You’re starting your business, and that is great! No matter what your type of business you will need some equipment to get started. The question then becomes whether you should buy new or used equipment.
The answer is that it depends. In some cases, new is a much better idea for a variety of reasons, but if you are starting a restaurant or a mobile food business, you might find that used food service equipment and used food trucks for sale can save you thousand and the items you are looking at will serve you just as well.
So how do you know and how do you decide whether to buy new or used for your startup? Here are some ideas to consider.
Item Depreciation
Much like cars, some items that you buy for your business will depreciate as soon as you purchase them. A new item is simply not worth as much as one that is brand new. A good example is office furniture.
Unless you buy items that are extremely high end, not likely if you are a startup, the furniture you purchase will lose value the moment you take them out of the showroom. A used office chair or desk will not fetch nearly the price that a new one will. Even lighting and equipment like printers and copiers have the same issue.
Therefore, buying used can save you thousands just like buying a used car. Think of the example above: buying a used food truck and outfitting it the way you want will cost you much less than buying new simply because the initial depreciation of the vehicle has been taken by someone else. Since these are usually not driven hundreds of thousands of miles, the vehicle itself will often be in great shape, and if you need the type of equipment that is already inside, you can save on that as well.
Think of it this way: if an item depreciates once you buy it, you are often better off buying used and saving the depreciation percentage.
Financing vs. Cash
This is often the kicker for buying new vs. used. It is often easier to finance equipment and furniture that is new rather than used. The same is even true for vehicles and restaurant equipment. Banks and lenders are often reluctant to make a loan on used equipment regardless of how good of shape it is in, and interest rates may be higher as a result.
If you have cash, of course, this is not a problem. You can simply pay cash for the items that you want, and you own them outright. They become assets for your business, and if you need a loan later, you can sometimes borrow against them depending on what they are.
The other financing option you have when it comes to equipment is just to get a small business loan for equipment upgrades, and then pay for items just as if you had cash. This is often a better option anyway because then you get more discretion about how to spend your funds anyway.
This is a way you can still buy used and save money, yet not have to worry about financing or taking large amounts of cash out of your working capital, and important number when soliciting investors.
Life Expectancy
This kind of relates to depreciation but is separate for a number of reasons. Why? An office desk might last pretty much forever if well cared for, but a computer will not. The computer and other pieces of technology can be a bargain because it is nearly obsolete or simply worn out. The same can be said for a food truck that’s so old, it’s unlikely that the vehicle will make it through the next 4 years. In some cases, buying a custom food truck that fits your business’s needs may be a better decision than buying a used vehicle.
This means it is not really a bargain, but instead may not be worth purchasing at all. On the other hand, certain things like a break room refrigerator have a much longer life expectancy, as well as do lighting options, the above-discussed furniture, and even vehicles used for business purposes. If the life expectancy of what you purchase exceeds a few years, buying used might be the best option when you are just getting started.
Warranty
One thing we have not discussed yet is warranty. New items might be guaranteed by the manufacturer for an extended period of time, while most of the time used items are not with a few exceptions. The same is true for refurbished technology equipment like computers or business phones. While often cheaper, the warranty may not be what you are looking for.
Remember to keep the costs of repairs in mind when purchasing used. If repairs that are possible exceed the difference between used and new, consider the new items that carry a warranty that will cover those costs.
Depending on where you make your purchases, you may be able to purchase extended coverage or longer warranties on new items. Since you don’t want to be hit with unexpected costs as a startup, this is another thing to consider. The money you save could be considerable.
Conclusion
Should you buy used or new? The answer simply is that it depends. Sometimes new is a better option, other times used items will be just as good of an investment. Each time you consider a purchase, list the pros and cons to determine what is right for you.
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