If you're reading through a machinery valuation before bidding on a piece of used equipment at auction, you'll run across the concept of remaining useful life. By understanding remaining useful life, you can understand how much the equipment values are and purchase with confidence. Learn more.
What is Remaining Useful Life in Equipment Appraisals?
Remaining useful life, sometimes abbreviated as RUL, refers to the amount of time in years a piece of equipment has before it will need replacement.
To gauge the remaining useful life of an item, the appraiser will review service records, thoroughly inspect the equipment, and check out the environment where the equipment is used. A forklift that's kept in a salvage yard will age much faster than one that's always stored in a garage overnight, for example. Even if two forklifts were purchased at the same time, their remaining useful lives can widely differ.
An equipment appraiser will consult guides that indicate equipment values over time, as well as the normal useful life of the unit, which is the typical life span of the unit. He or she may reach out to the manufacturer with questions that can help define a value if any questions arise.
By subtracting the estimated period of use from the normal useful life, the equipment appraiser can deliver an estimate for the remaining useful life. For example, say that a canner has a normal useful life of 25 years, and the appraiser determines the equipment appears to have been used for 10 years. The canner may be older or younger than 10 years; what matters less is the physical age than the amount of use the equipment shows. The appraiser would then subtract the use from the normal useful life to arrive at an RUL of 15 years.
How Understanding Remaining Useful Life Benefits You
If you are interested in a piece of equipment such as a canning machine, used equipment auctions can be a great way to purchase the equipment you need at a price you can afford. Yet if you don't understand the useful life, you risk paying more than you should for an old canner that won't truly last.
If you are the other party in the auction -- the owner of the canning machine who wants to sell it -- you also must understand the concept of useful life. By getting the equipment values taken ahead of time, you can gauge the fair market value of your item and decide your next steps. You might opt to have the old canner serviced, if a servicing can help you command a better price at auction. Or you might decide against servicing equipment, saving yourself money.
Whether you want to buy or sell a machine, remaining useful life is an important concept to understand. A skilled equipment appraiser will know how to accurately determine the RUL and can explain it to you so you understand the estimate and can make the right decision for your business interests. While the RUL is always an estimate, not a guarantee, it's helpful to have a baseline estimate for a machine's lifespan.
Once you know the remaining useful life of a piece of equipment you've just purchased, you can plan ahead for when the item might need to be replaced. This helps you budget accordingly for the replacement and avoid the unpleasant shock that comes with suddenly losing a piece of equipment you rely on every day.