How to Determine the Fair Market Value of Used Heavy Equipment?

Posted on 28 August 19


Heavy equipment are often required by many industries, especially those involved with heavy tasks, construction, etc. However, it's not always financially feasible to go ahead and buy new equipment for all the necessities. In this case, purchasing used equipment becomes a convenient solution as it performs the same tasks as new equipment would. 

Buying used earthmoving equipment is very beneficial. Some of its key advantages have been listed below:

  • Reduced financial commitment - Used heavy equipment is much less expensive than new ones. A large amount of money does not get locked in as an up-front investment. Thus, capital outlay is trimmed. 
  • No depreciation woes - Purchasing used heavy equipment is the right solution for those who consider depreciation a deciding factor. The initial depreciation of the equipment, which is more than a year old, is effectively saved. 
  • Warranties - Buying used equipment from a reputed dealer is highly beneficial. Most recognized dealers offer comprehensive warranties, preventive maintenance plans, and many other valuable services. 

If these benefits are compelling you to invest in used heavy equipment, then it's time for you to understand the various factors that affect the fair market value of used heavy equipment. 

In reality, the fair market value of the used heavy equipment depends on the current market supply and demand and the competition for that equipment. Thus, determining the fair market value of the used equipment will enable you to identify its right price. 

The factors affecting the fair market value of the used equipment are:

  • Age and hours - Depreciation of equipment do not occur consistently. It depends on the maintenance of the equipment. It becomes consistent when the equipment is maintained correctly. This is where you must check the number of hours on the equipment to determine its resale value. Usually, an older machine which has been properly maintained and has low hours on it will cost more than newer machines which have not been well maintained. 
  • The ability of the used equipment - The secondhand equipment which can perform a variety of tasks, is flexible and is equipped with better features is a better option for purchase considerations and will demand a higher price in the market. 
  • The reputation of the manufacturer - The reputation of the manufacturer also comes into play while determining the fair market value of the used heavy equipment. Used equipment from a reputable manufacturer is likely to be equipped with the latest features and offer higher flexibility, ensuring higher productivity and efficiency. Consequently, such machines would be priced at a higher rate than other ones in the market. 
  • The reputation of the dealer/seller - The reputation of the dealer or seller is equally vital in determining the fair market value of the used heavy equipment, especially when you are buying from an unknown seller. An professional dealer will verify the fact, along with evidence to support it, that proper maintenance of the used equipment has been carried out diligently. Reputed dealers also provide a minimum warranty on the used equipment. 
  • Market factors - The condition of the market also directly impacts the fair market value of used equipment. For instance, during a slow economy or recession, prices will decrease as there would be lesser demand for such machines. The fair market value is influenced by seasonal and location-specific factors as well. 

After understanding these factors affecting the fair market value of used equipment, you will now be faced with a choice of methods for determining this estimate. 

1. Professional appraiser

You may get the job done by hiring an appraiser. An appraiser is a professionally trained and certified individual who has expert experience in this field. If the purchase of used equipment is for business purposes, then you must hire an appraiser who specializes in business valuations to get a market value that's as realistic as possible. 

2. Comparative analysis

You may also determine the fair market value of the used heavy equipment by comparing it to other similar models in the market, after taking into consideration all the additional market factors. On the other hand, the recent selling price of similar equipment can be considered for determining what the used equipment would sell for if placed on the market this day. 

3. Valuations by third party websites

There are numerous third-party websites available on the internet today that determines the fair market value of various items based on their proprietary formulas. These websites make their calculations after deriving multiple pieces of data. 

If you want to do this task on your own, then you must visit all the reputed vendors selling the particular equipment that you are looking for. Inspect the equipment, ask them for their quoted price including extra fees, and note these down. Total the amount quoted by all the vendors and divide this amount by the number of vendors you have approached or several quotes you have received. The resulting figure is the fair market value of the used heavy equipment. 

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