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Beware the pitfalls of buying auctioned equipment

With machinery auctions more and more common, potential buyers need to be aware of the pitfalls of buying equipment at these events, and ask themselves this question beforehand: are you really further...


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March 1, 2009 by Rob Miller, Wittmann Canada



With machinery auctions more and more common, potential buyers need to be aware of the pitfalls of buying equipment at these events, and ask themselves this question beforehand: are you really further ahead buying at auction than if you had called your OEM local supplier, with whom you have an established relationship, and who knows your specific needs and business? It’s worth bearing in mind that the true cost ultimately depends on the condition of the equipment, and if it’s right for the application, rather than what you actually paid for it.

DO YOUR LEGWORK

Unless you’ve recently bought or requested a quote, your knowledge of the market and equipment cost may not be current. This is one value that machinery auctions can serve: go to the previews, get specifications, obtain as much information as possible, and try to get estimates on the cost of equivalent new equipment, so that you can determine if what you’re looking at is really a deal. In addition to the acquisition price at the auction, you’ll want to find out how much it will cost to install the equipment in your plant.

Most machinery on offer at auction is sold “as is,” with no warranty or return policy, so verify the terms up front before buying. Understand that in many cases in which a company has closed down, the best equipment has already been snapped up by insiders, meaning the equipment left to go to auction may be “the leftovers.” Don’t assume that everything at an auction is a great deal.

If you’ve decided to go ahead with a bid, establish beforehand the highest bid you will make, and don’t exceed it. And be careful: auctions can play on emotions, driving prices higher than the true value, so don’t get caught in the frenzy. Once you’ve done your best to determine a fair price based on the condition of the equipment, you’ll be better informed. If you can, determine as much as possible about the operation of the equipment. Is it fully operational — can you test it to find out? — and if not, what will it cost to make it fully operational? What is the service history of the equipment? Has the equipment ever been retrofitted or rebuilt?

Considering the time and effort spent specifying equipment, buying at an auction leaves little time to address typical questions and concerns. What about the electrical specifications for the equipment? Are the controls current technology? Does the equipment come with the current software, and back-up copies? Is the equipment compatible with your existing equipment?

Like any equipment purchase, you should still consider the ROI. There are many factors to consider beyond the unknowns of how it performed or if it was properly maintained that would contribute to the life of the equipment. While you might be all right if you purchase several identical pieces of equipment and can rebuild them as they age by using older equipment for parts, what if you can’t get spare parts, or if the supplier has gone out of business? It makes sense to check to see if you can buy a service contract, or if there is someone available locally to service the equipment. Maybe the warranty is transferable.

THE “FINE PRINT”

In addition to a number of other fixed costs when buying equipment, like transportation and installation,will you face any additional moving costs for rigging or storage to move the equipment? Are there any hidden costs that you have forgotten, such as the buyer’s premium or exchange rates? These are some of the questions you might ask yourself. Also, anything that was part of a system was likely designed as such, and may have to be re-engineered for your application.

When you add it all up and include the unknowns, what are you really saving when buying at an auction? Compare against the cost of new equipment, and all the benefits like the warranty, parts and service that are included in the purchase price from your known supplier. Finally, don’t forget about that last time your equipment malfunctioned, and how your supplier helped because of your relationship. By contrast, the auctioneer won’t be there to help you after the sale. In the end, it may be better to raise your hand first to ask questions rather than to register your next bid.

Rob Miller is president of Richmond Hill, Ont.-based Wittmann Canada (formerly Nucon Wittmann), a supplier of Wittmann automation and auxiliary equipment, and Battenfeld injection molding machines. The company can be reached at 905-887-5355, or

www.wittmann-canada.com