Equipment Appraisal Blog | Understanding Machinery Appraisals

Why a Machinery & Equipment Appraisal after a Purchase is Necessary

Posted by Equipment Appraisal Services on Thu, Nov 05, 2015 @ 03:00 PM

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If you have just purchased a large piece of equipment, then you may wonder why you would need to have a machinery valuation done. After all, wouldn't the equipment be worth the price you just paid for it? Not necessarily. Learn the benefits of having a machinery & equipment appraisal performed after a big purchase to ensure you make the most of your new asset. 

Why Have Equipment Appraisals After a Purchase? 

Top reasons to have a piece of equipment valued after a purchase include:

  • Reset fair market value - The business that sold the equipment to you probably did so at the point at which the piece of machinery had no book value to them. Perhaps they got a new excavator when their old one had fully depreciated on their books. Yet, you know that an asset like a used excavator still has a lot of life left in it. With an appraisal, you can reset the fair market value so that you can claim depreciation on the item. For your tax purposes, establishing equipment values is the first step toward being able to depreciate the item.
  • Insure the item - When it comes to something as large as an excavator, a machine appraisal is critical to protecting the item through insurance. If something were to happen to the excavator, would you have enough money to repair or replace it without affecting your profit and loss? If not, then you need the protection that insurance offers. An equipment appraiser can set the fair market value of an item so the insurer will cover it at its worth. 
  • Determine replacement cost - Ideally, your excavator will perform well for many years to come. Yet a smart business owner always covers themselves in case "the worst" does happen. By getting an equipment value from a machine appraiser, you can establish the cost to repair or replace equipment pieces as well as the whole machine. This allows you to make informed decisions about equipment repair and determine when the machine costs more to repair than it would to replace, saving the business money. 
  • Boost business value - It may seem strange that a machine appraisal can positively impact business value, but it is true. When you have all equipment appraised, including new-to-you used machinery, your business can have an overall higher value. This occurs in part because appraised value is higher than depreciated value. 

If you have purchased a large piece of equipment, or if you are planning on doing so in the near future, identify equipment appraisers who have expertise in your specific niche. This way, you can have them appraise the equipment so you can take the necessary steps to protect yourself once you move the new asset into business usage. 

When moving through the process of machinery appraisal, it is necessary that you work with an equipment appraiser who really understands what you do and how to value the piece of equipment that you use. This way, you end up with a fair market value for your large item that is accurate and fair. An inexperienced appraiser could guess at the value and accidentally lead you astray. 

If you would like to learn more about the equipment appraisal process for used machinery, or if you want to talk to an industry expert about valuing a piece of machinery, please contact us at Equipment Appraisal Services.

Tags: equipment appraisals, machinery & equipment appraisal