Whatever portion of the construction industry you're in, heavy equipment is quite possibly a big part of your daily life. Because this machinery can cost a pretty penny, it's important to know how to leverage those assets to your company's best benefit. But how do you know exactly what those machines are worth? Though they may be fully depreciated on your books because of the way business taxes work, they still have value. The best way to learn what your machinery is worth is through an earth moving equipment appraisal. Here's a look at how this type of equipment valuation works.
Exactly What's Involved in an Earth Moving Equipment Appraisal?
You probably have an idea of what your equipment was worth when you first purchased it, and you may have a rough idea of what you can sell it for used at end of life. But in the middle, between these two extremes, there is an entire range of possible values that will need to be carefully calculated. This is best handled by an accredited appraiser who can act as an independent third party, rather than working with an equipment dealer who may have their own interests in the process.
First, the appraiser will find out the basic information about your equipment, including the manufacturer and the model. This is because much like automobiles, different equipment will have a different expectation for total useful lifespan. If you have two pieces of equipment side-by-side, one may only expect to be useful for 5,000 hours while the other is expected to be useful for 10,000 hours. If they were both metered at 5,000 hours and were otherwise comparable, which one would you pay more for? That's the difference in value.
The appraiser will ask if there are any specific options or kits that were added to the machinery, as that will often increase the overall value due to the improved functionality, protection or other benefits it delivers to the equipment. Much like the similar equipment above, would you rather purchase a piece of equipment that has an upgraded radiator to help prevent engine overheating or a standard model? You'd prefer the upgraded equipment, of course, all other things being equal.
After this information is gathered, the appraiser will start a careful inspection of the equipment. Certain signs will be fairly apparent to them if something isn't quite right with the machinery, such as excessive control wear on a low-hours backhoe, dents and scratches on a forklift and new panels that have replaced old ones on a front end loader. These type of signs often show that the equipment may have been abused, which in turn will often shorten its useful lifespan. The appraiser will also go through your maintenance and repair logs to check that the equipment has been maintained regularly, which lengthens its overall useful lifespan.
By taking the time to have an earth moving equipment appraisal performed on your company's heavy machinery, you can discover exactly what these high-dollar assets are worth. This can make it much easier to decide when to update your equipment, how to handle a dealer who is undervaluing your machinery and many other benefits. The appraisal report will also serve as proof of value for insurance, tax, financial and legal circles, providing you with solid documentation of your company's assets.