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Weighing The Risks Of Traditional Used Equipment Auctions

Sep 4, 2014 - 5 years ago

By Supply Post

Having the right equipment on hand is essential to managing a fleet. One source for fleet management is auctions, both traditional onsite and more recently online. When electing to use an auction for both disposal and acquisition of fleet, it is important to weigh the pros and cons of the auction service. Traditional auctions can be infrequent and far away, adding both hassle and cost to the equipment acquisition process. And for those selling equipment, it’s important to get a favourable return, which can be difficult to guarantee with these auctions as the buyer base is limited to the local market. To encourage smarter buying and selling, equipment owners should understand the risks associated with traditional auctions.

Disadvantages to buyers: Trouble finding the right equipment

Finding the best equipment for your business can be difficult when buying at a traditional auction because it may have a limited selection of heavy equipment. Online marketplaces feature a wide variety of equipment from sellers around the world. This allows buyers to find items that are the best fit for their specific needs. Online marketplaces are easy to navigate and can be easily tailored to search for equipment based on sector, type, auction date and more.

Difficulty accommodating tight schedules

The opportunity to buy equipment at a traditional auction may only occur a few times a year within a buyer’s area and may not meet the timing of their business needs. With an online marketplace, buyers can purchase equipment at times that fit their schedules because these auctions occur more frequently. Online auctions are also more convenient because buyers can access them from their computers, tablets or mobile phones. Buyers no longer need to travel to auction sites to view and bid on equipment, which saves time and money. In turn, these savings give buyers more room within their budget to bid on equipment.

Limited transport transparency

The cost to transport an item can sometimes exceed the price paid for the machine. Thus, equipment buyers want to have an estimate of their transport costs before bidding on a machine at auction so that they can make smarter business decisions. Traditional auctions can be unaccommodating in providing costeffective options that buyers can vet ahead of bidding. In comparison, some online auctions will provide a list of transportation providers that have been properly vetted to ensure a safe, reliable and proven transportation service.

Lack of detail

At a traditional auction, there may not be ample room or time for a buyer to thoroughly inspect the equipment including overall condition and functionality. Online auctions can provide professional inspection reports that detail the equipment’s condition, features and include numerous photos to give buyers a more accurate state of the machine. Often, the online inspection reports provide more information than buyers can obtain at traditional auctions. Some online marketplaces also preview equipment weeks before the auction to provide potential bidders time to review the equipment reports. A thorough review of the equipment increases confidence in purchasing online.

Limited support

Traditional auctions don’t keep detailed records of all attendees, just the final buyer. In comparison, online marketplaces capture information and use it to nurture bidder relationships. These data-driven marketplaces have the ability to reach out to bidders who lose out on a piece of equipment when a similar machine is listed for sale in an upcoming auction.

Disadvantages to sellers: High transport costs

Paying to transport equipment to an auction reduces a seller’s final net proceeds. Online auctions connect sellers directly with buyers, eliminating the need to move equipment to an auction site. Online auctions also reach buyers around the world, providing a larger buyer base to drive higher prices.

Infrequent Sales

The traditional auction process also results in slower time to cash because of infrequent auction schedules. The lack of frequent sales forces equipment owners to hold fleet longer than their business needs require, tying up capital that could be utilized for current work. When selling online, owners can choose to sell their fleet when the timing is right for their business.

Difficulty finding the right buyer

Sellers take a risk transporting their equipment to a traditional auction in hopes of finding the right buyer. Traditional auctions run the risk of poor weather, lack of promotion or buyers’ busy schedules, which can result in low attendance. A seller may have to sell the equipment below fair market value or may not even find a buyer. In the event that equipment is not purchased, sellers must pay to transport equipment back to their site or pay for storage near the auction lot and wait for the next selling opportunity. Online auctions are a great solution for sellers because they reach a larger pool of global buyers and eliminate local buying slumps and distance and language barriers.

Online auctions reach people around the world and continue to increase in popularity among equipment buyers and sellers. Buyers are provided greater insight into the condition of equipment, flexibility to bid from anywhere in the world at any time, and eliminate the steep costs of travel to a traditional auction. Sellers are offered a cost effective way to sell equipment on their own schedule and save time and money in attending traditional auctions. Faced with the many risks of attending traditional auctions, online auctions are providing a more economical and efficient way to buy and sell equipment.

By Sue McGregor, Managing Director of Canada, IronPlanet

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