Used, but not abused

With the downturn in the economy during the last few years, many shops have changed their machinery buying practices and now seriously consider purchasing used goods. Used machinery auctions are held on a continuous basis, whether they consist of one machine or the contents of an entire business.

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Major manufacturers that once only offered new machinery have initiated programs to acquire and refurbish used machinery for resale. As one manufacturer says, "It's a whole new world out there." For buyers, if they do careful research, there are definitely bargains out there. But there are also pitfalls. As the old adage goes, buyer beware.

Auctions abound

There are a number of auction companies that routinely have sales of woodworking machinery and related equipment, including Industrial Recovery Services Auctions (IRS Auctions), International Auction & Appraisal Systems (IAAS), Ex-Factory Auctions, SIS Machinery and many others. Other companies such as Professional Machinery Group simply sell used equipment.

IRS Auctions (no affiliation with the Internal Revenue Service) deals solely with woodworking machinery auctions. The York, Pa., company was founded in 1935 as Carpenters Machinery, a woodworking machinery dealer and, in 1995, the company made the transition to an exclusive woodworking machinery auction company.

"We probably sell 80 percent of every woodworking machine auction in the United States," says Ian Liebgott, vice president of IRS Auctions. "We learn about the auctions in a number of different ways. Either a bank comes to us, a trustee comes to us, sometimes somebody in the industry knows that someone is closing and calls us and we would pay a finder's fee to people that give us a lead on a project. We have a lot of dealers throughout the country and feelers out there who find out that someone is closing and they give us a call to get us involved. Whether you have one machine or a complete Broyhill plant, there is no problem. We can sell either one piece or an entire factory."

IRS Auctions are held online, unless the seller requests a simultaneous on-site auction as well (a rarity). Liebgott says his company will get thousands of bidders for an online-only auction versus just a few hundred that show up at a regular auction. A reserve is set at about 20 percent of the anticipated price for most items.

"We sell everything 'as is, where is, in place, no warrantee.' What you see is what you get," Liebgott says. "We try to disclose anything we know about a piece. If there is a problem and we know about it, we'll tell you. But if we don't, we don't. We try to be as thorough as we can with our specifications and our pictures so people get a great idea of what they are buying.

"It's a huge business and it has grown because of the economy and also people's businesses have grown because they have been able to purchase used equipment at a lesser [price] than buying it at a big store. Since we changed over from a seller to an auction house, I'd say our business has grown a couple thousand percent."

International Auction & Appraisal Systems of Shrewsbury, Pa., is another auction house that deals with woodworking machinery, although not exclusively. The company's last two auctions have been for TBM Hardwoods Inc. and Bassett Furniture.

"I would say there are more woodworking auctions in the last few years because of the economy in general," says Julio Esteban, a sales director at IAAS. "The problem with that is [similar to] the housing market; there are a lot of great deals out there and if you are buying it for yourself it's different than if you are buying it to flip it. A lot of machinery is sold to [be resold] and there a lot of eBay people out there, too."

IAAS holds its auctions online as well as on site.

"We always do let the buyer beware, come and check it out or whatever, but we always stipulate ahead of time that everything is sold 'as is' with no implied warrantees or express warrantees and make sure you know what you're bidding on," Esteban says. "If it looks like a duck, it is a duck. If it looks bad, it probably is bad."

Unlike some of its counterparts, IAAS doesn't put a reserve on its auction items.

"As long as you have a good audience out there and the people know the equipment, yes, everyone wants to take it for nothing, but they don't want to see somebody else get it for nothing," explains Esteban.

So how does an auction happen? Does the business hire an auction house or does the auction house approach the business?

"Both," says Esteban. "We'll find that if a company is closing its doors, then that is an open door for me to call them up and see what we can do for you. Or on the same respect, like at TBM Hardwoods, other companies were there to buy, I can say, 'Hey, I have these two lines I want to get rid of. What can you do for me and I'll take it from there?"

Interestingly enough, neither IRS Auctions nor IAAS perceive eBay as a realistic competitor.

New market for manufacturers

Forever, it seems, machine manufacturers have only produced new equipment. They wanted nothing to do with used machinery. Well, because of the recent events affecting the economy, that philosophy has changed, even among the largest manufacturers.

As examples, two large CNC manufacturers, Biesse America and Vollmer of America, have made a serious commitment and expanded their businesses to embrace the arena of used machinery. Whether it is trade-ins, exchanges for upgrades or becoming involved in a brokerage program, there are a number of options available for the machine owner.

"The reason why we are somewhat active in used machines is for a couple of reasons," says Ralf Kraemer, president of Vollmer of America. "No. 1, there is a market out there; people buy used machines; not always, but sometimes. Also, it is an opportunity for us and some of our customers who like to upgrade and do that on a continuous basis. So there is always a chance to provide more technology to customers by accepting their used machines or pre-owned machines."

Kraemer says used machinery is a growing percentage of his company's business and it is a sign of the times. Customers often want to upgrade their machinery and Vollmer helps them into a new, higher quality and more productive machine. In doing so, the company assists the customers with moving their previous equipment.

"Sometimes customers cannot afford a brand-new Vollmer machine and by having trade-ins and providing those into the marketplace, [it] of course helps those customers," Kraemer says. "We have all the service data in reports in our archives, so we have a good understanding of the machine's condition. We do a complete full maintenance review on the machine to make sure that all of the functions and features operate within manufacturing's specifications. And if that would not be the case, then we start troubleshooting and finding out what it would take to repair it. We generally complete the repair and then we put the machine on our website as a pre-owned machine."

