When is the right time to sell your rental fleet?

Determining the right time to sell a construction equipment rental fleet is a critical decision that can significantly impact a rental company’s profitability and operational efficiency.

Surplex, a Germany-based digital auction trader of used machinery, suggested that companies set the timing of their fleet sales by considering different factors, such as tax benefits, accounting needs, storage spaces and cash flow. 

It said the end of the year, which means right now, is often an ideal time to sell used machinery from inventory. It said selling machinery within this timeframe can help industrial companies:

1. lower tax burdens and open up targeted deduction opportunities; optimise their expenditures by strategically allocating profits and losses within the current year to create a clear foundation for planning investments in the new financial year;
2. free up capital and reduce stock to streamline the balance sheet, improve liquidity, and provide a solid financial base for the year-end close;
3. free up room to implement modernisations and production adjustments in the coming year;
4. secure budgets for new investments for next year;
5. enjoy high year-end demand created by companies that seek to allocate their remaining budgets to investments and prefer to buy used machinery rather than new ones for immediate availability.

In August 2024, TBAuctions, Europe’s multi-brand digital auction platform for B2B used goods, acquired Surplex. It owns and operates different brands, including Troostwijk Auctions, which is the largest online industrial auctioneer in Europe.

Market demand

Photo: Ritchie Bros.

Ritchie Bros., a US-based auctioneer of commercial assets and vehicles, said in November 2023 that the best time for companies to sell their machinery was the end of that year. But this conclusion was drawn for different reasons to that of Surplex.

It said equipment owners tended to keep their machinery longer whenever there was a market downturn or general uncertainty, such as the supply chain disruptions in the aftermath of the Covid-19 pandemic.

But it said companies should consider selling their machinery to free up yard space as supply chain disruptions in 2022 had already eased in 2023.

Besides, it said companies should sell their machinery when the market was high, as the final quarter of 2023 would mark the start of a transition from a seller’s market to a buyer’s market, favouring buyers over sellers.

‘Sweet spot’ for selling

Euro Auctions, which owns and operates Leeds, Europe’s largest auction site for selling construction machinery, said factors such as market cycles, equipment brands, models, utilisation and work type could influence auction value and affect the timing for selling machinery.

According to Euro Auctions, rental companies should find the ‘sweet spot’ for selling their machines by balancing resale value against depreciation. It said rental firms may sometimes be unable to charge premium rates for newer machines.

“In booming markets, high demand and rising prices allowed businesses to sell freshly used machines close to their original cost, especially premium brands with global demand,” it said. “For example, rising costs in 2021-2023 saw buyers paying significantly more for new machines. This enabled rapid fleet renewal, keeping equipment age low.

“But in 2023-2024, as demand slowed and supply increased, used equipment prices fell, leading to steep depreciation for machines just 1-2 years old,” it said.

In this case, it said, retaining equipment for 3-5 years until depreciation is more cost-effective than selling it early.

Euro Auctions also said maintenance costs now play a critical role in timing sales. High-use machines in harsh environments may need earlier replacement, while low-use equipment retains value longer.

On average, holding rental equipment for 3-5 years appears to offer the best resale value under current market conditions.