No one takes a light approach to buying a piece of large equipment, nor should they. The right piece of equipment for any construction business requires a significant amount of due diligence before putting out thousands, sometimes even hundreds of thousands of dollars, to acquire the best machine for the job.

Traditionally, there are three avenues available for securing large equipment for commercial construction. Renting is popular for short-term and job-specific needs. Leasing is an option for intermediate uses where the machine is necessary for an indeterminate period and the costs can be absorbed in the project, then returned when the term expires. Outright ownership is still the most common means of controlling equipment and usually has the highest rate of return in the commercial construction business.

While choosing between renting and leasing machinery, the decision is normally made on a case-by-case basis. However, the decision to purchase and own a piece of construction equipment depends on the vision of what value it brings to the company. Every construction business works to increase their profits while keeping overhead and maintenance low. With this comes an attachment of value to each piece of equipment, and that stems from the benefit it provides for the job it’s required to do.

Purchase price

Most people think the number one reason to buy used large equipment is to save money. Without a doubt, the price tag on a used piece of machinery is going to be less than a comparable new one. The cost of a new machine could equal or exceed the cost of two or more used pieces of equipment, depending on availability and demand. The savings in buying used may also be transferred to purchasing a higher caliber of machine that would be out of reach if brand new.

Used large equipment often has exactly the same features as new machines fresh off the production line. Little changes from year to year in the benefits that construction equipment offers aside from advances in technology. A five-year-old machine may have some updated computerization features for ease of operation, but it still does the same job at a greatly reduced price. The benefits of new bells and whistles need careful weighing against what truly dictates the value of construction equipment — actual return on investment.

Depreciation

Like all mechanical commodities, heavy construction machinery suffers a significant rate of depreciation. That’s usually in its first year and can run from a minimum of 20 percent all the way up to 40 percent. This is inevitable in the construction equipment business and is something that adds great value to purchasing a used machine.

Be aware that depreciation schedules for used large equipment aren’t linear. That means resale values won’t depreciate at the same rate over the same time period. After the initial 20 to 40 percent hit on depreciation, heavy equipment values remain relatively stable for years out. A 10-year-old machine may retain the same value as one that’s half its age, and so forth.

When buying a machine that’s used, it may provide years of service at a much greater return on the initial investment than a new one and retain its value for years to come. That’s provided, of course, on other factors like the machine’s maintenance condition and the law of supply and demand.

What makes a Lyon Auction unique is that all of the equipment is in the same location. Companies are able to liquidate a large fleet of vehicles in a single auction. Lyon Auction is able to help well-known companies from the conception to the conclusion of the auction. This makes it headache-free and as enjoyable as possible for both the seller and buyer. If you have any questions, feel free to contact us, we’re listening!

Last week we talked about the importance of purchase price and depreciation. Today we want to talk about seller reputation, manufacturer and equipment age.

Seller Reputation

Who the dealer or handler of used construction equipment is plays another prominent role in setting the machinery’s value. Reputable dealers stand behind their inventory, including the used equipment they’re offering for sale.

Transparency in the equipment’s history, including who the previous owners were along with service records, brings a valuable peace of mind to the market. Reputable dealers will also add value by backing up everything they sell with some level of warranty support and return policy.

Reputation extends to the equipment’s former owner as well. The construction industry can be a small family at times, and the reputation of who previously owned the large equipment carries much weight in assuring a prospective buyer that the machine was properly operated, serviced and cared for.

On the other hand, equipment once held by a questionable owner may see its value degraded. The perception of poor maintenance and rough handling sends a risk message along with its asking price. This almost always results in a lower price or longer sale.

Manufacturer

Another major factor in determining the value of used large equipment is the manufacturer. Many construction business owners will only buy one or two particular makes of equipment, and brand loyalty reflects in annual sales in used machinery as well as in new large equipment. Equipment owners are often willing to pay more for a brand name that they’ve had good results with and are satisfied with the brand’s performance and retention of value.

Brand loyalty significantly reflects in used large equipment sales. The name often implies built-in quality and reliability. It’s no surprise the manufacturer’s reputation plays a key role in determining the price of used construction equipment.

Equipment age

One of the first things that comes to a buyer’s mind is the age of the used large equipment. What year was it built in? How old is it? How long has it been around? These are all the same valid question, but the answer is not truly in calendar numbers, it’s in hours of operation.

The amount of use is the primary consideration in evaluating price in relationship to the machinery’s physical age. After discounting depreciation, two identical pieces of equipment of the same age can vary widely on their asking price and actual value. They might both be old, but the unit with the lowest number of operating hours will command a higher price, especially if it’s well maintained.

While age is a factor in determining machinery value, it’s not as important as the machinery’s mechanical condition and appearance.

What makes a Lyon Auction unique is that all of the equipment is in the same location. Companies are able to liquidate a large fleet of vehicles in a single auction. Lyon Auction is able to help well-known companies from the conception to the conclusion of the auction. This makes it headache-free and as enjoyable as possible for both the seller and buyer. If you have any questions, feel free to contact us, we’re listening!

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