Lower Horsepower Backhoe Loaders Build a New Niche

Oct. 24, 2016

It’s starting to become old news that backhoe loader sales have suffered as some owners replace them with mini excavators, small wheel loaders, and similar combinations of equipment. What is new is that the most recent niche in the category—units strategically placed at 74 horsepower or below for rental operations and their customers who do not want to deal with DEF and aftertreatment hardware, as well as “basic” users who do not want to pay for many bells and whistles or aftertreatment—is gaining a firm foothold.

Caterpillar’s Dustin Adams, backhoe loader product specialist, breaks down the niche customers two ways.

Cost of Ownership for Backhoe Loaders

Dig depth (ft) Avg. price Hourly rate*
<12 $45,438 $22.17
12 to <14 $91,022 $37.11
14 to <15 $92,022 $30.94
15 to <16 $104,117 $39.27
16 to <17 $122,482 $44.65
17 and up $166,908 $65.00

* Hourly rate represents the monthly ownership costs divided by 176, plus operating cost. Adjusted operating unit prices used in the calculation are diesel fuel at $2.36 per gallon, mechanic’s wage at $56.67 per hour, and money costs at 2.5 percent.
Source: EquipmentWatch.com

“There are customers that utilize primarily the backhoe versus the loader feature on backhoe loaders. Roading and loading applications can be slightly impacted by the reduced horsepower. Then there are the customers that want to avoid use of DEF,” Adams says.

“Larger fleet owners may not be as concerned, as a result of having dedicated service trucks and personnel to maintain their fleets in addition to having a high turnover rate in equipment,” he says. “Smaller fleet owners and owner operators may want to avoid additional services or processes to manage. In addition, they will tend to keep equipment longer, thus having less experience with new Tier 4-Final technologies.”

Brian Hennings, Deere backhoe loader and tractor loader product marketing manager, says smaller fleet owners aren’t the only ones who appreciate a basic backhoe model.

“Some large fleet owners are also finding the basic, lower-spec model can fit their needs and are willing to accept the trade-off between lower acquisition price versus the higher horsepower performance, and the versatility that other backhoes provide,” Hennings says.

“For JCB,” says Rafael Nunez, product manager for JCB backhoe loaders, “rental equipment dealers are the largest segment of customers purchasing backhoes with 74-horsepower engines. They mainly purchase these types of units because they don’t have to worry about the hassles associated with DPFs and aftertreatment requirements. They don’t have to educate customers about the unique needs associated with higher-horsepower diesel engines—or worry that customers might not remember to follow required maintenance.”

JCB has bet big on backhoe loaders with 74 horsepower, introducing three models in North America. “Because backhoes with 74-horsepower engines have gained popularity, we now offer three models,” Nunez says. “The 3CX is our rental-ready offering. Then, there’s the 3CX-14 which is a high-specification, 74-horsepower machine. The 3CX-14 is aimed at customers who want more features and options but who are not doing a lot of loading and roading—that’s where you see the 74-horsepower engine not perform as well as a 91-horsepower engine. The third one is the 3CX Compact,” Nunez says.

Rental as an acquisition strategy for backhoes has increased over time, but is down at the moment. “Owning versus renting a backhoe really varies by individual customer and segment,” Hennings says. “The growing trend for commercial and residential builders is renting versus owning. Factors influencing the decision to rent or own include job length requirement and projected owning and operating costs based on how often you’re going to be using the machinery.

“Underground utilities and governmental agencies continue to value owning/leasing over renting, since those customer segments are regularly addressing similar job sites and need machinery readily available,” Hennings says.

“While at first glance, the [overall] backhoe market appears to have had a significant decline, much of the drop can be attributed to the rental market,” Nunez says. “Both independent rental companies and dealer-owned rental fleets are down 1,000-plus units compared to last year at this time, and that’s in a market that is down approximately 1,780 units overall.

“There are two primary reasons, we believe. First of all, the big independent rental companies are replacing units today that were originally purchased back in 2009 and 2010. Those were years when the overall equipment market was down and not many rental machines were purchased in the first place,” Nunez says.

