How Can You Determine the Fair Market Values on Used Heavy Equipment?

At any construction site, you will always need a range of efficient heavy equipment to do the task with zero defects and in the given timeframe and for that you need to buy them. However, most of the times, the cost of the new equipment is sky-high and one may look for used heavy equipment as they perform the same tasks but the purchasing cost associated with them is not that high.

Also used equipment offer a host of advantages like...

1. Reduce the burden of up-front investment: Buying a new heavy equipment like backhoe loader or excavator can be a big investment and it may not always possible to make that huge investment at the time of need. Also, construction companies are always under a lot of pressure to trim capital outlay. Hence, in all such scenarios, you can opt for used heavy equipment which are generally less costly than the new ones.

2. Puts an end to depreciation worries: When you buy expensive equipment, you are always concerned about its resale value because of the fact that the value of a piece of machinery drops considerably as soon as you pay for it and you can never expect to get back exactly what you paid. Further, since the construction equipment market is highly influenced by the technological changes, the heavy equipment can become outdated very fast, thereby, depreciating its value. In fact, most of the heavy equipment lose between 20-40 per cent of their value within a year of being purchased and you might not want to see your new equipment depreciate so easily. So, if such concerns bother you, then buying used heavy equipment can be a good solution for you. When a heavy equipment is bought that is more than a year old, the initial depreciation is effectively saved while still getting something that’s relatively new and good for a lifetime of use.

3. Available warranties: Most of the reputable used equipment dealers offer comprehensive warranties, preventative maintenance plans and other service agreements for all the used heavy equipment that they sell. This means you can shop with confidence knowing your purchase will be backed up by a reputable team that will take care of any sudden maintenance or repair requirement.

Well, after looking at the benefits of used heavy equipment, if you have made up your mind to make a purchase decision and you are now bothered about the factors that affect the price of used heavy equipment and its fair market value, then your problem is justified. Well, we agree that it is not that easy and it needs meticulous detailing.

Generally, the fair market value of the used equipment is based on the current supply and demand for that piece of equipment and the competition in the market. So, determining the equipment’s value in the market can help you in indentifying the right price of the used heavy equipment. However, not only this but a variety of factors play an important role in determining the fair market values on used heavy equipment.

Factors affecting fair market values of used heavy equipment

When performing market research or purchasing used heavy equipment, always bear in mind the impact of the following factors on pricing:

1. Age and hours: The cost of used heavy equipment does not depreciate in an evenly manner. If the equipment is properly maintained and it is in a good condition, then the depreciation value becomes consistent. Here, the number of hours on the equipment comes into play and help in determining its resale value. Generally, an older machine with low hours and which has been properly maintained is more costly than the comparatively new one which is not maintained properly.

2. Used equipment’s ability: Used equipment which are better equipped, flexible and are able to perform majority of the tasks at the job site are often the best to be considered for buying and command a higher price than the models which are less equipped and flexible.

3. Manufacturer’s reputation: It is not at all surprising that the manufacturer’s reputation also play a huge role in determining the fair value of the used heavy equipment. For example, if you buy Mahindra Construction Equipment’s used heavy machinery, then it is sure that they are equipped with the latest technology and offer high flexibility. As a result, the cost of these machines is higher than others in the market as these machines can ensure productivity and efficiency for years to come.

4. Seller’s reputation: Not only manufacturer’s reputation is important but used heavy equipment seller’s/vendor’s reputation also counts in determining the right market value of the equipment. This factor becomes all the more important when you are buying from an unknown vendor. For example, an authentic vendor will have a detailed service history of the equipment, thereby, verifying the fact that the regular maintenance of the equipment has been performed to the highest standards. Also reputed vendors give some minimum warranty on the equipment. This highly impacts the cost of used heavy equipment.

5. Market factors: Last but not the least, the market conditions also impact the value of used heavy machinery. For example, in case of slow economy, it is obvious that low money would be spent on construction and infrastructure development, this impacts the price directly as this will lead to fewer potential purchases for used equipment, thus, driving down the prices and giving an opportunity to the buyers to negotiate more. Seasonal and location-specific factors also have a huge impact on the values of used heavy equipment.

After understanding the factors affecting the fair market value of used heavy equipment, you can visit all the reputed vendors that sell the specific equipment that you want to buy to inspect the equipment. You should then ask all of them for their quote for the same equipment, in addition to any extra fees that is not included in the quote. Make a note of the company name and the total cost quoted by each one of them. You need to total the amount quoted by all the vendors and divide it by the number of quotes you have received. The resulting figure would be the average or fair market value for the used heavy equipment. Knowing that, you can contact the vendor which is your first choice and ask them to match the lowest quote or bargain on the best price.

So, do have your proper research in place and know about the fair market values before making the purchase decision for used heavy equipment.