Construction Material and Equipment Costs in 2026: What Contractors Should Know Before Their Next Purchase

Construction Material and Equipment Costs in 2026: What Contractors Should Know Before Their Next Purchase

Interest rates have gotten most of the headlines in 2026, but for a lot of contractors, the number that's actually hurting is the sticker price on the equipment and materials themselves. Tariffs on steel, aluminum, and copper worked their way through the supply chain over the past year, and the data confirms what a lot of buyers have already felt at the counter: this isn't a temporary blip, it's a new cost baseline.

What the Data Actually Shows in 2026

According to Associated Builders and Contractors' analysis of U.S. Bureau of Labor Statistics producer price data, overall construction input prices rose 0.7% in January 2026 alone, and were up 2.3% year-over-year. Nonresidential construction input prices specifically climbed 0.7% for the month and 2.9% year-over-year — an annualized pace ABC's chief economist Anirban Basu described as 'blistering' at 7.1%. The categories driving the increase are the ones tied most directly to tariffs: copper wire and cable, iron, steel, and industrial controls equipment. Separately, 50% tariffs on steel, aluminum, and copper imports have been cited as a direct driver of higher costs across the construction sector this year.

One useful detail buried in that data: Basu also noted that the bulk of the year-over-year increase in nonresidential materials prices happened earlier in the period, with relatively flatter increases in more recent months. That's a meaningful nuance — it doesn't mean costs are falling, it means the sharpest jump already happened and is now baked into the price floor everyone is buying against.

Why the Equipment Itself Costs More, Not Just the Materials

It's not only raw materials. The manufacturers building your excavators, loaders, and dozers are absorbing real tariff-related cost pressure too, and it doesn't stay fully absorbed forever. Caterpillar has cited hundreds of millions of dollars in additional tariff-related manufacturing costs, with some industry estimates putting Caterpillar's full-year tariff exposure well over a billion dollars; John Deere has disclosed a tariff impact in the hundreds of millions of dollars as well. Manufacturers have publicly said they're trying to protect margins without passing the full cost on to dealers and buyers, but 'without passing the full cost on' still isn't the same as 'no increase at all.'

What This Means for Timing a Purchase

If the cost floor for both materials and equipment has genuinely moved up and stayed up, then the machine you're pricing today is likely close to the cheapest version of itself you're going to see for a while — waiting for a steel tariff rollback or a manufacturer price cut to bail you out isn't a strategy most contractors can afford to bet a season on. A mid-size excavator like the Komatsu PC220LC-12 or its intelligent Machine Control-equipped sibling, the PC220LCi-12, is a good example of the kind of core capital equipment where this math matters most — it's a big enough purchase that a few percentage points of cost creep is real money, and it's productive enough on day one that delaying the purchase to 'wait it out' costs you active project capacity in the meantime.

A Simple Way to Think About Locking In Today's Cost

Here's an illustrative way to picture it (actual figures vary by machine, dealer, and timing — this is meant to show the shape of the math, not a quote): if a $200,000 mid-size excavator sees even a modest 3%–5% cost increase over the next twelve months in line with the current nonresidential input price trend, that's $6,000–$10,000 added to the purchase price of the exact same machine a year from now. Financing that purchase today locks in this year's basis. Waiting doesn't just risk a higher price — it also means paying for that same delay in rented capacity or lost bids in the meantime, on top of whatever the machine ends up costing later.

Who This Hits Hardest

Excavation and grading contractors buying or replacing mid-size excavators are squarely in the path of both the steel-tariff cost pressure on the machine itself and the higher material costs on every job they're bidding. Heavy-highway and utility contractors face the same double exposure on larger iron. And general contractors adding dump trucks or self-perform capacity are watching both the vehicle chassis costs and the underlying commodity costs move together. If you're shopping the excavator category specifically, our excavator buyer's guide update for 2026 and our roundup of what's new from Komatsu this year cover the current lineup in more depth.

Why Financing — Not Renting or Paying Cash — Is the Right Response Here

In a rising-cost environment, the case for financing gets stronger, not weaker. Renting at today's elevated rental rates while costs keep drifting up builds you nothing and leaves you exposed to the same cost pressure on every future rental invoice. Paying cash ties up working capital you may need to weather the same cost pressures on materials for your actual jobs. Financing locks in the machine's cost basis now, preserves your cash for job-level material costs that are moving in real time, and — if you're financing before year-end — lets the purchase count toward the Section 179 deduction the same as a cash buy (confirm the specifics with your tax professional, since limits and phase-outs apply). For the full comparison, our piece on the real math behind renting vs. owning construction equipment breaks down why ownership wins even before you factor in a rising-cost environment like this one.

BFC's role in all of this isn't just approving a loan — it's being the partner that helps you time a purchase intelligently in a market where both money and materials cost more than they did two years ago, and that keeps working with you on the next machine instead of making you wait years to earn that conversation.

The Bigger Picture: Two Forms of Uncertainty, One Fix

Contractors are effectively managing two separate sources of uncertainty in 2026: what equipment financing costs, and what the equipment itself costs. Both are influenced by policy decisions well outside any single contractor's control — Fed rate moves on one side, tariff policy on the other. Financing doesn't make either uncertainty disappear, but it does convert both into a fixed, known monthly number the moment you sign, which is a lot easier to bid jobs around than an open-ended bet on which way tariffs or rates move next.

A Practical Checklist Before You Buy

Before you sign on your next machine in this environment, it's worth confirming a few things with your dealer and your financing partner: whether the quoted price already reflects current tariff-driven costs or is subject to a surcharge at delivery, how long that quote is actually held, and whether financing terms can be locked at application rather than at final funding. None of that requires guessing where tariffs or rates go next — it just makes sure the number you're planning around today is the number you actually pay.

Whatever the rate environment does next, the fundamentals don't change: the crew that owns its iron out-earns the crew that rents it, every single season. If you're ready to see real numbers on your next machine, browse our current buy/sell inventory, start an equipment financing application, or head back to our homepage to see how BFC works with contractors like you.