Equipment Appraisal Blog | Understanding Machinery Appraisals

How Long Should You Continue Operating Your Older Equipment?

Posted by Equipment Appraisal Services on Mon, Oct 03, 2022 @ 07:30 AM



Machinery Equipment Appraisal Heavy Equipment Used

If you’re like many small business owners who run a lot of heavy equipment every day, you try to keep it operational for as long as possible to avoid purchasing new replacement machinery. Given the added capital investment, as well as today’s supply chain woes, which lead to long delivery delays and increased pricing with new equipment, this is a wise course of action. There may come a point, however, when the decision to retire older machines becomes inevitable.

Every successful company that operates expensive machinery employs experienced, talented personnel who manage day-to-day facility operations. This includes running and maintaining the equipment as well as replacing components, and even rebuilding the equipment when necessary. If done effectively, this leads to an extended economic life for your assets, well beyond their initial estimates.

That is why you will often see equipment and heavy vehicles still operating in the field 20, 30, or even 40+ years since the day they were first built. This can instill a sense of pride as it relates to the longevity of owned machinery, however, companies should consider reviewing annual maintenance and operating costs vs. the potential longer-term impact of buying new replacement assets.

Things to consider in this analysis:

Look back over a 5-10 year period and calculate the average annual cost of operating your machinery. Include factors such as monthly maintenance, refurbishments, component replacements, downtime effects, job completion delays, and anything else that relates to daily operations and project costs.

Weigh these average costs against the investment in replacement machinery, while estimating annual costs to service new debt, reduced operating and maintenance costs, more efficient run time, and project capabilities. The latest technologies developed for new machinery can be a double-edged sword, with a lot of computer-controlled components you need to consider, as well as training personnel to effectively operate them.

At some point, it will become clear when it’s time to make the call and upgrade your fleet of equipment. It’s a difficult decision that is based in part on common sense, practicality, competition, and even emotions. Moving into the next generation of equipment is always a big decision, however, don’t put it off too long before it begins to affect your bottom line.

Tags: heavy equipment appraisal, Machinery & Equipment Appraisals, used machinery

How is the changing market impacting heavy equipment appraisal?

Posted by Equipment Appraisal Services on Tue, May 16, 2017 @ 01:42 PM

used heavy equipment.jpg

As the economy continues to lumber on, a wide range of markets and industries are being impacted in the process. But what about heavy machinery? Current projections are showing growth in the heavy construction equipment market as global economies continue to crawl out of the last downturn. What does that mean for your machinery values? Here's some insight into how heavy equipment appraisal values will be impacted in the upcoming years.

How is the changing market impacting heavy equipment appraisal?

A recent report issued by Markets and Markets created a global forecast of heavy construction equipment by type, end-use industry, application and region out to 2021. It's projections estimate that the industry will grow by a compounded rate of 7% per year, from $121.46 billion in 2015 to nearly half again that at $180.66 billion by 2021. This is in line with estimates of growing government spending on infrastructure projects, increasing population needs and increased construction in developing countries. Earthmoving equipment is expected to lead the charge as new projects break ground. In all aspects of heavy equipment, the heavy hitters in the industry are already positioning themselves to take advantage of this construction boom. Where do your equipment values stand in the process?

As demand for construction equipment rises, some portion of that will be taken up by new equipment produced by industry leaders. But in many circumstances, the demand for used equipment will actually rise as well. In developing countries, many governments would rather invest in second-hand equipment that will allow them to achieve the same amount of work without having to make as much of an investment in the beginning of the development process. Construction companies that are forming to take advantage of the projected growth will want to maximize the value of their capital, making used equipment an excellent investment. As demand for this equipment rises, so does your equipment values.

As the market grows, you'll want to be in a position to take advantage of the opportunities that growth presents. Part of being able to do so is tied up in what assets you have available to secure funding for business expansion and upgrades. As the used equipment market grows, your equipment values also increase. By getting an updated construction equipment valuation, you can receive solid documentation of the increased value, allowing you to use that value as leverage with your financial institution.

What's more, an equipment valuation report created by a certified equipment appraiser uses methodology that has been proven to stand up in legal, financial, insurance and tax agency circles. That means when your tax assessor's office assumes that the growth in the industry means you should have a much higher tax on your equipment, you already have the documentation needed to fight the unfair assessment.

With the projected growth in the market, we can expect to see solid changes in heavy equipment appraisal values as time marches on. Are you ready for this upcoming growth? If you haven't had a recent equipment valuation, you may be missing asset value that you could use to your business' benefit as this growth takes place.

