An excavator appears online at $85,000.
Similar machines you’ve been watching are advertised for more than $110,000.
It looks like an opportunity.
You register for the auction, calculate your maximum bid and start thinking you might pick up a very good machine for considerably less than dealer pricing.
But the number on the bidding screen isn’t necessarily the amount the machine will ultimately cost your business.
For earthmoving, construction and agricultural businesses around Geelong buying used equipment at auction, there can be a significant difference between the hammer price and the real cost of putting the machine to work.
Before deciding what you’re prepared to bid, work out the complete transaction.
Start With the Buyer’s Premium
Auction buyers need to understand the fees applying to the particular sale.
A buyer’s premium may be added to the winning bid.
Depending on the auction terms, other charges may also apply.
That means an $85,000 hammer price doesn’t necessarily produce an $85,000 invoice.
Read the auction terms before bidding and calculate what the total purchase will be at your intended maximum bid.
If you’re arranging finance, give us the expected total transaction amount, not simply the number you’re hoping to bid.
Understand How GST Applies to the Particular Sale
Don’t make assumptions about GST from the bidding screen.
The way prices, premiums and GST are displayed can vary depending on the auction and transaction.
Find out whether the bid is GST inclusive or exclusive and how GST applies to any buyer’s premium or other charges.
This matters when calculating both the purchase budget and finance requirement.
Your accountant or registered tax adviser should advise you about GST credits and the tax treatment applicable to your business.
From a finance perspective, we need to understand what actually has to be paid at settlement.
Set Your Maximum From the Total Cost, Not the Hammer Price
Suppose your business is comfortable with a total equipment investment of $100,000.
Don’t automatically set your maximum bid at $100,000.
If premiums, applicable taxes, transport and immediate work still need to be added, a $100,000 bid could push the real investment well beyond the amount you intended to spend.
Work backwards.
Start with the maximum total amount the business is prepared to commit.
Then allow for the costs outside the bid.
What’s left is closer to the maximum hammer price you can justify.
Know Exactly Which Machine You’re Bidding On
Auction catalogues can contain dozens or hundreds of similar assets.
Make sure you have the correct lot.
Check the make, model, year, serial number or other identifying information, hours where stated, included attachments and any available description of condition.
If you’re financing the purchase, accurate asset identification is important.
Don’t send us a screenshot saying:
“It’s the yellow excavator around $90k.”
Send the actual lot details.
Hours Matter, but They Don’t Tell the Whole Story
An excavator with 4,000 hours isn’t automatically better than one with 7,000.
How has it been used?
How has it been maintained?
What work has already been completed?
Has it spent its life doing relatively light work, or has it operated in demanding conditions?
Are service records available?
Has the hour meter been replaced or is there anything else that needs clarification?
Hours are one piece of the asset story.
Condition and history matter too.
Look Underneath the Machine
A freshly washed excavator can present beautifully in auction photographs.
The undercarriage may tell a different story.
Tracks, rollers, sprockets and other wear components can represent substantial future expenditure.
The same principle applies across other equipment.
Tyres on a loader matter.
Mast and hydraulic condition on a forklift matter.
Pins, bushes and hydraulic components on earthmoving machinery matter.
The cost of replacing wear components should form part of what you’re prepared to pay for the machine.
What Attachments Are Actually Included?
This can materially affect value.
An excavator may be shown in photographs with several buckets, a hydraulic hammer, grab or other attachments.
That doesn’t necessarily mean every item visible in the photographs is included in the lot.
Read the description.
Check the lot boundaries.
Ask the auctioneer where necessary.
If attachments are separate lots, you may need to bid on them separately.
That creates another consideration: what happens if you win the excavator but not the attachment you actually need?
Don’t Overpay for Attachments Because You’ve Already Won the Machine
Auctions can create a psychological trap.
You’ve bought the excavator.
The bucket or attachment you want comes up next.
Now you feel as though you have to win it.
That’s when disciplined bidding can disappear.
Before the auction begins, establish what you’re prepared to pay for each component.
Also know what an equivalent attachment would cost elsewhere.
Winning one lot shouldn’t force you into overpaying for the next one.
Finance Approval Isn’t an Equipment Inspection
This deserves repeating.
A lender being prepared to finance a machine doesn’t mean the lender has determined that the machine is mechanically sound or commercially worth the price you’re paying.
The finance assessment and the equipment assessment are different things.
If the machine is material to your business and you don’t have the expertise to assess it yourself, consider obtaining an appropriate independent inspection where practical.
A $2,000 inspection can feel expensive.
A major unexpected repair on a six-figure machine can be much more expensive.
What If the Auction Is Interstate?
Then transport becomes part of the purchase.
An excavator bought hundreds or thousands of kilometres away needs to reach your yard or job site.
Get a transport estimate before bidding.
Machine size and weight can affect freight requirements and cost.
Attachments may also need to be transported.
Depending on the equipment, loading and unloading arrangements need to be considered as well.
