Many businesses need large pieces of equipment to succeed. These capital goods are key in production of goods and services sold. For example, restaurants need industrial-sized ranges, ovens, refrigerators and freezers. Dry cleaning businesses need presses, dry cleaning machines and conveyors. Construction businesses typically need trucks, forklifts, utility drills and more. All of these types of equipment can be bought in new or used condition. Which is the best option?
One of the best reasons to buy used equipment is that new acquisitions lose their value as soon as purchased. The best example is buying new vehicles. They famously lose about 10% of value the minute they roll off the lot.[2] Some types of equipment will lose up to 40% of its value during the first year of use.[1] That’s a lot of equity to lose in such a short time. Acquiring used equipment is the perfect answer in retaining its value.
In addition, typical bank loans prefer new equipment. This is not the case with entering into an Equipment Finance Agreement. Not only is used equipment acceptable, soft costs, installation, freight, etc are also able to be included with this type of financing which means greater savings upfront and in the long run.
Ultimately, the decision is up to the business owner. Before committing to buying used, make sure to view and inspect the machinery thoroughly by looking at maintenance logs and hours used when buying any type of yellow iron. With this kind of research and careful preparation, used equipment can be a great value for many businesses.
Sources:
[2]https://www.daveramsey.com/blog/car-depreciation
[3]https://www.allianceleasing.net/equipment-leasing/#faqs