Auctions not always best for reselling returned equipment
With glut of remarketed assets, prioritizing returns on used sales is key
Lenders looking to resell their returned used equipment may find more value in transactions outside the auction house.
While banks tend to assume auction sales are their only option, sometimes looking at the “whole life cycle” of an asset and moving it through retail or wholesale channels is the more lucrative choice, Sandhills Global equipment lease and finance manager, Jim Ryan, said.
Ryan led the conversation during a Feb. 27 webinar geared toward helping lenders understand best practices for evaluating and reselling used equipment assets.
“What we would like to do is give it an option to move via retail and wholesale transaction and not necessarily just dump it at auction,” Ryan said. “There’s a way to maximize the value of each asset [by] targeting that retail wholesale buyer and transaction before ever having to send it to auction.”
Sandhills moves about 40% of assets on average without going to auction, Ryan said. For larger transactions — a lender looking to offload multiple Class 8 sleeper trucks or more equipment, for example — going to auction will yield a greater net return, he said. But for smaller transactions or even pieces of individual equipment, there are better options.
While Sandhills isn’t a remarketer or auction house, it owns subsidiaries that are. It operates a wholesale network as well as several equipment retail sites, including MachineryTrader, TractorHouse and Truck Paper. Through these platforms, Sandhills works with 95% of dealers across all industries, Ryan said.
Sandhills also operates an auction website, Auction Time, which Ryan said is “vastly growing” and facilitates auctions each Wednesday from anywhere in the world. Last year, Auction Time recorded $1.3 billion in sales with over 120,000 assets sold, Ryan said.
“If we can move some of these assets before having to go to auction, it’s a win for everybody,” Ryan said. “That’s the whole goal here… to just really drive this process and be able to maximize the return on assets, regardless of whether it’s retail, wholesale or auction.”
Before auction
Ryan said that Sandhills moves up to 60% of its used equipment at auction.
“Our goal at the end of the day is to try to sell this via retail or wholesale channel where we’re seeing about 40% of that sell right now before ever having to go to auction,” he said.
“The life cycle approach with returned assets can be as simple as one week, it can be as long as 12 weeks,” Ryan said. He said Sandhills can connect equipment owners with a remarketing partner.
Properly evaluating the equipment’s value before auction is crucial, Ryan said. Remarketed equipment should go through a “full-service inspection” including pictures and a detailed analysis of the unit’s mechanical operations. The results of that inspection, and how depreciated the equipment is, will inform the eventual wholesale or auction price.
Before an asset is listed, Sandhills will evaluate the best possible return by comparing values on the wholesale, auction and retail markets, Ryan said. The company then uses its VIP tool – a sort of Kelley Blue Book for used equipment, Ryan said, – to determine the asset’s value.
Maximizing returns at auction
If auction is the best option, Sandhills will facilitate that through Auction Time. The asset is dropped off at the closest holding yard and repaired if needed. Repairs can sometimes push up the value of used equipment, Ryan said.
Sometimes, holding on to a piece of equipment is the right move. Ryan noted that Sandhills regularly assesses whether it’s best to sell an asset or wait to see how fast it will depreciate.
Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville, Tenn. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.
