Buying a brand-new shiny piece of equipment may look nice, but it’s not always the most financially responsible decision when you’re running a business. Costs add up, and it may be more cost effective to instead look at used equipment.
Auctions are a great way to restock your inventory or add to your collection, but how do you figure out what price you should pay? And if you’re selling items, how do you know whether you received good value? We’re delving into the factors that help determine the value of used equipment so you can be better prepared the next time you’re at a heavy equipment auction.
For starters, you’ll need to first figure out the reason for the valuation. In this case, you’re either buying or selling used equipment. Most often, items are based on fair market value, which describes a transaction between two parties under normal circumstances.
In other cases, the price of equipment may be determined using orderly liquidation value or forced liquidation value. Forced liquidation could be a bankruptcy or a foreclosure in which the goods need to be sold fast, thus the time sensitive nature may make the value decrease. Orderly liquidation is the value that could be realized when the goods are sold in an orderly manner.
Items will sell for more at fair market value than orderly liquidation value and items at orderly liquidation value will sell for more than forced liquidation value.
There are many different factors that help determine the value of used equipment. We detailed six of them below to give you a better idea of what to expect with pricing.
This one is simple — supply and demand. The value of an item will increase if there is high demand but low supply. Conversely, the value will decrease if the supply is plentiful without much of a demand. The COVID-19 pandemic was a perfect example of these economics. When manufacturers began limiting production of new materials due a workforce shortage, the value of used inventory skyrocketed since demand remained the same but the supply decreased.
Brands matter, plain and simple. There’s a reason your eyes are instantly drawn to a luxury car. Yes, they look nice, but they also come with a name-brand association of a quality product. Equipment isn’t any different. Brand-name equipment will likely command more value because buyers will feel more comfortable making a purchase from a company they trust.
A versatile product or piece of machinery will carry more value than a specialized piece of equipment. Standard items appeal to a bigger audience compared to say a saw that only cuts one particular type of wood. For example, a commercial van will generate interest from electricians, plumbers, HVAC companies, carpenters, or roofers since it can serve a variety of professions.
“Depreciating asset” is one of the biggest buzzwords you can hear when it comes to new vehicles. But just as quickly as cars lose their value, the same can’t be said for other pieces of equipment that have varying depreciation rates. It all depends on the type of machine, the manufacture date, the condition, and the amount of time it has been used. Time can be measured in years, miles, or hours used depending on what you’re in the market for.
Longevity is just one factor. An older machine in good condition is more valuable than a newer piece of equipment that has had problems.
If repairs are done, ensure you keep records of everything. This will help put the buyer’s mind at ease if everything is documented.
Buyers want to inspect their items before they make a purchase. If the items are available for inspection, either in person or online, this can help boost their perceived value and increase what they’re willing to pay. Used cars are a great example. Savvy car buyers will run a VIN report or a vehicle history check to see which type of repairs have occurred and what type of condition the car is in. They will then ask to visually inspect it to ensure there are no major defects or imperfections. This gives them more confidence they’re buying a quality product.
This ties into fair market value, orderly value, and forced value mentioned above. This also applies to the buyer. A buyer may have more urgency to buy a commercial oven to open a restaurant in a timely manner, thus the value will increase. In auctions, urgency helps drive up prices because many different people are bidding on a single item. More bids means more value and more value equates to more money.
Sometimes, it simply pays to do a little bit of research and use past auction results to see the trends.
For example, at our spring heavy equipment auction, a 2008 Kenworth cab with 973,072 miles on it went for $19,600, while a 2007 Kenworth with 1,266,612 miles went for $14,500. What caused the price difference? The models (W900 versus T800B) and mileage varied. For nearly 300,000 miles more, you could save more than $5,000.
This research isn’t the end all, be all of what to expect, but it can give some insight of what previous equipment has sold for. For more information about what heavy equipment typically sells for at auctions, check out our most recent online results.
At Dakil Auctioneers, Inc., we hold some of the biggest used heavy equipment auctions in Oklahoma. Four times a year (once a quarter), we auction off anything from old police cruiser fleets from the city of Oklahoma City to tractors and trailers being offloaded by companies looking for new inventory.
These auctions regularly feature upwards of 400 to 500 lots, sometimes with more than 1,000 total items of inventory.
Not all of the items are for commercial use, which makes heavy equipment auctions an attractive auction for bidders looking to add to their home or office. This includes equipment such as lawnmowers, power tools, workout equipment, and vehicles all for an affordable price.
Stay up to date with our upcoming auction schedule to buy or sell used heavy equipment. Our office takes consignments in the days and weeks leading up to these auctions, so contact us at (405) 266-2709 if you’re interested to offload old or unused equipment.
