Buying used equipment can be a smart way to reduce investment cost and increase profit margins. It can also be a way to take advantage of lower equipment costs when tailoring a rental fleet to meet the immediate needs of the market, which may include some specialized machines that were previously unaffordable.
Equipment is what makes you money in this industry, but you can make a lot more money faster if you can lower your acquisition cost on a piece of machinery. In the long run, this means having the ability to supply equipment on more jobs at a more competitive price.
To determine if now is the right time to invest in “new” used equipment, doing a simple acquisition cost versus utilization rate analysis is key. Some questions to consider are:
Will this piece of equipment allow your customers to do more specialized jobs?
Will it allow your customers to do their current projects more quickly and efficiently?
Will having this piece of equipment allow you to supply equipment to projects that your competitors are not able to?
All of these questions will help you determine if buying used is a better option than new.
Inspect before you buy
To reduce the risk associated with purchasing a piece of used equipment, it is important to do an inspection of the machine before making a purchase. The degree of the inspection largely depends on the age of the machine and the reputation of the seller. An appropriate inspection of the machine should expose any potential problems or money pitfalls.
For newer machines, a routine/basic inspection should be sufficient, including the condition of the battery, tires, hoses and wear pads, as well as looking for leaks and signs of damage or unusual wear and tear. For older machines with higher hours, fluid samples should be taken to check for any contaminants or system problems. The thoroughness of the inspection should also be adjusted based on the type of equipment and the weather and geographical conditions the machine has been exposed to. The more severe the environment, the more thorough the inspection needs to be.
Up-to-date maintenance records will also give a good indication of the condition of the equipment. Manufacturers, larger rental houses and auction houses should have service records, but if these records are unavailable — which may be the case when purchasing from a smaller distributor — the internet is a great resource for owner’s manuals and consumer reports. With used equipment, you don’t get a manufacturer’s warranty, so it’s up to you to do a thorough inspection and determine if the used piece of equipment is worth the risk of possibly incurring problems down the road. It could be that you are better off just going with new and mitigating that risk.
If you do your homework before you go shopping, you’ll be better equipped to make an informed decision.
When to walk away from a deal
Although the price tag on a piece of used equipment may be appealing, there are certain situations when the deal may just be too good to be true. If you’ve done your homework, you should have an idea about what kind of condition a machine should be in, in order for it to run properly. Then you need to decide at what point will your repair cost exceed your budget? You don’t ever want to put more money into a piece of equipment than you’re going to get out of it.
Ask the seller lots of questions. If the owner can’t answer basic questions about the machine history, it might be a good idea to continue shopping. Also, be sure to take the product serial number into a local distributor to have them verify update and recall information on the machine. With older machines you also need to find out if the manufacturer even supports that particular model anymore. It might end up costing you more to replace parts if the manufacturer no longer supports it, not to mention the additional time it’ll take you to hunt down the part you need.