The Advantages of Purchasing Used Equipment
When you own a construction company, you must pick where to invest your money wisely. You can always buy new equipment when you need it for a task, but there are times when investing in your business makes sense. Purchasing previously-owned gear from a licensed dealer has a variety of advantages.
FACTS AND STATISTICS FROM THE CONSTRUCTION INDUSTRY
The construction business is the world’s greatest employment. By 2025, it is predicted to have increased by 70%. With an increase in the number of workers, there will be an increase in the demand for more equipment. In order to stay up with the projects they have planned, companies will need to consider their choices for keeping their fleet at full capacity. Construction is a fast-paced industry that is always evolving. Take a look at the facts and figures below:
- Construction is one of the main industries in the United States. It accounts for around ten percent of the country’s GDP (GDP).
- Construction employment accounted for two-thirds of all jobs in the United States.
- The number of construction machines in the United States is estimated to be over three million. At any given moment, around a third of the fleet is in use
- Caterpillar is the world’s leading heavy equipment company. Nos. 2 and 3 are Komatsu and Hitachi, respectively.
BUYING USED CAT CONSTRUCTION EQUIPMENT HAS ITS ADVANTAGES
1. Get a Better Deal on Equipment
Purchasing new equipment is an expenditure that can have a big influence on the cash flow of your organization. However, you may get good used equipment for a considerably lesser price. By opting for this option, you can save thousands of dollars on the expense of purchasing new machinery.
Over the last few years, the cost of new equipment has risen. It’s always pleasant to think about getting anything fresh new, but just because the machinery has been used before doesn’t mean you have to compromise on quality. If the equipment has been properly maintained, it can provide years of reliable service.
2. Avoid Equipment Depreciation in the Beginning
Construction equipment, like your truck or automobile, begins to depreciate as soon as you drive it off the dealer’s lot. Double-digit depreciation is common in the first 12 months after purchase, although it slows down in the second, third, and fourth years. You can avoid taking a “hit” on the first depreciation by purchasing a used piece of equipment.
If you purchase a new piece of equipment that depreciates at the same pace as a new automobile (between 20–40 percent in the first year), you may owe more on it than it is worth after a year or so. If they ever had to consider selling the item beyond the first year or two, no one wants to be underwater on a car or truck loan, a mortgage, or heavy equipment financing.
By purchasing secondhand equipment, you eliminate the problem with the specific asset and may concentrate on expanding your fleet. You can also focus on the projects you have scheduled for completion.
- Model/serial number
- Hours of use
- Asking price
You should also be able to determine where the equipment was previously utilized since this will give you an idea of the types of circumstances it has been subjected to. You’ll want to know if it was used in an area of the United States or Canada that is predominantly wet, dry, warm, or cold, as this will offer you some indications of how well the equipment may operate if it was properly maintained and stored between operations.
6. Have Lower Ownership Costs
Because used equipment retains its worth well after the first 12 months, you can buy it for specialized work and then sell it to return a significant portion of your investment. Meanwhile, you can deduct expenses like amortization, interest on financing fees, maintenance, insurance, and so on your income tax return beginning in the year you bought the equipment.
The equipment is an outlay for your company, but it will help to pay for itself through higher revenue. The larger the jobs you can take on with the equipment you have in your fleet, the more jobs you can take on. You’ll also have the equipment to dispatch your workers to multiple task sites at the same time. When you can start earning money from multiple projects at the same time, you’ll be able to fully appreciate the value of having used equipment on hand. It will allow you to enhance your revenue by a factor of ten.
7. Increase your adaptability
Because you may obtain used equipment more quickly and for less money than a comparable model of a new truck, dozer, loader, or another piece of equipment, you will be able to consider bidding on tasks that you would not be able to consider if they were contingent on you purchasing new machinery. You can include the cost of temporarily financing old equipment as one of the costs of taking on a specialist work for several months or the duration of a contract. If you don’t obtain another contract that requires the specialized machinery once the project is completed, you can sell it and reclaim a significant portion of your initial investment.
Your company and team have gained expertise working on a specific project in the meantime. This will only help you build a better reputation in the business and with potential customers. When you’re asked about performing comparable work again, you might refer to your past project and clarify that you’ve done similar work before. You can decide at that point whether it makes sense to buy a used piece of equipment again or find another way to get the equipment you need for the jobs you’ve been contracted to accomplish, depending on the quantity of work being offered.
8. Take Advantage of Any Warranties That Are Available
On secondhand construction equipment, the vendor frequently provides a warranty. You will feel much more confident about making a purchase if you know that the equipment is covered by a maintenance plan.
