Get More Value from Your Used Equipment

Asset management is an important issue for today’s construction professionals.

Owners may want to upgrade backhoes, trenchers, skid-steer loaders and other equipment after 5 to 10 years of service. Even with items that remain productive longer, it’s important to find a valuable sales channel when equipment reaches the end of profitable use. Traditionally, equipment owners have had limited options when it comes to selling used equipment: trading it in to a dealer or listing it in the classifieds.Like buying a new car, many owners believe they will get the best value by trading in used equipment to a dealer when they purchase new equipment. While this might provide leverage for price negotiation on the new equipment, it doesn’t always yield the best price realization on the used item. To remain viable, dealers must create acceptable profit margins on each piece of equipment, making it difficult for owners to get premium prices for their used equipment. Geography can also limit owners’ choices as many are unwilling to get competing offers from dealers in other locations.

To increase resale value, many owners are now trying to sell their used equipment through classified advertisements. Sometimes this approach yields a higher resale value for the owner. However, it can often be a time-consuming process, creating headaches for sellers who must be available to answer questions and handle prospective buyers.  

Advantages of Online Auctions

There is a new option for construction equipment. Online auctions can provide another sales channel for those looking to sell used equipment. Because they are not tied to a specific location or region, online auctions can reach a global audience of interested buyers, ensuring more bids per item than traditional auctions. As buyers compete to “win” items, owners realize better prices for their used equipment. 

Some online auctions also take on traditional seller responsibilities such as fielding calls and handling questions from prospective buyers. In addition to listing the equipment and necessary information, online auctions can actively market items to better connect buyers and sellers. By monitoring website traffic, online auctions can create a strategy to increase the number of visitors to certain items. By using print ads, HTML e-mails, phone calls and other tactics, some online auction companies even allow bids to be placed before the auction begins.

Online auctions also offer convenience. Sellers are able to list their equipment from their workplace or home. Once the equipment is consigned, the seller has little to no responsibility to find interested buyers, and often does not even need to transport the equipment. Online auctions allow items to remain at the seller’s location. Once the item is purchased, transportation can be arranged to pick up the item directly from the seller. 

What to Look for in an Online Auction

Detailed inspection reports provide an invaluable service to online auction participants. Since sellers cannot physically show their equipment to interested buyers all over the globe, a detailed equipment inspection report on the company’s website provides a way to communicate the exact condition of the equipment. Auction companies that provide inspection reports ultimately generate better prices for sellers, especially when accompanied by an equipment guarantee. Anyone looking to auction equipment online should choose a company that offers both services. For buyers, an equipment guarantee allows them to shop, bid and buy with confidence. 

A secure payment and equipment delivery process can also relieve anxiety on both the buyer and seller. This transaction comprises the most significant component of online auctions. Sellers should look for an online auction company that can verify and guarantee payment, and buyers should purchase from auction services that provide a secure method of transportation and delivery. The best auction companies function as intermediaries between the buyer and seller, protecting both parties. One example might use the following process: Once a buyer wins an item, the buyer is required to pay the auction company directly. The auction company then notifies the seller to release the equipment. When the equipment is received by the buyer and its condition verified, the company then releases the payment to the seller. In this situation, the auction company stands behind the entire process, fairly moderating the exchange.

How to Sell Equipment Online

When deciding which online service to use when selling equipment, visit auction company websites to get an understanding of how the auction company does business. Look for pages that clearly explain auction formats, policies and features. This will give sellers an opportunity to place themselves in buyers’ shoes. The site should be easy to understand and use and have plenty of information on equipment offerings, including equipment makes and models, product categories and locations.

The next step is to meet with an auction company representative. Many online auction companies have regional representatives who will meet with prospective sellers. In the event that it is not possible to meet in person, contact customer service to address any remaining questions. Ask the representative about providing an inspection report to buyers. In most cases, this report increases equipment resale value. Be prepared to furnish documentation on equipment. 

Next, consign the equipment for sale.  If meeting with a representative, in many cases they will bring the necessary paperwork to sign or direct you to the Website for those materials. A consignment agreement legally recognizes the right of the auction company to sell the item(s) and obligates the seller to deliver the equipment.

It’s also important to understand all options. Sellers may have the ability to establish the price at which an auction opens, or set a “win it now” or reserve price, depending on auction type and relevant policies. Setting a reserve price allows sellers to retain equipment that does not reach a prespecified bidding amount. “Win it now” prices designate the amount buyers are required to pay to end the auction early by purchasing the product immediately.

Be sure to check on tax-free exchanges. Equipment sold for capital gain may be eligible for tax deferral as outlined in Internal Revenue Service Code 1031. This code allows equipment owners to defer federal income taxes on the sale of a piece of equipment when they buy a similar piece of equipment within a specific time period through a qualified intermediary. Ask a sales representative to help coordinate this paperwork.

Finally, if not already completed, register an online account with the auction company. Registering an account often gives sellers access to important auction information, messages, special offers and other features. It may also help to track the seller’s items. Often, personal accounts will keep a history of items listed and sold.

Construction Business Owner, February 2008