Inflation Strains Equipment Budgets
Inflation continues to strain equipment fleet budgets, with 41% of respondents to a new survey of equipment managers saying that they are increasing maintenance spending next year in order to extend the useful life of their machines. One in four (23%) said that they are increasing 2025 acquisition budgets in order to ensure that they will have the equipment when it’s needed.
Some 374 managers responded to the question in Construction Equipment’s 2024 Annual Report & Forecast survey. For a look at last year’s forecast by fleet managers, see “2024 Prices Remain a Concern for Fleets.”
According to analysis of the Producer Price Index by Associated Builders & Contractors, construction equipment and machinery prices have jumped 30% since February 2020.
The ability to boost budgets increases as fleet size increases, according to the survey. Among managers of fleets with estimated replacement value (ERV) above $10 million, 47% will increase maintenance spending and 37% will increase acquisition funding. Among small fleets—ERV less than $500,000—only 22% expect to be able to increase maintenance budgets and 11% acquisition spending. Fleets whose primary work is material production or highway/heavy construction also are increasing maintenance spending: 47% of highway/heavy fleets and 50% of material production fleets.
Other fleets are not keeping pace with inflation or are turning from purchases in order to adjust. One in five (21%) said that their total budget has not increased to keep pace with inflation. Slightly fewer (18%) say that they expect to rent more rather than buy, and 5% expect to lease.
Ideas for maximizing equipment budgets
- It may be time to consider the extension of economic life
- Use cost history to determine remaining life
- Rent or buy decisions depend on utilization
- How to quantify the replacement decision
One in three large fleets (ERV greater than $10 million) say that they increased their rental usage in 2024.
Increased spending on maintenance may extend machine life, although spending beyond the machine’s sweet spot will result in lower utilization, reliability, and availability. Productivity suffers and equipment costs increase, putting pressure on project budgets and profitability.
Machine data to monitor machine health
Nearly two-thirds (64%) of fleet managers said that they manage machine data and perform their own maintenance. Not surprisingly, the percentages increase as ERV increases. Some 84% of fleets with ERV greater than $10 million manage data, and 79% of fleets with ERV between $1 million and $10 million manage their own data. Fewer than one in three (28%) of fleets with ERV less than $500,000 manage data.
About 15% of respondents said that they do not use machine data, and 7% said that they did not know if their fleet uses data. The differential between fleet size is apparent here: 4% of the largest fleets and 34% of the smallest do not use machine data for maintenance.
How dealers partner on maintenance
- Machine data enables Bobcat of North Texas to manage maintenance for customers
- West Side Tractor maintenance-management system allows it to centralize preventive maintenance for customers.
- General Equipment & Supplies uses data in predictive maintenance
- Foley Equipment launches maintenance service, app
Equipment distributors and third-party vendors are other options for managing machine data and maintenance. Some 11% said that their dealer manages data and performs maintenance; 11% also said their dealers manage data and alert the fleet when maintenance is due. Fewer than one in 10 (7%) use a third-party vendor.
As dealers move to become more involved in fleet-management operations, fleets evaluate those partnerships. Almost half (47%) of respondents rated their primary equipment distributor’s ability to partner on service and support as “excellent” or “very good.” This is comparable to 2023 data, although fewer respondents rated their dealer as “excellent.” The percentage of respondents who rated their dealer as “fair” or “poor” remained level at 9%.
Fleet size certainly affects dealer partnership quality. Among the largest fleets (ERV more than $10 million), dealer satisfaction was highest. One in six (61%) rated their primary equipment distributor as “excellent” or “very good” at service/support. One in three (36%) of the smallest fleets (ERV less than $500,000) said the same.
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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