Capital reallocation between firms is becoming more important, with used capital accounting for a significant portion of total investment. A study found that the illiquidity of used capital is countercyclical, prices of used capital are more volatile than new capital goods, and the dispersion of firms' productivity is countercyclical. A search-based neoclassical model was used to explain these patterns, showing that search frictions in the capital market, financial frictions, and interactions between used and new investment are crucial for understanding these dynamics.