Buying Used Equipment: Bargain or Bust?
Purchasing new or used equipment is a skill as important as any other for earthmoving contractors. The business’s bottom line as well as the asset’s future value can be significantly impacted by the decision. When investing in additional plant, whether to buy new or used is one of the key decisions.
There are pros and cons for each. New vehicles and equipment come in pristine condition, with attractive warranties but have the price tag to match. Likewise, due to the depreciation that has already taken place, buying a piece of equipment in used condition can offer a huge saving. Bear in mind, though, that there may be risks in the form of problems and quirks with the gear.
Before signing on the dotted line, give yourself the best chance of winning the used equipment gamble by taking appropriate precautionary steps.
Here are our tips for getting a good deal when you make your next used equipment investment.
Do Your Research
The history of the machine is the biggest unknown when it comes to purchasing used equipment. You might be unsure whether it has been treated well, maintained regularly, or if it has been in an accident that has affected its primary functions.
The first thing to check is the equipment’s operating hours or kilometres and ascertain if it is nearing its usage life span.
However, a vehicle with low operating hours or kilometres that hasn’t been well maintained may not be better than one with higher usage that has been looked after properly. Asking for log books and proof of service history that demonstrate the equipment has been properly maintained and is fully operational is important.
Another clue is in the machine’s fluids. Checking things like engine oil, transmission fluid, coolant and hydraulic fluid can be telling, particularly if there is water or dirt in the fluids.
Ask a Professional
Get advice from those in the know. Getting the opinion of someone who knows what they’re talking about is always a good idea. Having a certified mechanic look over the machine to ensure you are completely aware of any potential future repairs could save you issues down the line. This level of due diligence will provide greater ammunition to negotiate with the vendor if there are issues and could possibly save you money in the long run.
Who am I Buying From?
The biggest risk of buying used equipment is receiving a dud from the seller. The fear of the unknown is the single largest reason individuals steer away from second hand sales.
Having an understanding of the vendor you are buying from is fairly important. The less you know, the riskier the deal potentially is. Buying from a recognised supplier or machinery dealership certainly provides comfort as their reputation and previous dealings with the market are easy to find out.
Purchasing with private sellers provides greater risk so try and do a little homework. Keep in mind that the vast majority of sellers will demand their payment upfront so there is always an element of trust involved. In this case, extra caution is not a bad idea.
Be Aware of Potential Hurdles
If you generally finance your machinery, buying used equipment, particularly from private sellers, adds a few complexities to the purchase.
Be mindful that lenders have a restriction on the age of each asset type they are prepared to lend against. There is generally a home for all assets but this may come at a cost as older equipment often incurs higher interest rates and establishment fees.
Finance companies put in place a few extra checks for private sales due to the increased risks. These checks include asset inspections, supplier and bank account verification enquiries along with appropriate PPSR checks.
Using an experienced and well recognised asset finance broker such as Magnolia Lane to navigate through this process and find the correct lender suited to your specific purchase is certainly beneficial. As a broker, we manage all this due diligence, saving you both time and worry.
Inspect, Inspect, Inspect!
When buying from people you don’t know, purchasing “sight unseen” is a dangerous caper. The internet has made purchasing equipment remotely easier, yet there are many stories of this practice ending in disaster!
Before signing on the dotted line, nothing can replace climbing all over your proposed purchase and picking it apart.
Will This do the Job?
Used equipment is openly accepted across work sites. However, some of the major contractors have been known to raise their eyebrows at gear that is aged or tardy.
Trying to forecast where a piece of equipment will be working is worthwhile. This can help to determine if these sites have any rules regarding equipment specifications. Are there any safety and compliance rules that require certain features on the equipment that your used machine may not have?
At Magnolia Lane, we tailor finance solutions specific to your unique business needs. It is our role as your equipment finance broker to source the best possible rate for you. Through our accreditation with a suite of lenders, there really is no limit to what we can assist with. Contact us or get a free quote today and let’s grow together.