When it comes to updating construction equipment, many business owners are torn between buying new or used equipment. Each has its pros and cons, and you will be in the best position to make a decision when you understand both sides. It is very helpful to be informed of what works best for you. You may think that buying new equipment is the better option because of constant technological advancements. However, this isn't always the case. It is important to consider what you want the device to do for you - is it for temporary relief during busy times, or is it for long-term assistance? Answering this question can help you decide which option is best for you.
Purchasing and maintaining equipment is generally one of the most expensive aspects of any construction job. As a result, many businesses opt to purchase old equipment rather than new ones. Purchasing pre-owned equipment is one of the most cost-effective ways to save money on a job. But what other benefits can you anticipate aside from saving money? What are the disadvantages of purchasing used equipment?
Lower upfront costs
Purchasing new equipment is always more expensive than purchasing used equipment. If you want to keep your project budget under control, buying used equipment can help you cut costs. When purchasing anything new (car, house, or piece of heavy equipment), you're paying a considerable amount for the item's newness rather than its genuine value. When properly maintained and repaired, used heavy equipment can be just as beneficial to your business as new heavy equipment, but at a fraction of the cost. You'll spend a lot less money up front with used equipment, allowing you to get your firm up and running sooner while saving money for additional expenses like recruiting and training operators.
The used heavy equipment industry is enormous. Since used equipment is in higher demand than new equipment, it stays in circulation faster than new equipment is developed. The global market value for used heavy equipment is expected to reach approximately $120 billion in 2022. It means that the used market will continue to have a considerably more significant assortment of equipment than new inventory. When you look at the second-hand heavy equipment market, you'll have a higher chance of obtaining the correct equipment for your business at the right price. You can acquire equipment at a reduced price if you can wait until the market shifts.
Used items depreciate over time; however, the most significant depreciation occurs within the first two years of a machine's life. When you purchase new equipment, you absorb the principal depreciation cost, up to half of the machine's cost, depending on current market demands. Because the most significant depreciation loss has already occurred when you buy second-hand equipment, you can receive a newer piece of equipment without paying the initial sticker price.
The depreciation of new equipment can have a considerable impact on your budget. If you purchase second-hand equipment, you won't have to deal with early depreciation which can help keep your costs in check.
Lower insurance premiums
Suppose something goes wrong with your new excavator. Since new equipment is more expensive to purchase, it is also more expensive to insure than used equipment. The initial cost is higher, and so are the ongoing costs due to increased insurance premiums. In that case, you may end up paying more for insurance since they will calculate the replacement cost as the worth of a brand new machine, even if yours has already depreciated.
Construction is a fiercely competitive industry, and contractors must remain adaptable to complete more contracts faster. You can buy a suitable used machine for a future contract and then resell it once it is over. Since there are long wait times for new orders, you would not find this flexibility with new equipment.
When purchasing used equipment, look for machines that you or your operators are already familiar with because they will have the same or similar controls and technologies. When purchasing new equipment, you will almost certainly be confronted with a new technology that will require training. Purchasing used equipment might increase uptime because it may require less training.
Although used equipment is a cost-effective choice, your project needs functional equipment. Used construction equipment sometimes comes with more hazards and unknowns than new machinery. When purchasing used equipment, there are various elements to consider that will assist you in making the best decision possible without wasting time or money.
Used construction equipment may come with an extended warranty, but you'll be responsible for any repair costs if it breaks or malfunctions if it does not have a warranty. Thoroughly inspect the equipment, preferably with an experienced specialist who can discover defects or concealed problems, to avoid this problem. Better yet, only purchase equipment in good working order with an extended warranty.
It can be challenging to spot deceptive merchants on the market. There are many untrustworthy sellers, and some of the available equipment may be stolen or awaiting seizure. Buying equipment from a shady company would almost certainly put your finances in jeopardy, so make sure you're working with a reputable supplier.
The seller's details and reputation are the first things you should check. Inspecting the person or company advertising the equipment is critical since you may find critical information about the transaction. It will be easier for you to believe their specifications on the machines if they are a reputable seller with testimonies or a solid reputation in the business.
Increased safety hazards
Always inquire about the product's history and maintenance records when purchasing used equipment. You can learn what kind of maintenance the piece of equipment has — or hasn't — received and assess potential safety hazards. Employees and the property you're working on are at risk if you buy used equipment that has been poorly maintained or has hidden flaws.
The listing price should not be the same as a new piece of equipment, but it should reflect a machine's worth based on its running time, age, and previous maintenance. On the other hand, the listing price should not be dangerously low, as this is also suspect. Consider depreciation and salvage value if you're buying from a seller that has to sell the equipment in a short amount of time to get the best price.
The frequency of maintenance, major repairs, and current replacement needs are all aspects to consider when purchasing second-hand equipment. The damage reports will reveal what kind of work the machinery has completed in the past and whether it has been subjected to too much extreme building work to be usable. If the equipment has suffered more severe or recurring damage, you may want to reconsider the purchase.
You can learn how to buy heavy second-hand equipment by looking at the history of buyers and sellers. Previous ownership changes will partially reveal the frequency of use and the amount of time the machinery has circulated.
Whether you purchase new or used construction equipment, Equify Financial is here to provide financial support.
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