Every seller wants to get a great return on their heavy equipment investment. To do so, it’s important for owners to understand why and when they should sell, and how to prepare items for sale. In addition, owners should determine how to efficiently and quickly sell equipment so that they can smartly dispose of their equipment and get more money in their pockets.
WHY SELL EQUIPMENT?
There are a variety of reasons for selling equipment, including:
Equipment needs replacing. As equipment racks up hours, in many cases, downtime starts to become an issue. If equipment is well-maintained, it can have a longer life. However, some repairs when evaluated against the age and overall condition of the equipment don’t make financial sense, leading equipment managers to opt for replacement rather than costly repairs on older gear. Sellers can still find buyers for equipment that is not in perfect condition, as some buyers purchase equipment with the intention of fixing it or using it for parts. In addition, globally there are areas where labor costs are much lower and repair of the equipment is economical, as well as areas where the older mechanical systems are preferred over newer technology.
The business no longer needs the equipment. Sometimes organizations acquire specialized equipment or additional machines to accommodate large or specific projects. Once the work has been completed, the equipment may not be needed at all or may be underutilized. Rather than tying up capital, organizations may opt to sell the excess machinery and use the funds in another part of the business or for equipment required for upcoming work.
Equipment has been sitting idle. Equipment depreciates over time. It’s not efficient for a business to tie up capital in assets that sit idle month after month and don’t generate revenue. This may occur because a machine is damaged, isn’t needed for any current projects, or is simply forgotten. An organization needs to consistently monitor equipment utilization, location, maintenance costs, and condition. If utilization is trending low, maintenance costs are increasing, and if there are no plans to use the equipment, selling is a great option for getting it off the books and putting some cash back into the business.
Equipment is in demand. Demand for equipment can fluctuate throughout the year, so sellers will want to be aware of peaks and lows. Reviewing the current fleet and selling excess or unwanted items is recommended in the first quarter of the year as many fleet managers assess their upcoming projects for the year and look into purchasing equipment that fits these needs. The second and third quarters of the year still see a great deal of activity in the auction industry, but prices may be slightly lower as demand levels off while equipment is put to work during typically warmer months.
A better machine is available. A newer model may offer better features, options, or fuel economy. In some cases, organizations are looking for equipment that meets local environmental or safety regulations, which often require the purchase of newer equipment. Or perhaps an owner wants an older model that is less complicated to operate and easier to repair. Selling equipment that no longer fits the needs of the business and its workers is beneficial in the long run. Many managers also see the proliferation of the equipment rental business as a plus in the decision process since a short-term need can often be filled by renting. This often makes a selling decision easier.
PREPARING TO SELL EQUIPMENT
Owners getting ready to sell equipment will want to clean it and make any affordable repairs that will increase the “curb appeal” and ultimately, the final selling price.
Regularly cleaning equipment prevents residue from building up, keeping equipment looking good and operating efficiently. Over time, the buildup of hardened grease, mud, vegetation, and road salt can cause corrosion and damage to the equipment. Equipment will benefit from the removal of dirt, grime, and debris from both the interior and exterior.
In addition to maintaining hydraulics, all major components, such as the engine and transmission, need to function properly. Providing oil sample records adds value as well, showing potential buyers that regular maintenance has been performed and that major components are in good condition. Before selling equipment, sellers can research recent sales of similar items to get an estimate of the potential value of a working machine. A seller should consider making only the most necessary repairs if the estimated cost of repairs and the original amount invested in the item outweighs the projected return. If equipment requires extensive repairs, the seller may want to sell the machine for its parts or utilize it a bit longer to reap the benefit of the repair expense.
HOW TO SELL
Some sellers are intent with disposing of equipment locally via physical auctions. However, spending time and money to transport equipment to an auction site diminishes a seller’s final return. Today, many sellers have turned to the Internet to sell their equipment from where it sits. Online marketplaces eliminate transportation costs and allow owners to list equipment quickly so that they can properly time sales and have more flexibility as business needs change. Online auctions also reach buyers around the world, allowing sellers to capitalize on global demand even when local demand is low. In addition to these advantages, online marketplaces generally have more frequent sales, so converting an asset to cash can happen as quickly or as slowly as a seller deems necessary.
Sellers will benefit from online marketplaces that offer guaranteed inspection reports that include photos, oil samples, and equipment condition details and functionality for buyers. An assurance of the item’s condition instills greater confidence in buyers and attracts a larger audience to the equipment, often yielding a higher selling price. Customer support is important so that sellers can get help through the selling and buying process. ■
About The Author
Paul Hendrix is an equipment pricing analyst with IronPlanet, the leading online marketplace for buying and selling used heavy equipment. IronPlanet’s family of sites includes IronPlanet®, GovPlanetSM, TruckPlanet®, Kruse Energy and Equipment Auctioneers, allEquipSM, and Asset Appraisal ServicesSM. For more, visit www.ironplanet.com.
Modern Contractor Solutions, January 2015
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