The influence of location on heavy equipment valuations

When determining values of heavy equipment, some of the factors aren't related as much to the nature of the asset as much as they are about the ability of the asset to be matched by the local market. Bill Albaugh describes how an asset might or might not fit the local market based on demand and configurations, as well as how transportation costs might have a negative impact on the value of ag and construction equipment.

When you're valuing equipment, one of the things you look for is "is that piece going to sell in your area?" Because if not, you've got freight costs of getting it elsewhere. Your core customers in your area aren't going to be coming in to buy it. But, specifically, you've got certain geographic areas of the United States that have skinny-tire tractors. Those skinny-tire tractors are used in vegetables. They're used in sugar beets. So, if you're trying to trade for one in Kansas, let's say, you have to understand that that's a tractor that's probably not going to sell with that type of rubber in Kansas. So, either A you're going to have a $20,000 expense of changing tires out to make it sell in your area or, B, you're going to have to find a way of selling it up in Minnesota or the Dakotas or along the front range of Colorado or out in California that use those types of tires.

The other thing, and I alluded to that in the combine segment, was Contour-Master lateral tilt on your feeder house and having a chopper on the back end for the crop to discharge out the back. There's only certain areas that will just use spreaders only. There's only certain areas that have fixed feederhouses. And, so, when you're looking at valuing a combine you want to make sure it has the configurations that are going to sell in your area and those are big keys.

In the forage business — having a kernel processor. If the forage chopper doesn't have a kernel processor in it you're going to have added expense in order to add one to it to sell it in an area that most generally they use kernel processors in anymore.

The other item would be transmissions. If you have a tractor in an area and it has a creeper transmission or only eight ranges of speeds in the smaller tractors. In comparison to tractors with maybe infinitely variable transmissions, IVT, or CVT, constant variable transmission, or a powershift or a 24-speed mechanical shift on tractors. Transmission differentiations have a big effect on evaluations of equipment as well.

On the construction side, if you have LGP dozers and you don't sell a lot of LGP dozers in your area, that's something that you're going to want to bring up when you're evaluating a dozer. Excavators with certain reaches, excavators with thumbs, excavators without thumbs — all those types of options that come into effect on what you want to value your piece of equipment on your yards.

Another thing on the construction side is tractor loader backhoes. You've got fixed backhoe or you've got extend-a-hoes — and how that affects the valuation. You know, out in California, Arizona — in the warmer climates you've got ROPS tractor loader backhoes in comparison to in the Midwest or out east where you're going to have cab, heat and air for obvious reasons — for climate. That has a big effect on values depending on what area, the geographic area, you're at.

And speaking of geographic areas, freight becomes a big issue on valuing used equipment. Unfortunately, the east coast and west coast is on the coasts and so freight costs of when you go to — whether you're going to auction off the equipment or when you go to sell the equipment — where you're going to take that equipment to to sell it. Freight costs are exorbitant. To get across the rocky Mountains either east or west is a big cost.

HeavyWorth provides software to ag and construction equipment dealers to streamline their appraisal processes for used equipment trade-in evaluations. We can also provide turn-key valuation services for anyone who doesn't have professional evaluators on staff. If you're interested in learning what your equipment is worth, taking into account all the factors including location, contact us to get started!