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“The Cat equipment retains its value. That’s one of the big reasons for the success of the program.”

– Steve Spoor
Maintenance Services Manager
Idaho Transportation Department

What if your agency could sell your used equipment for as much—or nearly as much—as you paid for it?

If you were in the market to replace the machines, you’d probably take a close look at the details and sell if the conditions were favorable.

The Idaho Transportation Department has found a way to sell equipment that is five years old and less at or near the price it cost when new.

When seeking bids for new machines, specs require that guaranteed buyback of the equipment be an option. The buyback option is exercised before the state owns the machines 60 months.

“The buyback option schedule depends on how the dealer wants it structured,” said Steve Spoor, Maintenance Services Manager for the Idaho Transportation Department.

The state’s flexibility on the duration of the buybacks – which enables dealers to receive a better return on the resale of the equipment – has helped the state financially.

“We’re selling the equipment for about what we paid for it. It takes very little new money to buy replacements. It has kept our wheel loader, backhoe loader and transport fleet in new and like-new condition,” Spoor said.

This fall, the agency took delivery of 47 Cat 928H Wheel Loaders, six 950H Wheel Loaders and 12 420E Backhoe Loaders. All were purchased with the guaranteed buyback option.

For buyback bids, specs require a “bumper-to-bumper” warranty as long as the equipment is state-owned. “The only thing we’re responsible for is wear items or damage,” said Spoor.

The state also requires delivery in October, so the machines are available for winter use.

The department uses the equipment to maintain 13,000 lane miles of highway. “All wheel loaders are located at stock pile sites for winter maintenance – loading salt and anti-skid materials into trucks,” Spoor said. “We also have various activities in the summer – primarily ditching and loading trucks.”

The agency purchases machines outright (without a guaranteed buyback) or with a guaranteed buyback. When purchased outright, the department determines a monthly depreciation cost. With the buyback option, the agency develops a cost-per-month for the period the equipment is owned.

“That way, we can fairly compare direct purchase and buyback bids,” said Spoor. The high resale value of Cat equipment – and state’s flexibility on the length of ownership – are key to the program working as well as it does.

“The equipment retains its value, so we can work with the dealer to get him machines he can resell,” said Spoor. “We learned a long time ago that we have to balance our needs with the needs of the dealer and their second-tier customers.”

Strategic ownership helps the state (new equipment features up-to-date technology and has better uptime than older machines). The dealer also benefits. The low operating hours and current technology make the relatively new machines attractive to contractors or agencies buying used equipment.

The agency has been purchasing equipment with the buyback option since 1995. Prior to that, awards were based solely on purchase price, and didn’t consider resale value.

Consequently, the state wasn't buying a lot of top-quality machines, which hold their value better than less well-made machines. Also, the state was typically keeping machines for 15 years, which led to breakdowns and maintenance expenses.

Today, the buyback option has made it possible to keep a fleet of new wheel loaders, backhoe loaders and motor graders (with the accompanying uptime and low maintenance costs) that the state might not otherwise own.

This strategy keeps machines operating at low cost and high performance, pleasing both taxpayers and equipment operators.