Managing a construction business requires deciding where to allocate capital wisely. It is always possible to purchase new equipment when necessary for a job, but investing in used equipment can sometimes be a better, more cost-effective choice. In the case of needed construction equipment, the first instinct may be to buy new, but there are many advantages to buying used. Here are some facts to consider:
A Lower Cost for Equipment Purchase
In addition to adding to your cash flow, investing in new equipment is a great way to expand your business. There are, however, a number of ways to purchase quality pre-owned equipment at a much more affordable price. By choosing this option, you can potentially save thousands over the cost of buying new machinery. Over the past several years, new equipment has become more expensive. Even though it’s nice to think about buying a brand new machine, it doesn’t mean you have to sacrifice quality for previous ownership. When the equipment has been maintained well, it can continue to provide reliable service for several years. In addition to saving sales tax, buying used equipment can lower the initial purchase cost. The savings can be put toward attachments, maintenance costs for your fleet, or the cost of buying a second piece of equipment.
Avoid Equipment Depreciation
The moment you take your construction equipment off the dealer’s lot, it starts depreciating the same way your truck or car does. During the first 12 months after purchase, a double-digit depreciation rate is normal. It then slows down through the second, third, and fourth years of ownership. You avoid taking a hit on the depreciation on a used item by choosing to buy it pre-owned.
After one year or so, you may owe more on a new piece of equipment than what it may be worth if the item depreciates at the same rate as a new car (between 20-40 percent). When it comes to both car loans, mortgages or heavy equipment loans, no one wants to be underwater if they ever had to consider selling the asset after less than a year. When you purchase used equipment, you eliminate the problem with that particular asset and can focus on growing your fleet instead. Also, you can focus on the projects you’ve booked for completion.
Getting the Right Features
The features you require in equipment are likely to be found in more recently used models if you make a list of them. In this market, technology doesn’t move as quickly as it does in other niches, such as computers, where updates and new features are introduced with each new version. You can compare the features of used construction equipment for sale with those of newer models. On a year-by-year basis, a used piece of equipment may have similar mechanisms as its predecessors. A used model will offer some of the same functions as the new model, but at a lower price.
The Right Equipment at The Right Time
The process of buying new may involve placing an order and waiting for your piece of equipment to be manufactured. Even though taking delivery of a brand new machine that has just rolled off the assembly line has its advantages, you will have to contend with any possible lag time. Whenever you’re searching for heavy equipment for your business, you need to evaluate how important speed of delivery is to the equation.
As for used equipment, it’s readily available, in stock, and on the dealer’s lot immediately. It can be delivered to your facility or directly to a job site so that you can start working with it immediately after you have purchased it. You can also expect the used construction equipment dealer to provide you with details like the manufacturer, mode, serial number, year, hours of use, and the asking price for each item they have in stock. Additionally, you may be able to find out where the equipment was previously used, which will give you a sense of how well it would perform, and if it was well maintained between jobs.
Low Ownership Costs
Buying used equipment holds its value quite well after its first year, so when you sell it, you will be able to recoup an amount that is close to what you paid. At the same time, you can deduct expenses such as amortization, interest on financing costs, maintenance, insurance, and so on from the year you purchased the equipment.
Even though you have to pay for the equipment, it will help you increase revenue, so it pays itself off. Having more equipment in your fleet will allow you to take on bigger jobs. Your employees will be able to go to more than one job site at a time with equipment available to you. Having the used equipment at your disposal can be quite beneficial when you can start generating income from multiple projects at the same time. The income you earn will increase exponentially as a result.