This paper studies the dynamics of capital reallocation. Leveraging a novel dataset of over 25 million lien filings spanning four US states, this paper documents capital reallocation patterns for over two million unique pieces of heavy equipment and machinery at the serial number level. Reallocation of these capital goods is significantly procyclical and three times as volatile as aggregate output. A dynamic heterogeneous firm general equilibrium model with trade in used and new capital goods is developed to show that the coincidence of lower capital reallocation and lower output can be explained by the asymmetric nature of recessions: smaller, higher-growth firms are affected more in recessions than larger, lower-growth firms. This asymmetry implies that demand for used capital declines disproportionately more than the supply of used capital increases, which results in a lower quantity of used capital traded and a lower price of used capital during recessions. The implication of this explanation is that the lower rate of capital reallocation observed during recessions is partly due to an efficient response of the economy to asymmetric changes in the firm productivity distribution. The model is capable of rationalising a variety of investment-related business cycle moments including the puzzling negative correlation between productivity dispersion and capital reallocation observed in the data.