Tags: heavy equipment appraisal, heavy equipment appraisers

How a Heavy Equipment Appraisal Gives You a "Grade A"

Posted by Equipment Appraisal Services on Tue, Nov 29, 2016 @ 08:30 AM


When you work in grading, working with heavy equipment is just part of the process. But what are your equipment values? Many businesses determine their equity based on tax accounting records, which may not give you an accurate picture of your equipment's value. Smart business owners turn to heavy equipment appraisal services to get the real value of their heavy equipment. Here's why:

How a heavy equipment appraisal is Helpful in Your Business

First off, let's take a good look at where tax accounting isn't helping you get the best out of your business. Tax accounting is focused on getting you the best possible results for your tax return. In most cases, this involves trying to lower the tax liability of the business as much as possible. Because it covers a wide range of industries and businesses, tax accounting is focused on what most businesses face rather than specific industries and businesses. For example, machinery is reduced in value using a depreciation table. This may not reflect the actual value of the machinery, just how much it is expected to lose value according to a table developed by the tax agency.

We've all seen heavy equipment that has been gently used and well cared for, resulting in a machine that continues to perform long after it has been completely depreciated. That equipment is an asset that still has significant value to the business owner, no matter what the tax tables say. Equipment appraisals do a great job of helping businesses recapture that hidden equity that isn't apparent in a tax return. The appraisal report provides you with legal proof if you need to make an insurance claim for a higher value than the adjustor is willing to pay without further proof. This type of documentation is also accepted by virtually every financial institution, because a certified equipment appraiser is able to document the standardized methodology and sources the appraiser used to calculate the value of the machinery.

What about the other side of the coin? We've all worked on sites that were absolute murder on equipment. Unless a machine appraisal is performed, your tax return will reflect a much higher amount of equity in that asset than may be realistic. It's bad enough knowing that the equipment will probably not last nearly as long as you had hoped when you bought it, but having to pay taxes on a false level of equity because a tax table dictates the machine's depreciated value is even worse. Because a machine appraisal from a certified equipment appraiser holds up to scrutiny and uses standard methodology to determine value, the report will stand up to serious scrutiny in court or during an audit.

By getting a heavy equipment appraisal, you're ensuring that you know the right value for your grading machinery. That will help you make good business choices, because you'll know whether you're negotiating from a position of strength or weakness, and whether that new investment is a good idea or a big risk. But are you working with an experienced, certified equipment appraiser? Using a certified appraiser ensures your machinery valuation will hold up to scrutiny in financial, legal and insurance circles.

Tags: construction equipment appraisal, heavy equipment appraisal

4 Details Potentially in a Heavy Equipment Appraisal

Posted by Equipment Appraisal Services on Mon, Oct 05, 2015 @ 03:00 PM


When you own heavy equipment, knowing the equipment value is an important part of your business' financial situation. But what does a machine appraiser look for when they're performing a heavy equipment appraisal? In this post, we'll take a good look at what details an equipment appraiser looks at during a machinery and equipment appraisal and how it affects your equipment values.

Excessive Wear That Doesn't Match the Meter Hours

When an equipment appraiser is performing equipment appraisals, one of the biggest signs that something may not be right with the equipment is when there's wear on the machine that is far too excessive for the hours shown on the meter. Much like an odometer reading that shows very few miles on an old, beat-up vehicle, a mismatched amount of wear compared to the amount of hours on the meter is often a sign of tampering. This raises a red flag for most appraisers performing a heavy equipment appraisal and can lead to a much lower appraisal. If you have equipment that has excessive wear, documenting what has happened with the machinery will help the equipment appraiser get the whole story and value the equipment accordingly.

Legal Title Issues

When a machine appraisal is taking place, one of the areas that is looked into is the title for the machinery being appraised. Because issues with the title can affect your ability to sell the machinery or legally claim financial rights on the equipment, it's an important part of the appraisal process. A title that has the wrong name, a co-owner who is not part of the business or other legal issues can impact your ownership of the machinery, which means that you can't depreciate it in your accounting. A salvage title can raise questions about whether the machinery can be safety operated or if there is hidden damage or other problems that could affect its value. If there's any possible way to clear up any title issues prior to your heavy equipment appraisal, it will help the process go more smoothly.

Poor Maintenance or Nonexistent Repair Records

When you own machinery and times are difficult in your industry, it's often less expensive to repair or maintain your equipment on your own or put it off instead of hiring the work out. But a lack of maintenance, incomplete repairs or nonexistent records can make it appear that the machinery has been neglected and will often devalue the equipment. If you can document the maintenance or repairs you've done on your machinery, including any receipts for supplies or parts, you can help avoid this potential appraisal pitfall.

Excessive Abuse

This is different than the excessive wear mentioned above, because it's a sign that the machinery has been abused and may have been taken well beyond its safe limits in daily use. Machinery that falls into this category can include serious dents in the body panels, welds, bends or cracks where the machinery has been taken well beyond its original specifications or rips, cracks and tears in the cab and safety equipment that compromises operator safety. By taking the time to properly train your workers and stay on top of any repairs or safety issues, you're ensuring that your equipment will receive a great appraisal value.

If you're ready to have a heavy equipment appraisal performed on your machinery, take a few minutes to get your records together and make sure any needed repairs or maintenance is performed. Then contact a qualified machinery appraisal service to get a quote

Tags: machinery valuation, equipment appraiser, heavy equipment appraisal