“We got back more than we paid”
28 January 2022
A post last week concerning a hire company that is finding it difficult to raise hire rates ended by saying on a more positive note that it had found an unexpected way of reducing its costs.
In that earlier story, which you can read here, I said that I would give more details in a follow-up post. So the hirer went on to say:
“We’re doing our best to buy new kit wisely at the right time, or well in advance because of the current supply chain issues, to be ahead of the game. And what we’re finding is that after running some machines for a year or so, we have been able to sell them for virtually the same as, or even slightly more than, they originally cost us because of current reduced availability and long lead times.
“This situation cannot last forever, obviously, and it doesn’t apply to all machines, but by placing forward orders at a known price, we should be able to do the same in a year or so from now.”
As another earlier post described, many factors such as central government infrastructure spending and reduced availability of new machines suggest that demand for hire equipment will remain strong for some time yet.
“We’ve just taken delivery of some 1.5-tonne minis,” added the hirer. “They are replacing machines we added to the fleet a year ago and which we are now selling for more than we paid originally. In fact, we placed the order for these latest ones as soon as the old models were delivered because we knew it would take months to get them. As it was, the original arrival date was put back by several months.
“We’re doing the same again. And we’ve also just sold some five-year old three-tonne minis, bought replacements at very good price and the outcome is that it’s cost us only £2,000 per machine.
“It’s almost like being a broker and I’ve heard similar stories from the second hand car market. It sounds silly, it’s hard work to organise and you’re relying on actually getting the kit when expected. Delivery dates are frequently being extended.
“Some equipment that we were expecting in January from various manufacturers is now scheduled for April or May, and we have other orders that were due in the second quarter of 2022 delayed until the first quarter of 2023.”
Obviously this level of demand for new or nearly-new equipment is a situation that won’t last forever, and one cannot make assumptions about future resale values without careful consideration.
But with governments around the world making commitments to infrastructure spending and projects to ‘build back better’, demand for equipment and the squeeze on supplies is likely to remain for some time.
It’s another example of the unexpected developments arising in these unprecedented times and the ongoing management challenges they bring.
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