A machine that’s $10,000 cheaper interstate may not remain $10,000 cheaper once the complete logistics are included.
Can You Move It Legally?
For large plant and machinery, transport isn’t simply a matter of finding someone with a trailer.
The equipment may require appropriate heavy transport, permits or other arrangements depending on its dimensions, weight and route.
Use a suitably qualified transport provider to determine what’s required.
Don’t build the auction budget around a freight estimate that turns out to be unrealistic.
The landed cost at your business or job site is the number that matters.
What Work Does It Need Before Day One?
Some auction equipment is ready to work.
Some isn’t.
Perhaps the machine needs a service.
Maybe the tyres are approaching replacement.
An attachment needs work.
A safety item has to be addressed.
The machine might require registration or other work before it can be used for your intended purpose.
Estimate those costs before deciding whether you’ve found a bargain.
An $80,000 machine plus $25,000 of immediate expenditure is a $105,000 decision.
Be Realistic About Auction Descriptions
Auction listings can provide useful information, but buyers should understand the conditions applying to the sale and conduct their own due diligence.
Terms such as “runs well”, “good condition” or “ready for work” shouldn’t replace your own assessment.
Read the auction conditions.
Understand what representations are and aren’t being made.
If something is important to your decision, investigate it before bidding.
What If the Machine Is Being Sold Because a Business Closed?
Auctions can include fleet disposals, deceased estates, insolvency-related sales, repossessions and ordinary businesses updating equipment.
The reason for sale may give you context, but it doesn’t tell you the condition of the individual machine.
A repossessed excavator isn’t automatically a bad excavator.
An ex-fleet machine isn’t automatically a good one.
Assess the actual asset.
Auction Deadlines Can Be Short
This is where finance preparation matters.
Once you’ve won, the auction terms may require payment within a specified period.
Your lender doesn’t automatically adopt the auctioneer’s deadline simply because you’ve purchased the asset.
A finance application still needs to be assessed.
Documents may need to be completed.
Asset and transaction requirements need to be satisfied.
Settlement needs to occur.
If you’re relying on finance, speak to us before the auction, not after you’ve won.
Can You Arrange Finance Before You Know the Final Price?
You can start the conversation.
You may know you’re looking at excavators in approximately the $100,000 to $150,000 range without knowing whether the winning bid will be $112,000 or $127,000.
Tell us the expected range and the lots you’re considering.
Depending on the application and lender, we can investigate the finance position before the final purchase is known.
That doesn’t mean any machine you subsequently buy is automatically acceptable.
The final asset and transaction still matter.
But the borrower assessment doesn’t necessarily need to begin from zero after the auction ends.
What If You Win Several Lots?
This happens easily at equipment auctions.
You intended to buy one excavator.
Then a skid steer sells attractively.
A trailer comes up.
There are two buckets you want.
Suddenly the business has committed to far more than the original transaction.
Before bidding on additional assets, stop and calculate the total.
Don’t assume finance discussed for one machine automatically expands to cover everything else you decide to purchase.
If you’re deliberately planning to acquire several assets, tell us beforehand.
Depending on the lender and circumstances, a broader equipment finance approach may be worth investigating.
What If You Don’t Win?
That’s fine.
Starting the finance conversation before an auction doesn’t obligate you to overbid simply because you’ve spent time discussing finance.
If the machine runs past your maximum, let it go.
Another machine will come along.
Knowing your finance position should make it easier to remain disciplined, not encourage you to spend to an approval limit.
The Approval Amount Isn’t Your Bidding Target
If you’ve discussed finance around $150,000, don’t interpret that as:
“I can bid to $150,000.”
Your maximum should still reflect what the machine is worth to your business.
Finance availability and asset value are different questions.
The goal is to purchase productive equipment at a commercially sensible price.
Winning the auction isn’t the objective.
Buying the right machine is.
What Should You Send Us Before the Auction?
If you’re planning to bid on equipment, send Thrive Broking:
the auction link
lot number
equipment details
expected bidding range
your maximum budget
auction date
payment deadline
whether you’re considering multiple assets
If you already know transport will be required, include that in your overall budget.
The earlier we understand the proposed transaction, the better position you’re in if you become the successful bidder.
Buying Equipment at Auction Around Geelong?
An auction can be an excellent place to find used machinery, but the lowest-looking price isn’t always the lowest-cost machine.
Before bidding, calculate the buyer’s premium and applicable transaction costs.
Understand the GST treatment of the sale.
Look at condition, attachments and transport.
Estimate any immediate work.
Then decide what the machine is worth to your business.
Found an Auction Lot You Want to Bid On?
Send Thrive Broking the auction link, lot number and your expected bidding range before the auction starts.
We can investigate equipment finance options based on the proposed purchase and explain what information may be required if you’re successful.
Don’t decide what an excavator is worth from the number on the bidding screen. Work out what it will cost to have that machine sitting at your job site ready to earn money.