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IS IT THE TIME TO SELL YOUR EXCESS
HEAVY EQUIPMENT?
Editorial focus by Harold Hough June/July 2009
The sluggish economy has hurt many sectors of the mining and
aggregate industry. As a result, heavy equipment that was being
kept busy a couple of years ago is now sitting idle in the equipment
yard. With profits down, this has left many managers asking themselves,
if they should sell their idle heavy equipment in a sluggish market
or keep it on the back lot until times improve?
The first impulse might be to hold on to it in hope of getting
a better price later or just to keep it in the equipment yard
for production to pick up. However, the smart answer might be
to take a lower price and sell it now.
Heavy equipment is expensive and keeping unused equipment makes
as much sense as keeping a pile of cash in your backyard. And,
even in a sluggish economy, heavy equipment is still a ready source
of cash that can be profitability invested in your company. If
your Return on Investment (ROI) is 20% (which means that $10,000
invested in you company brings an additional $2,000 in sales),
than an unused piece of equipment that could sell for $20,000
is costing you $4,000 a year in additional sales. That’s
like paying $330 a month for the privilege of keeping the equipment
sitting in your yard.
Nor, does it make sense to keep heavy equipment in the hope of
using it in the future. Assuming a 20% ROI, it makes more sense
to sell a piece of used equipment for $10,000 today and buy the
same piece of equipment back in five years for $20,000 because
the cash from the sale will have generated the extra $10,000 in
the intervening five years. That doesn’t even include the
tax benefits from buying new equipment. Nor, does that take into
account the fact that with technological improvements the $20,000
will probably buy a newer, better piece of equipment while the
equipment in the yard will just get older and deteriorate from
disuse. If your ROI is even higher than 20% than it makes even
more sense to sell it quickly.
Maybe you don’t want to sell the equipment because it doesn’t
work and you don’t have the time or money to fix it. However,
heavy equipment experts all agree that the time and money spent
on repairing heavy equipment pays off in a higher sale price.
And, if your budget is too tight to spend the money on repairs,
than you definitely need the money. In that case, it makes even
more sense to sell it in “as is” condition.
GETTING TOP DOLLAR FOR YOUR EQUIPMENT
Everyone agrees that the best way to get the most money for
your equipment is to clean and repaint it. Holly Henderson of
Henderson Construction noted, “A paint job will sell a machine.”
She noted that equipment that was stuck on used heavy equipment
lots will suddenly attract buyers as soon as it was painted and
new decals were put on it. Nor is this just vanity. “No one
will hire a construction company that uses junky looking equipment,”
she said. Good looking equipment means more business and a $1,500
investment in paint will often realize an additional $5,000 in
the sale price.
Servicing the equipment before it comes to market is also important
according to Ms. Henderson. Changing the oil, lubing it, and performing
any other scheduled maintenance makes it more attractive to the
buyer and makes it look like it has been well maintained.
Obviously, a working machine sells for more than a broken one.
Everyone contacted for this article said that all the dials, lights,
and other important functions should be working. In most cases,
a little effort in fixing these problems is well worth the investment.
If you can’t make the repairs, then you can still sell it
at an auction, although you can’t expect to get as much for
it.
As in used cars, buyers focus on certain things, which will determine
the demand and final price. The undercarriage of tracked equipment
is important to buyers and the greater the percentage of new undercarriage
components, the more desirable it is. Conversely, tires are important
with wheeled vehicles. A piece of heavy equipment with three good
tires and one bad one will bring much less than one with four
new tires. Hydraulic hoses that are in good condition also attract
favorable attention.
So, where do you sell heavy equipment and how much can you expect
to get? Unfortunately, setting the price for heavy equipment isn’t
as easy as it is for used cars. The market is thinner and the
value depends on the location and the state of the local economy.
However, there are a couple of places to get ballpark estimates
of your equipment like websites of used equipment dealers and
heavy equipment publications.
Since there are a lot of factors that can affect the price, here
are some suggestions that will maximize what you will get. First,
remember to sell early in the year, when annual budgets are fat
and operations are looking at their needs for the busy spring/summer
season. Second, remember that private sales will give you a better
return, although it takes more effort. If you are a poor negotiator,
it might be best to place the equipment on consignment.
However, if you need cash fast (not always a bad idea since sitting
equipment wastes money) than auctions and used equipment dealers
are a good option. Used equipment dealers will often cherry pick
the best equipment, even though they won’t offer the top
dollar. Auctions will only give you 60 to 70 percent of the private
sale value, but they offer a fast turn around and are a place
to sell broken equipment.
No matter how you sell it, what is important is that you extract
cash from an asset that is just taking up space in your yard.
By keeping a sharp eye on your equipment yard and spending a little
time preparing your heavy equipment for sale, you can make a major
impact on the bottom line of your company.
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