When deciding whether to buy a new or used car, the decision depends on a number of factors…and money isn’t always number one. Determining whether a new or pre-owned equipment purchase makes sense depends on the situation. As an engineer or production manager, it is always fun to dream of all the possibilities that the custom features and built-to-spec options offer. But when the rubber hits the pavement, there are many advantages to opting for a used car instead. Similarly, pre-owned equipment can offer several advantages over buying new.
There are many reasons pre-owned equipment is available, and it is worthwhile to consider it as an option. Before reading further, note that pre-owned does not necessarily mean used. There is a significant difference. It is often possible to find pre-owned equipment that has never been used or is only lightly used. The seller may have purchased it, but never installed it for one reason or another. It may have been a back-up or temporary unit used for a brief period to bridge a gap in production or to launch a product that never took off.
The Big Two: Time and Money
Most capital equipment is built-to-spec after the order is placed; the buyer gets exactly what they want with features tailored to their specific application. Buying new also ensures the buyer gets what they want by way of warranties and support packages. If the buyer has the budget and time for this, new equipment is probably the way to go.
However, when time is an issue, vendors don’t typically have a large inventory of equipment sitting around ready to ship. In many situations, the lead times for made-to-order equipment don’t fit into the project timeline.
The cost of brand-new, customized equipment may also be prohibitive. This can be especially true for start-ups, new product launches, or when addressing unbudgeted capacity increases. For these reasons, pre-owned equipment can be an excellent option for saving money and shortening timelines. It is typically discounted to listed catalog prices and ready for immediate delivery.
Here are some additional tips to bear in mind when considering pre-owned equipment.
Meeting Your Specifications
We cannot emphasize this enough – any piece of pre-owned equipment must be able to meet the project’s goals and expectations. This is where equipment expertise becomes invaluable. In fact, though it may seem odd, there are strong arguments for writing a specification prior shopping for pre-owned machinery.
The price and availability of pre-owned equipment might be attractive, but if its specifications do not match the need, then it’s not the bargain it seems. Certainly, a piece of pre-owned equipment may not precisely match desired specifications, but not all compromises are equal. Make an informed decision on pre-owned equipment by evaluating the time and costs associated with adjusting for any compromises and compare that to the bottom line for buying new.
Urgent Need
Determine whether fast timelines are because an urgent need must be addressed or because of artificially imposed deadlines. If there is an urgent need – a spike in orders, failing equipment, new demand – then consider pre-owned equipment as a stop-gap measure to meet that need while new equipment is made. This might sound like an additional expense but reselling pre-owned equipment once new equipment is online can recoup much of that expense.
Proof of Concept
In some cases, pre-owned equipment might serve as a prototyping tool to test a concept. An innovative production process might be under consideration, but it is risky to invest in new equipment on an unproven idea. Pre-owned machinery is an excellent way to do proof-of-concept evaluation to test the new process without the hefty investment. An added benefit is that teams learn what does and doesn’t work allowing them to dial in specifications for the new equipment before it is purchased. Think of renting the car you’re interested in buying to see if it works for your transportation needs.
Market Entry
For producers starting up or entering a new market, pre-owned equipment offers a lower cost and faster time to market than new. Teams can test out new products on a limited basis to evaluate market demand and estimate the size of the market. Gaining quick market entry is a valuable way to establish yourself as a forerunner in an emerging market or to quickly gain foothold in a new market segment. As the new products gain market share, pre-owned equipment can be phased out, and new equipment can be purchased to fulfill the demand. The pre-owned unit(s) can be sold or repurposed as back-up capacity, for R&D, or as a pilot plant.
There are many reasons to consider pre-own equipment, but as with a used car, buyers should proceed with precaution. Kicking the tires, looking under the hood and even test-driving is, of course, necessary. Beyond assurances that the pre-owned equipment functions, remember that the most important consideration before investing in pre-owned equipment is that it must meet the expectations of the users and goals of the capital project.
In our next blog, we will discuss ways to increase your likelihood of success when investing in pre-owned equipment.
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