Replacement Value of Construction Equipment

Replacement Value – Definition

The replacement value of construction equipment refers to the costs required to acquire an equivalent machine of the same quality on a given valuation date. It's important not to confuse replacement value with market value (sometimes called current value). Market value is determined by factors such as the machine's age, maintenance condition, useful life, and current market demand – it's the price you would receive if you sold the machine on the valuation date. Replacement value, on the other hand, is what you would need to spend to purchase an equivalent machine on that same date. The difference between selling price and purchase price is therefore also the difference between market value and replacement value.

Calculating the Replacement Value of Construction Equipment

In the Construction Equipment List (BGL) 2020, you'll find the average new prices for the most common machinery makes. These are average values of list prices including procurement costs (freight, packaging, customs), but excluding sales tax or VAT. Such an average new price refers to a fully equipped, ready-to-operate machine without fuel and without spare parts.

The average new prices in the BGL 2020 are based on 2020 pricing. However, machinery acquisition costs change over time. You must account for this when calculating the average new price for replacement in a specific year X. In addition to the average new value from the BGL 2020, you'll need the producer price index for "Machinery for the Construction Industry" from the German Federal Statistical Office (Statistisches Bundesamt) for year X. The producer price index is published by the Federal Statistical Office under subject series 17, series 2; available online at: https://www.destatis.de/DE/Service/Bibliothek/_publikationen-fachserienliste-17.html). For example:

Average new price for replacement in 2021 = average new value from BGL 2020 multiplied by the producer price index for construction equipment in 2021. The result is then divided by 100.

It's important to select the producer price index that refers to the 2020 pricing basis (just like the BGL 2020) – for 2020, this producer price index must have a value of 100. If the producer price index does not have a value of 100 for 2020, you must use an appropriate conversion table.

If you need to calculate market value (see the distinction above in this article) rather than replacement value, factors such as the machine's age, maintenance condition, useful life, and current market demand also play a role.

Rent Construction Equipment from klarx – How am I Insured?

Without a liability limitation agreement, the renter is liable for any damage to the rental equipment (regardless of whether caused by the renter or third parties) and for loss or theft during the rental period. In this case, the renter is required to insure the equipment for the duration of the rental against all types of damage, insofar as insurable, in favor of the lessor, and must provide proof of insurance coverage from the insurance company to the lessor before the rental begins.

When you rent machines from klarx, you automatically receive a liability limitation from us that covers you against damage to the rental equipment. If you already have your own coverage, please provide us with proof.

You can find more information in our Terms and Conditions.