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The cost of investing in new equipment can sometimes keep a small business from reaching its full potential. Many small business owners find themselves caught in a dilemma: they cannot grow their business unless they upgrade their equipment, but they cannot upgrade their equipment because business is stagnant. If that is the case, there is the option of purchasing second-hand equipment for your business. There are many misconceptions about purchasing used equipment. Here are some important points to consider when looking for second-hand equipment:

1. Pre-owned and used are not always the same thing.

There are plenty of deals on both refurbished equipment and equipment previously not used. Just because a piece of equipment was owned by someone else its quality and condition are not necessarily less than buying new.

2. Always make sure buying secondhand will result in savings.

Calculate your possible savings and ensure you know the correct average price for an item. Online research is often the best solution for estimating this. Ideally, you should save from 20% to 50% of the full price if purchasing preowned equipment.

3. Do your research!

The internet is a powerful tool so take the time to search for online reviews of the equipment you are purchasing. You may even discover other issues to consider, eg your equipment may require specific software, training or infrastructure you were not aware of. You should also conduct research into the supplier. If they have had poor performance with previous customers someone may have posted a bad review. It is always a good idea to ask for references - if something feels wrong, look for a different supplier.

4. Get a warranty!

Ask the supplier if they offer a warranty or if they will extend the existing warranty. Be aware, if purchasing equipment from overseas the warranty may be void once it leaves the country of initial sale. Paying extra to extend the warranty can offset worries you may have about purchasing second-hand. Ensure the refund policy and terms of purchase are well defined by both parties to avoid misunderstandings if something goes wrong.

5. Uncover any hidden costs.

When tallying up the savings, make sure you factor in hidden costs such as delivery costs, international shipping taxes, customs processing, shipping and transportation. If the supplier offers shipping, it is often worth the cost. Factor in your time to pick up and transport the equipment. Is the cost of your time worth more than paying to have it delivered directly to your door? If you are not achieving the desired savings target after adding these costs, it may not be worth it.

6. Determine ongoing costs.

You also need to calculate ongoing operating costs and the useful life of the asset. Used or second hand may attract higher maintenance costs and the determined useful life may have implications for tax depreciation purposes. So, you’ve done the research and second hand looks viable. What now?

Financing your purchase

It is important to determine if you are able to obtain finance for your second hand equipment BEFORE you commit to the purchase. Some financiers can assist in the importation of equipment from overseas by providing letters of credit and/or arranging to pay the supplier in a different currency. This is a great help if the overseas supplier requires payment prior to shipping the goods. Most lenders will normally require a risk assessment to ensure Australian standards are met on equipment sourced overseas.

Does it have clear title?

As a starting point, in Australia you can search the PPS Register to determine whether certain personal property has a security interest registered against it. Go to www.ppsr.gov.au. Looking to purchase equipment for your business? Call us first and we can help you assess your finance options.