Used Equipment can save time and money – OR it can cost more in time, money & aggravation than buying new. So, here is some good advice to avoid costly mistakes when making the buying decision.
Before starting an equipment search, business owners should answer a few questions.
1.) Will this piece of equipment diversify my business?
2.) Will it allow me to handle my current volume more quickly & efficiently?
3.) Will it help me reduce downtime and increase the volume of material I handle?
After confirming that the equipment is indeed necessary, the next question might be New or Used?
At first glance, the benefits of buying used might make it seem like an easy decision. The first benefit is time: The equipment is available immediately, whereas a new product might take months to design and manufacture according to your specifications. Or it may take a lengthy amount of time to arrive from a distant factory.
Time is important. Business Owners must consider current market conditions, the location of the equipment in relation to their business and the length of the wait for a new machine. If you place an order for new machinery and it takes two months until it is delivered but you have secured a job that has to be done soon you may be in big trouble. If you buy used and its available immediately, you may not have that problem.
The second benefit of buying used is price, which might be 60 percent of price for the same machine new, or less. Price is related to supply and demand, of course, If a particular type of equipment is in high demand, expect to pay more for it even when it is used.
Used equipment is not just cheaper; it can get you more for your money. Just because the equipment is used doesn’t mean it is nearing the end of its service life, Charlie Fritz, VP of Area Material (Kankakee, Ill.) Points this out “I recently bought a couple of material handlers that had about 2,500 hours each. They are expected to last 15,000 hours. New, one of these machines would be in the $230,000.00 range. I paid $ 130,000.00”’ as staff puts it. “Equipment is what makes you money in his industry. You can make a lot more money faster if you can lower your acquisition cost (for) a piece of machinery that also allows you to increase the volume of material handled.” In other words, the less you pay for the equipment the better the return on your investments.
But these purchases require the same due diligence as the purchase of a used car, caution those who buy and sell equipment. Before signing on the dotted line, consider the following.
Buy from a trustworthy seller: Work with a dealer who is familiar with your industry – someone who understands the business,” It is important to know and trust the dealer or private party you’re buying from.” If you’re not buying from an equipment dealer, the first question you should ask is, “Who has title to the machine, and is that title to the machine, and is that title encumbered in any way – (is there) a lien on the machine or a security agreement?” “You’ve got to be concerned with whether a bank has a claim in it, particularly with more expensive equipment. That’s critically important, and with today’s climate in the banking industry, banks are increasingly reluctant to release liens on machinery. A benefit of buying from a credible machinery dealer help’s to ensure the machine being purchased has a clear title.
Buy the right tool for the job. Make sure the equipment is suited to its intended use and is the right size for the application. For example, some scrap processors try to save money by buying used excavators and converting them for use in their yard. Ivan Jacobs, owner of Equipment International (Aurora, CO.)states, “They mount a generator on it and a magnet or grapple, but they just got by with it because it doesn’t have a long enough reach or a cab riser for visibility. If the operator is loading a high-sided trailer “blind” It is dangerous, and they usually can’t get the correct weight into their trailer. If it’s a crawler, every time the operator makes a turn the tracks are tearing up the driveway.” He explains “In such situations, I’ve sold one used material handler with a hydraulic cab riser that has replaced as many as three old excavators. Scrap dealers are ecstatic. With this change they’ll never go back to a converted excavator. Compatibility also is essential, if one piece of equipment must work in tandem with another. Make sure your machines are hydraulically capable of handling attachments and that they will physically attach to it.”
Examine the machines condition: When considering the purchase of a used machine, go through a checklist of questions for the seller before agreeing to make the purchase:
° For what purpose was the machine used?
° How many hours was it in operation?
°What is the overall condition of the machine?
°What components have been replaced, and at what hours?
°What is the maintenance history? Are the maintenance records available?
While the meter tells you the total hours on the machine, you have to rely on the seller to learn what components have been changed and when.” Says Don Davies, sales manager for Sargent’s equipment and repair (Chicago Heights, Ill) “ Material handlers today are designed to give you a lot of hours, but it it’s a high-hour machine, you need to pay attention to the component changes throughout its life, such as the engine , hydraulic pumps and undercarriage”.
