Heavy equipment and machinery require a huge initial investment, and that is why it becomes important for businesses to work out their finances carefully. It also goes for the used heavy equipment; however, one might not always get good value if they want to resell them. It goes without saying that the buyer and seller would want a fair deal, and this is where equipment appraisal comes into the picture.
In heavy equipment appraisal, the appraiser takes into account the condition of the machine and gets a fair deal; it does not matter if you want it for a bank loan, financing, buying, selling, etc.; an accurate appraisal will help you make an informed decision.
To get more information about heavy machine appraisal, its importance, methods, etc., read on.
The Purpose Of Valuation
The valuation process might be requested for the following reasons:
- Buying or selling
- Insurance claims
- Financial reporting
- Corporate planning
- Property tax assessment
- Mergers and acquisitions
- Litigation or bankruptcy filing
It depends on your reasons; the appraiser will pick a method that applies to your situation.
Why Are Heavy Equipment Appraisals Important?
Whether you have a small business or a big one, if your company is expanding or it is down turning, liquidating, invested or audited in, etc., it is vital that you must have the market value of your tangible assets, including the equipment and machinery. When you obtain an appraisal from a professional, you get firsthand knowledge of your heavy machinery value and what you can expect if you wish to finance, buy or sell or if you want to upgrade the machines.
Secondly, the appraisal report you receive will also help you move to the next phase of the development of your company. You can also share these reports with third parties who can assist you with your plans.
Why Is Machine Evaluation Good For Your Business?
You have seen above the purpose and reasons for conducting the machinery appraisal. It offers some benefits too. Below are some of the advantages of conducting machinery appraisal include:
For The Insurance Coverage
This goes without saying every company or business requires insurance, and it includes coverage too. But how much your insurance will cost depends on several factors, such as your equipment’s value. So, when a professional evaluates your heavy machinery, the insurance brokers will have proof of report, and they will be more likely to agree on the face value. The word of the appraiser provides you with protection against financial risks.
For Buying And Selling Purposes
If you are willing to buy or sell any of your assets, then with the help of the equipment appraisal, you will know what your assets are actually worth. So, when you work with a certified appraiser, they will ensure that you are spending or paying fairly. Also, there are some instances where the machine has plenty of life left, and you can return some of the original investment. This will help you in getting funds for new equipment.
And with the help of the appraisal report, you can determine the financial and logical risks that could come from the equipment. When you know the risks, you will be well prepared and can mitigate the consequences. It ensures that your plant is operating at the highest efficiency.
Property Tax Assessments
If selling the equipment is not on your mind, an appraisal report can help you plan your property taxes. There might be a possibility that you are entitled to write-offs for machine depreciation. This will be helpful for you during the tax season. So, this is one of the advantages of working with professional appraisers, as they will give you an accurate assessment.
Apart from these reasons, appraisals also help you to be ready for your future budgets and maintenance, and you have records of the conditions of your machinery. Also, when you have this knowledge, such as the condition of your equipment, it helps you in decision-making processes. Since you will know the fair value, you can work through all the possible scenarios.
Steps Involved In Equipment Valuation
The appraisers follow these steps:
- They identify the assets to be valued and set the date of the valuation.
- They define the assessment team’s purpose
- After that, they identify the required concepts and then decide upon the methods to be used.
- Then they select the equipment valuation report type
- Check the availability of information and data.
In the first step, as you have seen, they determine which equipment is to be evaluated. They also decide which technical assets to evaluate, usually accessories, machinery, vehicles, etc. Also, the valuation is not only limited to a single device; you can appear for your production line, multiple operating facilities, etc.
Methods For Valuing Used Equipment
Three methods are widely used for evaluating heavy machinery:
- Cost method
- Sales comparison
- Income method
The cost method is applied for customized or unique equipment that has little market demand. The appraiser takes into consideration the replacement cost of the new model; they also consider the depreciation, condition, and lifespan of the machine.
In the sales comparison method, the appraiser collects the information, and after that, they study the market on used and new equipment to decide the pricing. They can also look to dealers, manufacturers, etc., to get an idea about the price. When generating the pricing estimate, they consider the age of the heavy equipment, condition, lifespan, etc.
The last method is the income method which deals with the level of income provided by the heavy equipment. So, it is basically used when the heavy machinery is connected to the income revenue stream, and the income can be easily tracked.
Summing up, when you are looking for buying or selling, financing, securing insurance, etc., equipment appraisal is a vital element that helps in getting a fair deal. However, since it is an intricate process, it might be difficult to assess the worth of the equipment on your own as it requires analytical skills. That is why you must opt for a certified and professional equipment appraisal company that can accurately appraise your equipment.