In the construction industry, so much of the focus is on new equipment. But the market for used equipment is growing.
Bob Martin, who follows these trends in his role as solutions manager at Vermeer, believes the availability of information in today’s world is the major reason for this.
“The Internet and social media are wonderful tools for researching pre-owned equipment,” he says. “Not only are people researching specific pieces of equipment, but they’re researching what to look for in specific pieces of equipment. And with social media, they can post questions and get responses about certain types of equipment or even sellers.”
Navigating the used equipment market can still be tricky, however. Buyers need to determine the quality of a piece they are interested in, the dependability of the seller, and whether buying something that’s already been owned really is the best option for them.
“It can be like buying a used car: Under the wrong circumstances, you may not know what you’re getting,” says Chad Van Soelen, general manager at the Vermeer Midwest dealership.
REASONS TO BUY USED
To continue with that comparison, contractors often consider used equipment for the same reason drivers do used cars. They can get a nice piece of equipment for a good deal.
Price is inarguably a big reason why contractors purchase pre-owned equipment. This is true for all types of companies, but Martin and Van Soelen say it can be a significant advantage for startup businesses.
“They usually do not have a lot of capital to put into equipment, and sometimes a new company can’t get financing from a lender on a brand-new piece,” Van Soelen says. “But they may have enough money to purchase a used piece to get the business started.”
Another reason contractors buy used equipment is it’s not an item they need on every job, but they need it frequently enough that owning it makes more sense than renting. A rockwheel for an underground contractor who occasionally has projects in hard rock is one example.
Availability also is a factor. Contractors sometimes get attached to certain models and features. As equipment is updated, the used market becomes the place they can still get the models they prefer.
Finally, the growing prevalence of aftermarket service contracts is increasing contractor interest in pre-owned equipment.
“One reason customers feel confident with new equipment is the manufacturer stands behind it with a warranty,” Martin says. “If they can feel close to that same degree of confidence with used equipment, they’ll absolutely go in that direction.”
One example of this is the Vermeer Confidence Plus® asset protection program. Vermeer equipment receives a detailed inspection from a Vermeer dealer technician and can provide a comprehensive parts and labor service contract for major components.
USED NOT ALWAYS A FIT
This is not to suggest that buying used equipment is always the right choice. Some of the reasons why are related to the benefits just mentioned. For instance, while some contractors prefer older models, those won’t have all of the updated features and technology found on the newest models, and adding them to a machine may not be cost-effective or even possible.
The same goes for a warranty on new equipment versus a service contract on used equipment. While there are growing service contracts options out there, in some cases the manufacturer may not have available a service contract for used equipment, or the contract’s coverage may not be as comprehensive as the contractor prefers.
“When a buyer is looking to purchase used equipment, having a service contract from the manufacturer can be a big benefit,” Martin says.
Another potential roadblock is that, although the pre-owned equipment market is an international business, some equipment is off limits to overseas buyers. For example, emission regulations can limit which countries some equipment can be operated in.
WHAT TO LOOK FOR
Contractors should be thorough when looking at used equipment. First and foremost, know the item’s history. Who owned it? Was it properly serviced? Has it been modified? How would the seller rate its condition? How did they use it? If it was a horizontal directional drill, for example, was it primarily used in softer ground conditions, or was it used on rock bores? Think of the car analogy again — the wear and tear of city miles versus highway miles.
Ask to see service records. They may show not only what’s been done (or not done) to the machine, but also if there is a chronic issue.
“There should be no reason that you should not be able to walk up and say, ‘Hey, can I see all of your service invoices for this machine for the last 12 months?’” Martin says.
Another tip is to get an independent assessment by a trained technician.
There are also potential warning signs you can look for on a machine. One thing to watch out for is a new paint job. It may be covering up damage or trying to distract the buyer.
“Are you really getting a quality piece or are you getting something that’s just been repainted that has a lot of internal issues?” Van Soelen says.
Get under the machine and look for signs of unusual wear on the frame, weld joints and other places. The powertrain is another big one that deserves attention.
Then, of course, start up the machine and insist on seeing it in action. Make sure it functions as it should. Listen to it. If something sounds off, that may be a sign something is not right.
SOURCES OF EQUIPMENT
Who you’re buying from is another important part of the evaluation process.
“The biggest thing to look for is to make sure you’re buying from someone you trust,” Van Soelen says.
Sources of used equipment include local dealers, auctions and fellow contractors. There are pros and cons with each of these.
Buying directly from a contractor means you’ll be dealing with someone who should have intimate knowledge of the machine’s history. The question is how forthcoming they are with that information, especially if it’s negative. And in Martin’s experience, it often costs more to buy from a contractor because that person has an emotional attachment to the machine.
“They’re proud of that piece of equipment and can tell you stories about how it did amazing things for them, and they kind of lose sight of the fact that it’s one of many other pieces of equipment like it on the market,” he says.
Also, if an item is being sold online, such as through Craigslist or eBay, the buyer may have to evaluate it based on photographs selected by the seller.
That also may be true for auctions, as more and more online auction sites proliferate. At in-person auctions, a potential buyer usually can inspect the equipment, but they probably won’t be able to demo it.
Martin says auctions have a reputation for buyers walking away with great deals, but as auctions have become more mainstream, the prices have climbed. Also, people often end up paying more than they were planning to if there’s competition for a piece.
“It’s emotional bidding,” Martin says. “Nobody likes to lose.”
Auctions also can create doubt on the part of a buyer. Why, one may wonder, is a piece of equipment being sold at auction rather than at retail? Could that be an indication something is wrong with it? Van Soelen says that, at the dealer level, he has lots of experience with repairing equipment someone got at an auction.
“They may save money on the initial price, but a lot of times, they could end up putting more money in it in repairs because it came from an auction where it wasn’t checked out as extensively as it should have been,” he says.
Then there are dealerships. They don’t always have a large selection of pre-owned equipment, but if they are part of a dealer network, they may be able to source a piece of equipment from another location. Dealers also can offer support after the sale. They have in-house technicians who are very familiar with the equipment.
Demos are more likely with a dealer. Van Soelen says potential customers can come to his yard and test out a piece of equipment.
“We have space where a contractor can operate a drill or a trencher,” he says. “We keep a stack of wood here so someone can run it through a brush chipper or a grinder.”
Some people may be reluctant to buy used equipment, either because of a bad experience or general apprehension. But with the availability of information and the maturation of the market, now is the time to reconsider.
“Before it may have felt like the deep dark corners of the marketplace,” Martin says, “but now it’s a very viable opportunity for contractors.”