You will profit from the maintenance plan in other ways as well. It assists you in budgeting for maintenance costs. These items include not only parts and labor but also supplies and lubricants. You are protected from the impact of significant business costs as well as having to deal with tiny repairs that tend to mount up over the course of a month or more when you know how much these expenses will cost each month and over the lifespan of the maintenance plan.
Your dealer will work with you to determine how much a package for the specific brand and model of Cat used construction equipment for sale that you are interested in would cost. It would comprise a customized set of services, maintenance intervals, and replacement parts tailored to your company’s needs. The estimate for the equipment would be worked up to be a realistic cost per running hour.
If the maintenance cost is too high, you will not want to purchase the protection plan, and if it is too cheap, there is no value to you as a consumer in purchasing a maintenance agreement to keep your equipment repair costs in check. For the agreement to be beneficial to both parties, it must include provisions that will benefit both of you.
9. Save money on insurance
Insuring secondhand equipment is frequently less expensive than insuring new equipment of the same model. Insurance rates are usually calculated based on the equipment’s replacement cost, not how much you could sell it for after you’ve owned it for a while. Because the replacement cost of used construction equipment is cheaper than that of new construction equipment, the overall cost of coverage is often lower. When assessing the insurance for a used piece of equipment, consider the following factors:
- Cash value vs. replacement value. Make sure your agent or broker understands that you want to cover the equipment for its replacement value, not its cash value when negotiating adding it to your policy. For insurance reasons, these are two quite distinct concepts, and failing to grasp the difference might cost you a lot of money if you need to make a claim on your policy.
If you simply insure it for the cash value, you will only be entitled to the depreciated value if it is lost. Even if depreciation decreases after the first year, the equipment continues to depreciate, and if you get this form of coverage for your used construction equipment, you will be left with a financial loss.
You will be entitled to compensation for the worth of a similar year and model of the type of equipment that was destroyed in a total loss if you choose replacement value. Although the insurance company would not cover the cost of fresh new equipment, you would be “made whole” up to the time of the loss.
- Per incident limit vs. overall policy limit. When purchasing construction equipment insurance, keep in mind that your overall policy maximum may be a particular sum, but that amount may not be the amount you would receive if your fleet was destroyed in a total loss. Although your policy may have an overall maximum of $X, the insurance company’s limit for any particular loss could be substantially smaller.
Even if there was damage to more than one piece of equipment, the most you could receive to replace it in the event of an accident would be limited to a fixed amount. Before you agree to acquire coverage, it’s critical that you understand all of the terms of your insurance policy.
BEFORE YOU BUY, INSPECT THE EQUIPMENT.
Make a point of properly inspecting the previously-owned construction equipment both inside and out before you commit to purchasing it. Before making a purchase choice, the dealer should allow you to view it thoroughly so that you are familiar with all of the equipment’s features. You should pay special attention to the following details:
The cab is an essential component of any piece of machinery. This is where all the action happens throughout the day, whether you plan to run it yourself or have someone on your team work with the equipment once you buy it. Your entire team will be less productive if the operator is uncomfortable if the controls are difficult to read or reach. This will have an impact on your bottom line.
As if you were buying a car or a truck, take a seat in the driver’s seat. Get a sense of what the operator sees during the day by sitting in it. Check to see if the seat can be modified in height to accommodate varying leg lengths and if the backrest can be altered as well.
Next, take a look at the console and think about how the operator will read the instrument panel. Because you may need to operate the machinery after dark, you’ll want to make sure it’s adequately illuminated and that the information can be seen in both strong sunshine and low light circumstances. To reduce the danger of neck and back fatigue, as well as repetitive strain injuries to the operator’s hands and wrists, consider whether the equipment is operated using foot pedals or a joystick.
2. Tracks and tires
Examine the tires on the piece of machinery you’re contemplating. Make that the treads are in good condition. The presence of cracks and bubbles in the tires indicates that the equipment was left outside. If the equipment has been exposed to the elements for an extended period of time by a previous owner, its condition may not be as excellent as a similar model that has been housed in a climate-controlled environment when not in use.
Check the tires for uneven wear with a tread gauge. If you notice any of these indicators, it could suggest a drivetrain issue. Before moving forward with a potential purchase on a specific piece of equipment, you’ll want to have that issue thoroughly evaluated.
If you’re thinking about adding a track machine to your fleet, double-check that the tracks and bolts are secure. It’s important to keep in mind that tire and track replacements might be costly. You should make it a point to learn about the overall cost of replacement parts for the equipment you’re thinking about buying.
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