“So, considering the equipment replacement cycle, it makes sense that rental companies would not be purchasing as many backhoes in 2016,” Nunez says. “We expect that the rental market will begin to pick up again over the next two years as the independent rental companies begin refreshing their fleets again. The second reason for the recent backhoe market decline can be traced back to the drop in oil and gas prices.”

In exclusive industry research, Construction Equipment found that 20 percent of respondents said they rent backhoe loaders more often than they did just two years ago (click for more data on backhoe loaders). For buyers, acquisition price (24 percent) and brand (23 percent) are the most important factors in purchasing, with the dealer (16 percent) being the third factor.

Eric Zieser, NAFTA product manager for Case backhoe loaders, thinks there’s a generational factor contributing to lower horsepower popularity among buyers.

“There’s a generation of backhoe owners in other [nonrental] applications who, if they haven’t bought a recent model backhoe, remember when most backhoes were rated at about 74 horsepower and have been operating those models for years,” Zieser says. “These ‘new’ lower-horsepower backhoes will fit their needs just fine while still offering the standard backhoe loader features and options of the higher-horsepower models.”

Backhoe loader horsepowers, similar to other machine categories, have indeed crept upward in the last couple of decades as contractors have craved more power; but as engines have become more efficient and better matched with hydraulic advancements, horsepower isn’t quite as important as it once was.

Regardless of the horsepower and aftertreatment requirements of the backhoe loader, there is no shortage of sound buying advice. “Seasonality is very important: Where do you live and how late into the season will you be operating?” Zieser says. “This will help make decisions such as cab versus canopy, or which transmission option to choose.

“How do you transport your backhoe? If a backhoe is being trailered from site to site, the size of the backhoe may be somewhat dictated by your current trailer. Unless you’re also in the market to buy a new trailer, the best option to keep total costs down is to keep something that works with your current transportation setup,” Zieser says.

“Auxiliary hydraulics can significantly expand the capabilities of the backhoe, whether it’s running a hammer off the backhoe end or snow removal attachments, sweepers, or other attachments off the loader side,” Zieser continues. “There are three types of auxiliary hydraulics: unidirectional, bidirectional, and auxiliary hydraulics for attachments mounted to the loader end.

“Bidirectional hydraulics provide the most flexibility to run attachments because hydraulic power flows two ways—ideal for attachments such as augers, thumbs, and swivel buckets. Unidirectional auxiliary hydraulics are for running attachments with one-way hydraulic flow, such as breakers and compactors,” Zieser says. “Bidirectional hydraulics should not be used on unidirectional attachments because switching the flow could damage the attachment. This is why, if you are running multiple attachments, a combination hydraulics set-up is ideal, as owners can then switch back and forth between unidirectional and bidirectional as needed.”

Manufacturers also offer some salient tips on keeping operating costs down, including an emphasis on telematics, which only 21 percent of backhoe owners responding to the Construction Equipment survey report they are using.

“The basic areas contractors can focus on to reduce operating costs are minimizing idle time, and reducing fuel usage and transport hours on the machine, which can dock time away from a warranty period,” Deere’s Hennings says. “And it’s also important to calculate counterweights correctly, to save both in machine costs and minimize wear on tires.”

Zieser hones in on fuel savings and telematics. “Today’s backhoes offer a variety of fuel-management features made possible by advancements in electronics, such as eco-mode, auto idle, and auto shutdown that help operators save fuel,” he says. “Auto idle immediately kicks rpm down after the backhoe has been at idle for a certain amount of time, and auto shutdown turns the machine off if it has remained idle too long. Each of these combine to provide significant fuel savings in a product category that is subject to excessive idling.

“As it relates to maintenance, one immediate thing backhoe owners can do to improve their maintenance costs is to utilize their telematics systems. Better utilizing the telematics system to monitor operating factors and maintenance intervals can help owners better plan and perform planned maintenance, identify non-optimal operating parameters and conditions, and get a better understanding of operator performance,” Zieser says.

“The biggest piece of advice we could give managers is to use telematics,” JCB’s Nunez says. “Here’s an example of just one simple way that telematics can help keep operating costs down: Fuel is one of the largest expenses incurred when owning and operating a backhoe. A machine that’s idling too much is not just burning fuel, it is also depreciating with every hour that is put on the hour meter. A manager who knows these facts is better equipped to change the situation sooner rather than later, saving money in the long run.”