Equipment Appraisal Blog | Understanding Machinery Appraisals

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

Machinery valuation is often a missed opportunity. While Equipment Appraisal Services knows most business owners appreciate the importance of properly functioning equipment for producing a revenue stream, it is difficult for them to go beyond that assessment and think of their machinery as a valued business asset. Many managers believe they can run their machinery until it is no longer useful, and then simply buy a replacement.

That approach is all well and good until an event occurs which requires the business owner to provide an equipment value. This could be related to an insurance claim or a potential sale, or an equipment appraisal may be required to allocate property as part of a divorce settlement. It can be difficult at that point to find a company that is capable of performing an accurate machinery and equipment appraisal within a limited timeframe.

Our equipment appraisers at Equipment Appraisal Services provide an unbiased and professional opinion of the value of a tangible asset. We may look at the original cost of the equipment less any accumulated depreciation, assess its age and current condition, calculate its estimated earning capability, and try to determine the cost to replace or reproduce it. Values may range from what it would cost to reproduce the equipment with new machinery all the way down to what its value would be as scrap. This provides accurate information on which to base further actions and decisions. There are three approaches we may use when determining equipment values:

• Cost Approach: This machine appraisal approach may be used most often for such purposes as an outright sale or for tax reporting purposes. It begins with as assessment of what it could cost to reproduce or replace the machine, deducts all forms of depreciation, and takes such factors as age and condition into consideration to determine an estimated value. For example, if you have a lathe that you want to sell, our equipment appraiser would determine what a knowledgeable buyer might reasonably pay for a new piece of equipment, and then make appropriate adjustments to account for the existing wear and tear, in order to justify a realistic sales price.
• Sales Comparison Approach: In this instance our appraiser will compare the value of your machinery to recent sales and offering prices for similar pieces of equipment. We will then make an upward or downward adjustment, depending on the particular condition of your equipment.
• Income Approach: This approach tries to determine the present worth of the future benefits that might be derived from a piece of equipment as the result of ownership.

Equipment Appraisal Services is a nationwide provider of certified machinery and equipment appraisals for litigation, bank financing collateral, allocation of assets, divorce and partnership dissolutions, property tax appeals, insurance recovery claims, mergers and acquisitions, gifting and donation justifications, estate settlements, financial reporting, and risk management.