Biesse America began a program several years ago called Biesse Exchange. Owners of Biesse machinery have several options: they can sell their machine back to the company, have the company list a machine for sale through its brokerage program or trade in a machine as part of an upgrade.

"The Biesse Exchange division has grown tremendously in the two-and-a-half years since it has started and our shop has grown to where we have between eight and 10 machines in stock at all times in various stages of refurbishing," says Derrick Barton, division manager for Biesse Exchange. "Even though there is an abundance of used machinery out there right now, the way we sell them and offer them is quite unique. No other manufacturer does this across their whole product range. In other words, we do sanders, edgebanders, panel saws, all of our wood machinery, and our stone and glass machinery. We bring them in-house, fix and clean them with manufacturer's parts, install them with our own installation people and sell them the same way we sell our new machines."

Barton says he has a waiting list for machines. On average, a used machine will cost about 40 percent of the price of a new machine.

"It is a whole new world and we are continuing to grow every year and it has been really good for us. It has been a good offshoot. For instance, we sold a package of machines to a customer in Canada that needed four new machines, but he couldn't afford four new machines. So we sold him three new machines and one Biesse-certified machine to complete his machinery package. Initially the company thought we may be competing against our own sales and that is not really the case. Instead of competing against our new machinery, we are complementing our machinery offerings. So people have a choice."

Buyers weigh in

No matter what the size of your shop is or the number of employees, used machinery has become a business reality. There are incredible cost savings to be had with used machinery, but there is one thing to remember. As corny and redundant as it sounds, the buyer must beware because there are bargains and there are disasters. Here are several examples.

Tom Calhoun, a furniture maker and wood turner in Makawao, Maui, Hawaii, was looking to purchase a large lathe. He bought a 1964 Oliver model 2258S lathe from an eBay seller in Connecticut. He paid $1,000 for the lathe and another $2,000 for shipping the 3,100-lb. piece to Hawaii. Upon receipt, he discovered there were several missing parts and the lathe had been damaged in shipping. It cost him another $2,000 to make it operable. Although he had insurance, the seller can't be found and Calhoun is attempting to regain some of his unexpected expenses.

"When I bought it, it was marginally functional, the gear case needed new seals and oil, and the cross-feed carriage had been damaged in shipping so I had to remove that," he says. "Everyone involved is pointing fingers and I am the one that ends up losing. But if you want to turn large pieces, like what I am turning now, there is no other practical way of doing that except to either buy a restored one or have somebody make you a new one. It does what I need it to do, so yes, I'm satisfied. All in all, I guess it was a good deal."

From one extreme to another, Rick Hearne, owner of Hearne Hardwoods in Oxford, Pa., wanted the ultimate band mill. So he purchased a $10,000 band mill from the old Philadelphia Navy Yard that was originally made to cut metal for aircraft carriers and battleships. The spending didn't stop there.

"We had to dismantle it and move it," Hearne says. "It was bought at a few pennies on the dollar knowing that we had a huge project ahead of us. We didn't know how big a project it was going to be, but part of the reason the project ended up being so big was that it was our imagination that took it to where it is. Although we paid $10,000 for it, we are well into six figures putting it together. It has 6' wheels and will saw 67" wide. It took about two years to put it together."

Hearne offered one other important piece of advice.

"If you buy something from a used equipment dealer, you're going to spend 30 percent more than you are at an auction. Another important thing to remember when buying a used piece of equipment is to know beforehand where you are going to get the parts for it. Not all equipment has U.S. dealers and some of them are out of business, so you need to do the research beforehand to make sure you can get spare parts."

Dave Boykin, owner of Boykin-Pearce Associates, a high-end custom furniture and architectural shop in Denver, has purchased several used machines during the last 35 years.

"A few of our machines are used," Boykin says. "Our SCMI sliding table saw we bought from a shop in Fort Collins that had burned down and we were able to buy some of the equipment. It was sort of a weird situation. We also bought a stroke sander where the whole belt sander portion is on a hanger on the ceiling.

"When we bought the table saw, we just essentially checked out how flat the table was, but it wasn't in a condition where we could run it so there was a certain amount of risk. So we simply took the person's word and felt OK about it. There is a huge cost savings; we figure we got the table saw at half price."

Boykin isn't sold on the idea that auctions are particularly advantageous for small shops.

"I've been to several auctions and I guess my feeling is, that as a small business, you essentially have to lose a day to do that. I think if you are a bigger business, that is a great way to buy. I think typically you can go down a day ahead of time and check things out. But it takes up a whole day and you don't know if you are going to get a good value or not. I've seen clamps at auction go for even more than you buy the new ones. But other times you can get a great value, but I am speaking from another era. There is so much available right now that it is a completely different environment. I assume people are getting absolutely amazing prices."

Boykin says he is inundated with auction e-mail notices, receiving an average of at least one notice a day in the regular mail from shops, lumberyards or companies going out of business.

Roll up your sleeves

The bottom line is that purchasing used machinery is becoming a larger player in the woodworking industry. And until the economy makes a serious turnaround, it will continue to occupy a dominant portion of the market. Even when the economy eventually turns around, it appears the used machinery market is here to stay.

"Of course, the advantage is the price," Hearne says. "When you buy a used machine, you are buying something at a fraction of the price of a new machine. When you buy a used machine, you should be somewhat of a mechanic and expect to have to do some work on the machine. The more complicated the machine, the more work you should expect to have to do.

"We have had good luck buying from the auction sites, but then again it also depends on how complicated a piece of machinery is that you are buying. If you are buying a table saw or a jointer, there is a lot less exposure to risk than if you are buying something like a molding machine or a CNC machine."

This article originally appeared in the September 2010 issue.