Small Business Taxes & Management
New or Used?
Small Business Taxes & ManagementTM--Copyright 2020, A/N Group, Inc.
New or Used?
Some people will never buy a used car--some swear by used since they avoid the big value drop as the car leaves the lot. Buying equipment for the shop or office can also be subject to personal preferences. But there are times when one option, new or used, makes overwhelming sense. Here are some thoughts:
- Consider the application. If it's mission critical, buy new. You'll get a warranty, may be able to purchase a maintenance contract, and won't have to worry about getting parts. On the other hand, if you just want a backup unit should the main one fail, consider used. For example, you do some high volume copying and can't afford to be down for more than a few hours. Buy new. On the other hand, if you want another machine as a backup or for employees at the other end of the building to use occasionally, buy used.
- Consider the type of equipment. Some equipment that has few moving parts, is built well and isn't technologically advanced, can last for years. For example, a drill press that hasn't been abused can have plenty of life left even after 20 years. The motor may have to be replaced, but that could cost less than $100. On the other hand, a computer that's much more than two years old is obsolete for many tasks, although it might make sense as a backup unit.
- No moving parts? Older office furniture can be a particularly good deal. Some items were made better than those made recently and the savings can be substantial.
- Consider the price differential. It doesn't make sense to buy used just to save 10-20%. Look for a savings of at least 30%. Your goal should be closer to 50% off. Again, there are exceptions. Some well-made industrial equipment might have low hours and be as good as new. Make sure you get a good inspection before purchase.
- Consider the source. Auctions, both online and the old-fashioned kind, can be great sources, but there can be traps. Plant closing auctions may be the result of bankruptcy. Equipment may not have been cared for, may be abused, or even partially stripped. Make sure you know what you're buying. You may or may not get a good deal at an auction. Sometimes the prices can be bid up to the point where you're better off buying new. Know the prices of items before you start bidding. Smart buyers set a limit before the auction starts. Once that's reached, they stop bidding.
- Pandemic closings. Depending on the business, there's probably more used items on the market now than ever because of store and business closings. It's sad that a business failed, but you can pick up some great deals.
- Consider maintenance. If you buy a name brand, parts and service should be available for a number of years. But not always. And you should be particularly careful of an offbrand.
- Consider supplies. If the equipment needs supplies such as chemicals, toners, ribbons, etc., the same rules apply. Larger companies usually support equipment longer. You can improve your odds by buying a model that's been particularly popular. Even if the original manufacturer doesn't support the equipment, an aftermarket supplier should.
- Consider appearance to others. If you've got a consulting business and have clients visiting, you want to look your best. But even then it doesn't mean you can't buy used for the back room.
- Consider your expertise and the equipment. If you or someone in your shop is adept at fixing equipment, particularly if it's the same type of equipment, you can take more of a chance. A 20-year old paper drill for a print shop has few parts that may break. You may be able to find or fabricate replacement parts if they're not available commercially. That may not be possible with many electronic or electro/mechanical units.
- Starting a business? One of the most successful companies some years ago began operations in an old mill building with used furniture. The cash they saved allowed them to get a foothold and grow without extensive startup capital.
Copyright 2020 by A/N Group, Inc. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The information is not necessarily a complete summary of all materials on the subject. Copyright is not claimed on material from U.S. Government sources.--ISSN 1089-1536
--Last Update 12/30/20