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Making Sense of Used Construction Machinery Pricing

Making sense of Used Construction Machinery PricingWhen you’re in the market to buy a piece of used construction equipment, chances are you have a question or two about the costs and/or fees associated with the process. You don’t want any surprises. Here are a few considerations that will help as you make sense of the pricing model for used equipment.

Buying “As-Is”
As you shop around for used construction equipment, you will likely see a range of prices for similar machines and ask yourself, “Why doesn’t everyone charge the same?” While, it may be tempting to buy the cheapest unit, the reason why the price for similar machinery is not the same is most often because of who is selling the machine and how much work has been done to it beforehand.

When you buy from other contractors, auction houses and some dealers, you’re really buying “as-is;” this means that machine has come directly off of a job-site and straight to the sale yard, without an in-depth inspection or routine maintenance done. In other words, you’re taking a bit of a gamble to get the best price possible.

If you want more assurance for your investment, you will likely have to pay a bit more and work with a used equipment distributor that spends time with each machine they sell to ensure routine maintenance has been performed, as well as any needed repairs. For example, Jeff Miller at Trophy Tractor in Grand Prairie, TX, specializes in selling used equipment and says his team runs every machine they sell through their shop before listing it: “We change all the fluids, check for any manufacturer service bulletins and make any necessary repairs,” he explains. “By the time a machine hits our listings, we’ve spent an average of $10,000 making sure it’s ready to go for the buyer. It’s work contractors should be either asking the seller to perform or doing themselves after they buy it.”

Miller also says that their process will help them provide a more thorough inspection report for buyers. “Since we spend so much time going through a machine, we can provide the buyer with a lot more detail,” he adds. “For instance: On dozers and excavators, we give more information about the condition of the undercarriage and help the buyer determine how long they have before potential having to replace it.”

And if there ever is a problem with anything Trophy Tractor sells, Miller says they do everything they can to make it right with the customer.

Trophy Tractor, and other members of the Independent Equipment Dealers Association (IEDA), operates this way because their reputation is their livelihood. Members of the IEDA specialize in selling used equipment and have taken an oath to provide the best buying experience for their customers.

Buying on Consignment
Many contractors choose to sell their used equipment on consignment rather than trading it in, or selling it themselves. The contractor will sit down with an equipment broker and outline what they think is a fair price for a machine. From there, the broker will market it to potential buyers. The broker’s fees will be typically worked into the list price, so buyers don’t have to worry about any additional costs.

You probably want to know how much the broker is getting for his or her efforts. Well, the average fee ranges between 5–10% depending the type of equipment and market demand. If there’s less of demand, there’s more work involved in selling a machine so the fee will typically be on the higher end of the range.

Keep in mind: Not all equipment brokers are the same. Whether you’re buying or selling with a broker, you want to seek out an honest partner who is transparent about their fees and what they will do to earn them.

“When I’m brokering a deal, I do everything I can to make sure the buyer is getting a fair deal, and the seller is getting what the machine is worth,” says Chris Lohman with South Mountain Tractors in Tempe, Az., and a member of the IEDA. “The buyer and seller are both customers of mine, and I depend on repeat business, so I do everything I can to bring the two parties together and make sure everyone is happy.”

Lohman says that consignment process doesn’t always follow the same process, though. “There are times I’ll work with a buyer, who is looking for a particular piece of equipment and enlists me to find it,” he says. “In those instances, there is a buyer’s fee involved since I’m working for the buyer. That fee is negotiated before I start searching for a piece of equipment, so the buyer knows exactly what they are going to pay in addition to the piece of equipment beforehand.”

Additional Buyer Fees to Consider
Here are a few additional fees to be on the lookout for:

  • Lien search: Depending on who you’re buying equipment from, you may have to do a search for liens. If you’re working with a member of the IEDA, chances are they’ve already taken care of that process. However, if you’re buying from a private seller, you will want to do your own search.
  • Auction buying fees: In the last couple of years, many auction houses have begun charging buyers a fee on top of the fee they already take from sellers. Make sure you understand those fees before you place a bid.
  • Transportation: Wherever you buy your equipment, you will have to factor in the cost of transporting it to your shop or the job-site.
  • Your time: Remember “Time is money” and the amount of time you spend shopping for equipment is worth something. To minimize the amount of time, spend shopping for used equipment, seek a partner that you can trust and one that stands behind the equipment they sell. The IEDA and its used equipment listing page, IEDAUsed.com, is a great place to find that honest partner.

Buying used construction equipment is a sound investment. And, when you work with an IEDA member, you’re working with someone who has made the commitment to delivering value — transparent and honestly

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