Equipment Appraisal Blog | Understanding Machinery Appraisals

When you work in construction, your machinery is a big part of your company's assets. But part of being a responsible business owner involves knowing the value of your assets. How do you determine how much your equipment is worth once it's gone into service? Here's a quick look at what happens when appraising construction equipment.

What happens when appraising construction equipment?

There are a number of different areas that an equipment appraiser considers when appraising your equipment, some of them not what you may consider when setting up an appointment to have your machinery appraised. 

• How old is the equipment? Though age isn't a solid indicator of performance, it can create a lower overall value as newer machinery has features that have become standard because they are very handy and help improve your rate of production. As an example, a miter saw with a laser cut indicator helps speed up cutting time, allowing your crew to get back to work on the project instead of lining up careful cuts one at a time.
• What is that model's performance history? Some models are known to have specific issues that can impact performance, lifespan or functionality. If there has been a remedy provided by the manufacturer to deal with a specific problem that has not been installed on your machinery, it can negatively impact your machinery's value.
• What features are available for that specific model? If you have a pickup to help haul materials and tools, does it have four wheel drive or a towing package that will improve its functionality on the job and improve its overall retail value? Added features and kits that improve functionality often improves overall equipment value.
• What condition is the equipment in? If it's in good shape and has been well maintained, your equipment may value much higher than you may expect. If, however, it is nearing the end of its expected useful lifespan, the value may be much lower than you'd expect. A good equipment appraiser will take a solid look at the equipment's workings to determine its condition.
• Are there signs that the equipment has been abused or neglected? If it's obvious that there are problems with the equipment, most people can pick up on it and would offer a lower value. But what if the equipment you're considering buying has had panels replaced or fluids changed to hide abuse or neglect? A good appraiser will catch issues like this.
• Are there receipts or maintenance logs available? Being able to prove the machinery has been well maintained proves it has not been abused or neglected, as above, and may help build value through the documentation. It also helps the appraiser determine what has been done on the machinery, whether it has been well maintained from the beginning or if it has had to be rehabilitated at some point.
• What is the industry or market like for reselling machinery? When the housing bubble burst and helped crash the economy, construction equipment wouldn't resell for very much, especially compared to a few years prior when the industry was booming and finding equipment was virtually impossible.

Appraising construction equipment can seem like a confusing process, but by understanding how that process works, you can have a better appreciation for how equipment values are determined. By knowing how the appraisal process works, you can leverage this information to your company's best interests.

As the building industry rapidly evolves, are you keeping up with the changes that are happening? If you aren't, you might not have an accurate picture of how valuable your heavy machinery is in the market. Fortunately, a construction equipment appraisal can help you stay on top of changes and take advantage of growth in the market without subjecting your business to unnecessary risk. Here's how it works out:

Using a construction equipment appraisal to keep up with current trends

Current industry trends in construction primarily focus on one particular aspect of building design: efficiency. The general change in the population towards healthier living, sustainability and lower waste on construction projects mean that today's construction company must provide high-quality, sustainable products and techniques while cutting waste and the end cost of the structure to the client. But how do you keep up with these changing trends? One way is by using well-maintained equipment that holds its value well while providing years of reliable service.

But overall, the construction industry is growing both across the country and around the world. As the industry grows, what happens to the value of your construction equipment? As growth overtakes equipment production, existing equipment becomes more valuable, but to what extent? Many businesses find that having construction equipment appraised helps them understand how their equipment values change over time and how that can impact their overall asset values.

However, with this growth also comes the opportunity to replace aging equipment. But how do you decide when it's time to get rid of older construction machinery? A good equipment appraiser spends all their time looking at equipment and writing up reports on its value. This means that they generally have a good feel for how long the remaining useful life span of the equipment may be. By determining this information, you can decide whether you need to change out that older grader that is getting up in years or whether you want to hang on to the old backhoe you have on site because it's still expected to provide years of reliable service, despite its age. This means you can choose the right time to sell, trade in or donate your older equipment for your business' best interests.

When you know your equipment values, you can also make smarter business decisions. When you think that your equipment is worth more than is realistic, you're more likely to take on risky investments because you think  you have the equipment assets and collateral to back up the investment. But when that investment goes south, you'll quickly discover you don't have the assets to cover the financing you took out for the investment. Conversely, if you think your equipment is worth less than is realistic, you may be missing out on fabulous opportunities because you don't believe you have the collateral or assets to make the investment. That means you won't see the level of growth your business is capable of achieving.

By keeping on top of your equipment values, you can quickly take advantage of favorable trends to grow your business while avoiding investments that could prove too risky. Construction equipment appraisal provides you with a wealth of information about your machinery, from its expected useful remaining life to any range of different sale situations. Make sure you take the time to get this important information today to help protect your business interests.