Each purchasing route has its pros and cons. In this blog, we will break down the pros and cons of each option to help you make the best decision.
New Equipment
Pros of Buying New
In a perfect world, where money is not a constraint, new would always trump used. You think of your company image and the professional impression you give by operating a shiny, trouble-free new fleet. Here are more advantages to buying your equipment new:
Trouble-free operation: New machines are far less likely to give you operating troubles. Routine maintenance costs are part of being an equipment owner, but your repair expenses will be a lot lower, for a lot longer, if you buy new heavy equipment. In addition, all new machines have warranty coverage.
Technology: There are major technological breakthroughs all the time in heavy equipment engineering and design. When you buy a new machine, you will get the very latest in high-tech developments.
Selection: When you buy new heavy construction equipment, you get exactly what you want. There are always advances in heavy equipment design and manufacturing techniques, as well as new models that out-perform and take on tasks that older machines can’t handle.
Cons of Buying New
Capital outlay: New construction equipment costs money. Some landscaping pieces such as skid steer loaders are relatively inexpensive, but road-building equipment such as articulated trucks, asphalt pavers, and vibrating drum compactors are big-ticket items requiring a major capital outlay investment.
Depreciation: It’s a harsh reality that new construction equipment depreciates far faster than used machinery. Although there’s no universal depreciation rate, your accountant will tell you that new equipment resale values drop further in the first few years after purchase than in mid and late lifespans.
Return on investment: Buying new heavy construction equipment or mining equipment is an investment. And anytime you’re making an investment, you have to consider the return you’re getting. By losing resale value due to depreciation and having your working capital tied up, you might be compromising your overall return on investment when buying new.
Availability: Many new equipment pieces are listed for sale, but they don’t actually exist yet. Specialty orders aren’t readily available and usually have to be ordered and then built. This could be a delay of months from the time you decide to buy new equipment until its delivery date.
Used Equipment
Pros of Buying Used
South Africa’s used heavy equipment market is alive and thriving, thanks to the vast inventory of quality machines. Here are some of the top reasons why you should consider buying used heavy equipment:
Lower upfront cost: Used construction equipment or mining equipment is going to cost you less than buying new, and, in many cases, used heavy equipment will return the same work revenue at a fraction of the new equipment cost. You might be better off saving the difference and reinvesting it in other parts of your business. You may even be able to buy multiple used machines for the same price as a single piece of new equipment, which means you can expand your fleet faster and get more work done.
Depreciation avoided: Suffering new-equipment depreciation can be a real hit. There is no escaping depreciation, but if you buy a used machine, someone else has suffered the expensive initial hit. Whether you're looking for a small skid steer or a large excavator, your used heavy equipment won’t depreciate at anywhere near the rate as new, especially if you take care of it.
Holds its value: Because used equipment doesn't depreciate as quickly as new equipment, it holds its value, especially if you keep up on regular maintenance. When it's time to upgrade, you have a much greater chance of selling used equipment for close to what you paid for it, giving you an excellent return on your investment.
Greater selection: Nationwide, there’s a massive inventory of used heavy equipment, from boom lifts and backhoes to industrial loaders and compactors. There are thousands of used machines available, from older equipment that can handle the basics to last year's models that are likely as good as new at a fraction of the cost. If you shop the used machine market, you’ll have an excellent chance of finding what you need. You’ll also be able to get your equipment when you need it and not have to wait months for your machine to be built. Flexibility can mean the difference of quickly putting a used machine to work rather than sitting idle, waiting for the inflexible luxury of new.
Lower insurance costs: This is a used equipment advantage you might not have thought about. Because your heavy equipment’s value will be lower with a used machine, you’re going to pay lower insurance premiums. New equipment insurance will assess replacement cost at a new machine value, even if it’s experiencing normal depreciation. You’ll likely overpay for insurance premiums with a new machine while a used model will have its premium adjusted.
Cons of Buying Used
You also have to know who you’re buying it from. Here are some disadvantages to buying used heavy equipment from unauthorized sources:
Stolen equipment: As with any industry, there are some unreliable businesses out there with heavy equipment for sale.
Bad condition: Be aware of what shape a used equipment piece is in.
Subpar safety: You can't really know if the used equipment you’re looking at is safe without a thorough maintenance record and product history.
Vikfin Will Help You Source High Quality Used Equipment
We believe that the benefits of used equipment far outweighs the benefit of new equipment for small to medium sized companies if you are able to mitigate the risks inherent in used equipment. Given our experience in the used equipment market, both in rentals and used parts, we can assist on sourcing high quality, reliable equipment that will not let you down.
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