I am looking to buy a business. The asking price for the equipment is much higher than the depreciated book values. What would be a fair guideline for pricing used equipment?

Book value is rarely a good indicator of value. It represents the original cost less depreciation. Depreciation rates vary depending on the rates used and the depreciation method used. Book value also assumes depreciation has been recorded correctly each year. Some companies use the same rates for depreciation in their financial statements as they do for calculating Capital Cost Allowance (CCA) for income tax purposes. But those rates may bear no resemblance at all to actual depreciation of the assets.

Two companies may buy the same type of equipment and depreciate it at the same rate. But one company may run it constantly and not have an adequate maintenance policy, while the second company may use their equipment sparingly and have a very good preventive maintenance policy. The book value of both pieces of equipment will be the same, but obviously the latter would have a higher value than the former. The only "fair" price is "current market value," which can be determined by a qualified appraiser.

If some of the equipment is automotive equipment, look for booklets that indicate current values. For more specialized equipment, try going to the manufacturer and getting estimates of value. An experienced industrial auctioneer can also provide reasonable estimates.