Thinking of purchasing power equipment, should you buy brand new or purchase second-hand?
Before you contemplate the big question, keep one thing in mind: your company image.
Your company image is everything and when it comes to your equipment, looks really do matter. Relatively new, clean and recently painted trucks and equipment are your company’s best advertisements. Remember, your truck parked on the street and the equipment scattered across the lawn is highlighted for all your neighbors to see. If your trucks and equipment are covered in dirt and grime, emitting loud noises and looking old enough to belong in the junkyard, then it doesn’t speak too highly of your business. On the other hand, if neighbors see a professional looking truck with a company logo, and clean, modern equipment, then they are more likely to call you up for their next landscape project.
This is not to say that new equipment is the only route to go if you’re trying to maintain a professional image. It does mean, however, that you need to keep looks AND function in mind when purchasing used equipment. If a piece of machinery requires a lot of work to fix up, and let’s face it, in many cases used equipment is going to require at least some work (why else would it be up for sale?), it may not be worth the extra time, money and grief. It’s best to thoroughly examine the machinery up-for-grabs and carefully question the owner about the equipment’s history, usage and current state before making any decisions. In some cases, you may find a gently-used secondhand piece of equipment that will serve your company well. In other cases, you may realize it’s better to just ‘bite-the-bullet’ and purchase something new. Here’s a list of the pros and cons of each option:
Buying Used Pros:
First and foremost: the price.
There are great deals for used equipment and if you’re lucky, you’ll find a winning piece of machinery to go along with that great price point. Regardless, the price of used equipment is far less than the price of buying brand new equipment. Equipment depreciates in value fastest during its first few years. Buying used equipment can allow you to purchase reliable equipment where someone else has absorbed the greatest depreciation costs.
There are some hidden gems (and some great deals).
Used equipment doesn’t have to mean ‘unreliable’. Some suppliers guarantee a thorough inspection, product support and extended coverage for the purchase of their certified used equipment. Visit Caterpillar and check out their Used Equipment Inventory.
Increase fleet without breaking your budget.
If the equipment is in good condition and works well, then you can purchase more equipment, for less cost, and take on more work (increase sales). With the right company and systems in place, more work means you stand a better chance of improving your company’s bottom line in a shorter period of time.
Buying Used Cons:
Unknown supplier.
Anyone can sell equipment. There are no credentials, mandatory inspections or certifications, so there is a good chance that used landscaping equipment is going to come with more than a few problems. You don’t know how the previous owner operated, inspected or maintained the equipment. There are many precautions to take, one of which is questioning the owner. Ask the owner what he used the equipment for and why he is selling it. Was he impressed with how the machine worked? Of course, when asking these questions you are relying on the word of an unknown source, which is why it is best to have a reputable mechanic look at the equipment before you purchase it. And keep in mind that once you purchase equipment from an unknown source, you are likely on your own in terms of future assistance and concerns with your purchased equipment.
Likely old equipment.
Plain and simple: most used equipment is outdated. Unless you happen to find an exception, like an owner going out of business, than you can guarantee most of your used options are going to be older models. Before you decide to go with the cheaper, older model, consider the newer versions currently offered by major manufacturers. Will your savings on the older equipment more than compensate for the potential improved productivity, efficiency and quality of newer equipment?
No warranty.
For most used machinery from an unknown supplier, there is no warranty to ensure your satisfaction with the equipment, especially when you’re purchasing privately. When purchasing from a dealer, you may want to negotiate some warranty into your purchase agreement to help protect yourself.
Poor condition.
Wear and abuse due to years of unknown and unaccounted for use will affect the condition of your newly purchased used equipment – once again stressing the importance of having a good mechanic take a look. Think of the extra costs that will have to go into repairing the equipment and ask yourself if it’s really worth it?
Equipment could be misrepresented (i.e., hidden financial costs).
Similar to the above-mentioned problem, some equipment damage and extra costs may be hidden from you when you go to inspect the machinery. If you can, get an equipment or vehicle history inspection report, or a documented history of its maintenance, and get a second opinion from an expert.
Buying New Pros:
Productivity.
When you’re buying new, chances are that your equipment is latest and greatest model. The equipment should be efficient, has the latest and greatest features for safety and comfort, and the risk of breakdowns and repairs is minimal. The cost of breakdowns can cripple a business –you must realize that breakdowns have repair costs, productivity costs, and lost sales opportunity costs. As an owner, you must look deeper than just your monthly costs to make the right decision when purchasing new or used equipment.
Professionalism.
If you don’t want to compete with low bidders in your market, then make sure your company doesn’t look like them to your customers. Newer, clean equipment projects a professional image and will build customer confidence in your company’s brand.
Added comfort of knowing you’re the only one who’s used it.
There’s no need to fret over the equipment’s history, use or current state.
And, as mentioned in The Great Equipment Debate: Part I,
Easier than leasing.
There are no agreements, no negotiations and no contracts to sign.
You determine whether it needs maintenance or not.
There are no mandatory maintenance or repair costs. Only you judge when your equipment is due for some TLC.
Tax benefits.
As the owner, you can declare capital allowances.
Buying New Cons:
New equipment can take longer to get.
Backed up equipment orders may mean a long waiting period for new equipment. In the construction and landscaping industry, sometimes the supply of manufactured power equipment doesn’t meet the demand. Make sure you confirm lead time(s) with your sales representative.
And, as mentioned in Part I:
Cash flow.
When you buy a new piece of machinery, you have to pay the full cost of the investment up front – an undertaking many businesses simply can’t afford to do unless they take out a hefty bank loan.
Stuck with dated equipment.
When you purchase a piece of equipment, there’s no upgrading to the latest model once new technology streams in. You’re stuck with what you buy unless you decide to re-sell it.
Additional Reading:
The Great Equipment Debate Part I: Leasing Vs. Buying
Leverage Landscape Equipment to Boost Your Bottom Line (or not…)
