Equipment Acquisition: New Vs Used
Part 3 of 3: Pros and Cons of Buying New
In this, our third and final blog post in the ‘new vs used’ blog series, we are going to discuss the pros and cons of buying new equipment for your business.
A lot of businesses consider buying new equipment a first and preferred option, though there are admittedly some pitfalls involved. First of all, buying new is more expensive. For companies that don’t have a lot of money, this can be a negative. But on the other hand, buying new also offers a lot of positives.
Let’s get right to the pros and cons—starting with the biggest challenge associated with the ‘new’ option.
Buying new is more expensive
There really isn’t any way to sugar-coat it—buying new can sometimes cost twice as much as buying used. You’re looking at spending the maximum amount on your equipment if you utilize this option, regardless of the method of payment.
Once a piece of equipment leaves the factory and is purchased by a business, its cash value slowly begins to depreciate. This is why buying used tends to save business owners so much money initially.
Getting a bank loan to cover the costs of new equipment can be difficult
Bank loans aren’t always easy to obtain. They require a ton of paperwork, will require you to jump through dozens of hoops, and can take weeks or months to authorize. Approval is also dependent upon a good credit score—which is something that not all businesses have to work with.
On a somewhat related note, equipment leasing can be used to obtain new equipment without going to all of the trouble that bank loans put you through. In fact, equipment leasing can usually be obtained within a couple of days, allowing you to have your new equipment installed and running in little more than a week’s time.
The payments on a lease are a little bit higher, but a lease is also much easier to get. Plus, they allow even smaller businesses to acquire high-dollar gear for low monthly payments. With equipment leasing, you also usually get a $1 purchase option at the end of the lease term (depending on the type of lease that you get) that will allow you to own the equipment outright anyway—which is a win-win scenario that many businesses nowadays are taking advantage of.
Buying new might save you money in the long run
While buying new might seem like the more expensive option, you may find that crunching the numbers tells a different story. In all actuality, buying or leasing new equipment might really save you money, and here is why.
First of all, you get a better warranty when you buy new. Some used equipment does come with a warranty, but these warranties are almost never as good as what you get when you buy new.
Secondly, new equipment has not acquired the wear and tear that used equipment has. When you buy used, you are actually buying something that has already been through the grinder. You are investing in something that has probably given the best years of its life to another business. How long is it really going to last you? How long until you experience problems or breakdowns that you are going to have to pay to fix?
When you buy new, you know where your equipment has been
When you buy used, you often have no idea what you are investing in. You might be investing in something that fell out of a truck and had a few parts replaced—but how many other parts are going to give out as well?
This lack of surety is something that comes automatically with used equipment. But when you buy new, you usually get a good warranty and the peace-of-mind that comes from knowing that your investment has only recently come off of the assembly line. This means better reliability, a longer life span, better performance, and probably money saved.
Who should buy new?
Some companies might simply not have the funds available to buy new. For them, new equipment leasing might be a fantastic option, though buying used can also end up being a profitable avenue. You can admittedly get some great deals on used equipment, though a lot of companies end up deciding that the risk is simply not worth it.
If your company is looking to buy new but doesn’t really have the capital on-hand, then they might want to look into equipment leasing as a viable acquisition method. It’s inexpensive, fast, and easy. Plus, as stated before, you can usually own the equipment after the term of the lease for only $1—which means that you’ll still own it after everything is said and done.
Of course, in the end, it all depends on your business and your current financial situation. Choosing to buy new or used might not be easy—but a little bit of thought, a good look at your business plan, and an evaluation of your future goals can all help you to figure out what will truly be best for your organization.