January 28, 2010

Whether you’re running a typical office-based business, a janitorial service, or a custom manufacturing company, the rising cost to purchase and maintain equipment will directly affect you in 2010. While the most efficient way to cut costs is to regularly maintain and service your existing inventory, even the most carefully cared-for pieces will eventually need to be replaced. Here is our quick expert guide to knowing when to buy used, what to look for, and how it can benefit your bottom line for years to come.

Use the Recession to Your Advantage

An unfortunate casualty of the recession – small business failures – can work in your favor when looking for high-quality, used office, retail, and manufacturing equipment. Auctions, which traditionally haven’t fared well for sellers, can be a viable option for small businesses looking to go used. Ed Castagna, president of Nassau Asset Management, notes that the low prices will require a bit more discernment when making purchasing decisions. “Buyers will need to be careful to note the condition of the item up for bid. Some auctions will require sellers to upgrade the condition of the equipment as a “make ready” requirement for the event, which can also increase the price.”

Those who aren’t finding success on the auction block may discover Craigslist.com to be a rewarding alternative. Within each local “For Sale” category, resides a section just for used business wares, which can include anything from goose neck trailers to angel food cake pans to commercial freezers for a fraction of new retail cost. Adam Kruse, of the St. Louis Hermann London Group, shares a recent experience where someone else’s misfortune became his small business gain. Mr. Kruse found a Craigslist ad for a liquidation company reselling the contents of a Holiday Inn hotel, and he immediately took advantage. “They had hundreds of high quality matching wood desks almost exactly like the ones I found at Target, and they were 15 dollars each.” By purchasing 25 of these units, he spent less in total than he would have for just five of a similar product at retail.

What Should You Buy Used?

Whether you go the private route, or prefer to do business with a more established company dealing specifically with used business assets, there are some basic tips that can help you determine what makes a good deal:

• Most business owners agree that furniture (restaurant, office, hotel, etc.) is almost always appropriate to buy used. The savings is usually significant, and even the most outdated looking pieces can be given a facelift or used in a “vintage” setting for a unique fashion statement. Savings may vary, but it’s not unusual to realize savings of 50 – 75% over retail.

• Electronics purchases seem to have our experts split. While many will risk cash on used PC’s, monitors, or printers, others need the assurance that only a new product warranty can provide. If in doubt, consider the overall value of the warranty options, remaining useful life, and technologies against the cost of the equipment. If the math doesn’t add up, skip the second-hand option. If used is the only choice for your budget, try to buy through a dealer with a warranty and service contract – and don’t be afraid to ask for extras like regular cleanings or upgrades.

• Heavy duty or manufacturing equipment will vary by industry, but one thing is for certain: Just like cars, used equipment will need repairs. Factor in the cost for a good service agreement or provide an ample budget for upkeep, as needed. If you can’t afford to put that kind of cash aside, consider financing on a new model with a generous service plan.

Use What You Have, Only When You Have To

Despite the growing market for used equipment, many businesses continue to outsource large tasks that require specialty units. Even bulky print jobs may be more economical at your local Kinko’s and can save you the headache of a last-minute breakdown or performance issue. When it’s all said and done, putting hours on your own equipment should only be done when it’s cost-effective. The storage, liability, and maintenance of any used purchase must make absolute financial sense for your business.

Tax Benefits for All

While the advantage of purchasing used come tax time won’t be as significant as if you bought new, it’s still a consideration to be taken seriously. Buying before you really need a replacement item may make sense at the end of a very good tax year. Small businesses that foresee replacing an item in the next 6 months and that would like to realize the deduction immediately may want to strike right away on a good end-of-the-year bargain. Speak with your accountant to see if depreciation on used equipment will be of any benefit to your business. (Some companies reserve depreciation for items with a value of over $500 and handle these on a case-by-case basis.)

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Linsey Knerl, Article, savings, financial management, Wise Bread

Join the conversation ( 2 )

• Thursday Bram 2 years 4 months and 5 days ago

  

  I've purchased a lot of my office furniture used. One place that many business owners don't always remember to check is furniture liquidators. You can often get a great deal, even if you want several matching sets of furniture, because a larger company switched out all of their furniture already.

• Julie Rains 2 years 3 months and 29 days ago

  

  Re: office equipment: I've picked up nice, used desks and chairs directly from businesses who were changing their space or landlords who acquired quipment from former renters. For those who are looking for retail fixtures, sadly, retailers going out of business often have sales that include these items.Checking with your accountant is a good idea in regard to taxes. You could still classify equipment as a capital expenditure but rather than depreciating the asset, owners should be able to deduct the entire purchase under the Section 179 tax rule.