Leasing & Finance Foundation noted a drop in confidence among leasing professionals. The MCI-EFI was 40.1 in October, down from 50.3 in September. Among other factors cited, “Inflation remains significantly above Fed targets, and the possibility of interest rates going higher or remaining elevated for longer than expected is high…,” according to the group.

A significant portion of respondents said they do not know how their organization will respond to either inflation or ongoing supply challenges. About one-fourth (23.3%) said they didn’t how supply chain disruptions are affecting 2024 plans, and 18.1% said they didn’t know how inflation was affecting budgets for next year.

About the Author

Rod Sutton

Sutton has served as the editorial lead of Construction Equipment magazine and ConstructionEquipment.com since 2001. 

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