Different types of equipment have different items of concern when it comes to maintenance and condition. For some equipment buyers assume certain items need to be replaced on the outset. “I will figure into the purchase price the cost of replacing the engine and some of the pumps. Perhaps look into the pins, boom, and the integrity of the undercarriage. A lot of times it is wise to get a second opinion from a host of dealers that you may have a relationship with and trust before you buy. It’s also important to know if and when major components such as the engine, pumps and turntable bearings were rebuilt and who did the work. You need to ask, was it done in house or sent out, and does it still have a factory warranty in play? An unscrupulous seller might dress up used equipment in poor condition with temporary patches and lie about the number of hours a machine has been in service. You have to know and trust the dealer or private party you are buying from. You need to inspect the machine and be sure the hour meter is correct so that you’re not buying a machine with 5,000 hours that is only showing 2,000 (hours) “If the machine’s undercarriage and boom look like they’ve experienced heavier usage than the hour meter indicates, it might be worth getting a second opinion.
For some deceptive practices it takes an experienced individual to detect potential problems.
This can happen when buying attachments at auction. It looks great, but it’s been doctored up. Auto body putty has been used to fill any flaws and cracks; it’s been painted and re-decaled. Then on the first go round it falls apart.
Seeing a machine in action also is important. Let the value of the equipment being purchased determine the inspection approach. If a Business owner wants to buy a $ 5,0000.00 piece of equipment he can do it after seeing a picture of it. If it’s a used Excavator you may want to get on an airplane and take a look at it. It depends on value. Some business owners feel that anyone who is going to spend close to half a million on a excavator & conversion and doesn’t see it running is crazy. Before booking a flight to inspect a potential purchase ask the seller the following questions:
Is the machine running now? If not, when was the last time it ran? Did it run with material in it? Did you notice any problems with material in it or performing its intended tasks? Can you be sent a video of the machine running & working?
Consider the availability of parts and service. Every piece of equipment, regardless of its age or condition when purchased, will need repair and service at some point, so the purchasing decision should factor in the availability of support, service and parts. “Your success with a machine is going to be dependent on the support you get from whom you are buying it from and the amount of support you have available internally and in your business”. Whether new or used, How much technical capability you have access to, whether internally or from a third party, will determine how successful you’re going to be and the reliance you can have on used versus new.
The best deals in used machines are those on the five to 15 year old range that the original manufacturer or current dealer will support. If you can’t get parts overnighted from a manufacturer it may take several days to figure out where to get the part from and then you have to order it. If that is the case you could be down for a week to ten days. Of course that does not help your business.
Should you expect a warranty? It’s a matter of customer expectations versus the dollars he is spending.
If a buyer is spending 50 cents to 60 cents on the dollar for used equipment with no warranty they’re probably overspending. Normally you would spend 60 percent of what it costs for new for something reconditioned, with 90 day warranty on parts and labor. If the machine is being bought “as-is” you should be spending no more than 30 – 40 percent of the new-equipment price.
A warranty is reflected in the price and depends on how new or recently reconditioned the item is, A buyer concerned about a warranty should purchase new or near new equipment. As a warranty is rare.
The equipment cost might be only one expense associated with the purchase, Consider the cost of disassembly, the condition of the machine and the cost to bring it into operating condition. The possibility of having to upgrade safety devices and the cost of transportation and installation of the machinery are all included in the cost of ownership. You may be unpleasantly surprised by the total cost of the purchase. “When it is all said and done and all the costs have been tallied up you might have spent more money getting the used machine up and running than what a comparable new piece of machinery would have cost”. Unless time workability is a consideration it would be a mistake to spend more on a used machine. Disassembly costs can equal the cost of equipment especially in the larger machines. If you buy , for example, a 25 year old, 500 ton shear it might cost only $50,000.00 to$ 60,000.00 but you would spend that much on disassembly and loading because there is so much involved. The weight will result in high transportation costs and then the cost to reassemble which is about the same as to disassemble. Not taking into consideration the foundation costs and electrical, the soft costs can cause potential buyer to look at the total and back away from the sale. Some costs are the responsibility of the buyer regardless of whether the equipment is new or used, so be sure you’re comparing apples to apples.
Operating costs are another consideration. Fuel efficiency technology has changed significantly over the past decade, especially for larger pieces of equipment. A big older material handler burns 10 to 14 gallons of fuel per hour, whereas a late model material handler only burns five to eight gallons per hour. Equipment owners have reported an annual fuel savings from replacing a big older machine with a smaller newer used machine were enough to pay for the machine in one year.
If you have done your due diligence and made a purchase of used equipment make sure your workers know that the purchase has been made in ensure it doesn’t get processed for scrap accidentally upon arrival.
Just a thought.
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