Looking for some advice. My plan was to buy a skid steer with about 2000 hours on it and use it for a year and put about 500 hours on it and sell it next summer with around 2500 hours. I figured the depreciation of 500 hours over a year would be a lot less than renting a unit when I needed it over the next year. This past week I purchased a 2012 CAT 226b3 at a large online auction (I'd prefer not to name the auction company as they are working with me to resolve the matter) . They listed the unit as having 2077 miles on it which was just about where I wanted to be so as not to start to have many mechanical issues. Well I paid someone $300 +$50 gas to have the CAT delivered to my property about 4 hours from the auction and when It arrived I noticed that the hours were 2877 not 2077. I called the auction company and they said one of their inspectors read the 8 as a zero, which is understandable. They asked what I would like them to do to make it right. I was going to ask them to pay the $700 roundtrip transport and refund my money so I can buy a machine with 2000 hours on it but it seems like a lot of trouble for both of us and I'm thinking of just asking them to adjust the price down. So, my question for you experts is how much does 800 hours 2077 vs 2877 effect the value of the machine. Based on a 4500-5000 hour skid steer life, 800 hours is about 20% of the machine's life. I'm guessing I'll have more maintenance and repairs with a 2900 hours machine and I'll also have less resell value after putting on 500 hours... (in a year I'll be selling it with 3,377 hours instead of 2577 hours it would have had if the hours were correct) What do you think I should request dollar wise that would be fair to both parties. Thanks for your help.. I'll update everyone as to the resolution. Ray
The 800 hour figure is meaningless. What really matters is how the hours were put on the machine. A machine can be killed in under 1000 hours or be years old have 10,000 on the clock and in great shape. What you really need to look at is the condition of the machine vs the hours and price. Surely you could get an adjustment for a few bucks but if the machine is in great condition I would be reluctant to send it back.
You could find a depreciation number for that machine per hour, CAT could probably help with that since they rent them. Multiply that number X 800 and you would get paid back for the additional hours. You could look at similar machines that have gone through IP or whomever this is with 2800 hours and what they went for verse machines with 2K hours and negotiate a pay back based on that. Hard to compare machine condition into that but it might help in coming together on a number. When you go to resell this, you will have a machine with over 3K hours on it, and the depreciation hit will be noticeable verse one with 2500 hours.
Where are you getting those hours for skid steer life? I worked for a Cat dealership for twelve years and have never seen anything published by Cat that gave those hours. I've looked at hundreds of skid steers and seen hours and condition factors all over the place. You are as likely to see a 9,000 hour really nice machine as you are to see a 2,500 hour machine total destroyed.
I am not saying anything about skid steer life. Only that the machine purchased has 800 more hours than what it was sold as having. Those 800 additional hours have a cash value. I realize that condition matters, but two identical machines one with 800 more hours than another, the machine with higher number of hours is worth less. My dealer has hourly depreciation numbers, I am sure someone has depreciation numbers for this machine. I would want to determine what that dollar amount is. That in my view, would be a fair way of being compensated for the additional hours on the machine.
I could not have said it better.. Thank you KSSS. I'm going to keep the skid steer but the condition is the condition regardless of the hours so that is out of the equation. The exact machine in the same condition with 800 more hours is worth less.. There are several online valuation databases that banks use to depreciate equipment such as equipmentwatch. punching in the same machine with 2077 hours vs 2877 hours should give a general idea.. It's just finding someone that has access to such a system. The auction company made the mistake misreading the hours and they going to work with me to resolve the issue .. I'm just trying to put a monetary value to the 2077 vs 2877 hours that is fair for all.
All I'm saying is prove it! I have put together those figures for bankers in the past. I can put it another way. Did you pay retail market value for the machine in the first place? If the auctioneer does something then you are a lucky man. All that I've dealt with would just leave it for you to try working through the court system.