Tom Hirt has interacted with loggers and small business contractors around the world for more than 45 years – hundreds, maybe thousands of great people. They have been instrumental in his growth of understanding the opportunities and challenges or buying and selling used equipment.
His company, FSK Equipment & Supply, has focused on the used equipment market since 2007. Tom has learned much about some of the hazards that contractors and business owners encounter when they enter the used equipment world on an occasional basis.
He has highlighted some of the critical issues that might be used to your advantage if you are navigating the market of used equipment as a buyer or seller.
Why do you want to sell your equipment? Here are some reasons Tom often hears. A logger or contractor may not be trading in, so the only way to maximize the value is for him to sell it himself. Maybe his dealer won’t give him what he thinks the machine is worth. He may need to sell it quickly and figures he can put more effort into it than his dealer or broker. He may be knowledgeable about equipment and think he can sell it as well as a dealer or broker. Finally, a logger may not want others to know he is selling some equipment.
There are good reasons why you should have someone or some company help you sell a used machine, according to Tom. First of all, companies that specialize in selling used equipment have more contacts and methods for advertising your machine – websites, customer lists, dedicated staff; they can connect with a larger audience of potential buyers. Do you want your phone number going out to thousands of people and fielding calls day and night? A used equipment dealer can help you properly document the sale in order to avoid any legal issues or conflicts later. They can also help you to price your machine to attract buyers and still get top value for your equipment. Your business is your area of expertise, and you probably have a banker, an insurance agent, a bookkeeper, a doctor, and so on; it’s reasonable to rely on the services of an expert to help you find or sell your used machinery.
Whether you go it alone or work with a dealer/broker, it is wise to know as much as possible about the process. Tom has some observations that may help you better understand the ins and outs of buying and selling used equipment.
The condition of used equipment is subjective. You might consider your used machine to be in good condition, but the guy who wants to buy it could see it completely differently – simply based on your perspectives. It is common to have differing opinions about the condition, notes Tom.
What are some of the important things to know about the equipment you want to buy or sell? There are several.
Do you know the history of the machine? Is the seller the original owner? Did the seller perform regular maintenance? If he is not the original owner, where did he buy it? Does he have repair records? If the machine has low hours, is it still under warranty? If so, is it transferable to a new owner? There are different types of warranties: standard, power train, and structural. Did the machine come from an auction? If so, be wary.
Get the serial number. If there is no serial number plate, you may find it stamped somewhere on the frame of the machine. If you still cannot find it, you may be able to locate the serial number of the engine. If it is the original engine, the manufacturer should have that number in their records and should be able to match it with the serial number of the machine. If there is no serial number, proceed carefully! If the seller cannot produce the documents that he received when he bought the machine, buying it could be risky. Talk to a professional for advice as to how to proceed or find a different machine.
How many hours are on the machine? Do the hours seem to match the overall condition? It’s possible to change the hours on some machines, such as when a new engine is installed or a dashboard is replaced. If the hour meter is broken, you are dealing with a total unknown. Have a dealer research the serial number and learn all you can about the history.
Where has the machine worked? If it’s been working in pine in the South, those contractors do not get paid as much per ton, so they must have higher production to be profitable. The general view in the industry is that equipment from the South has been worked harder than similar machines in the North that work in hardwood, which pays more. Don’t misunderstand, southern loggers take good care of their equipment, but they generally must push their machines harder to be profitable.
How does the cab look? If the cab is in poor condition, it may reflect how the rest of the machine has been maintained. The cab may be clean, but look closely for signs of neglect.
Does grease show on the pins and pivot areas? Are the pins and bushings tight? Do you know how to judge an undercarriage if you are looking at a tracked machine?
Does the owner owe anything against the machine? Does he have references in the industry? How does his other equipment appear?
Do you know what the engine and pumps should sound like and how to determine if they are functioning at full capacity?
If it has over 8,000 hours, the owner may have had to replace or rebuild some major components. If he has not, the pumps and engine have a greater chance of failure. They may run another 8,000 hours, but the possibility of a major failure is greater the higher the hours.
Check all the fluids. Are they clean? This relates to the owner’s records of regular maintenance.
In a nutshell, added Tom, inspecting a piece of equipment is similar to inspecting a used vehicle or a pre-owned home. If you are not confident in your ability to determine the condition of the used machine, get help from a pro. If you buy a used car, do you take it to a mechanic so he can check it out? When you bought a home, did you have it inspected by an individual certified to perform home inspections? Engaging a qualified service man (perhaps from a local dealer) can provide you with greater peace of mind that the machine is in the condition represented.
When it comes to a late model machine or one with low hours, the seller bears a much higher risk of not getting fair market value because he is competing with new equipment. He must price it substantially lower than a new unit.
For example, imagine you bought a new skidder in 2016 for $300,000. After putting 1,400 hours on the machine in 18 months, you were put on quota and can no longer justify the payment, and you have to sell it. You might weigh its value against a new 2018 model that is priced at $325,000.
Most people would consider 1,400 hours is maybe 10 percent of the useful life, so pricing your 2016 skidder for $260,000 would seem reasonable. However, your skidder no longer has a warranty. The 2018 may be offered with lower interest rates and longer terms than a used 2016; the monthly payment on the new unit will be very close to the payment on the 2016, and it will have a warranty.
The only way you can compete with new equipment is to price it low enough that a buyer sees more value than a new model. Selling a late model machine can be more painful for the seller.
One final point: You are buying a used machine. There is always a risk that something unforeseen might be wrong, and it won’t show up until you have bought it and put it to work. Buyer beware!
If you take your time, ask questions, do your research, and are not afraid to ask for professional advice, you greatly increase your chances of buying a great value that will serve you well.
Tom Hirt is the president and owner of FSK Equipment & Supply, Inc. FSK is focused on solving problems of clients with the right piece of equipment or helping them generate more value when selling a used machine. Its specialty is material handling machines with a concentration in forestry and land clearing equipment. For more information contact Tom at tom@fskequipment.com or visit the website at www.fskequipment.com.
