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Excavator Purchasing Decisions: Used vs New?
🕑 Added 2023-07-07 17:08:55 +0000 UTCThe decision to buy new versus used is always a complicated one without a clear answer, but it was especially complicated when it came time to buy a piece of equipment to help us develop our new property.
I'm going to focus this writeup on the decision to buy new versus used, although there were hundreds of other decisions that needed to be made as well such as: type of equipment (tractor, backhoe, skid steer, excavator, etc), what brand to buy (price considerations, local dealer support, financing incentives, lifetime cost of ownership predictions, resale value, etc).
The summer of 2021 was an interesting one. Low interest rates and a global pandemic had the construction industry BOOMING. On top of that supply chain shortages had squeezed new equipment production and dealer lots were virtually empty. Once we closed on the property, Courtney and I knew we needed a piece of equipment and the sooner the better. We had high hopes of having a building up before the snow started falling and that would mean we needed to stay focused on that one objective.
I started shopping for used equipment. I made the assumption that most smaller construction equipment is good for about 8000 hours before needing some sort of major part replacement (engine, hydraulic pump, etc) and by that point the entire machine will be pretty worn out. I also assume that in the 4000-8000 hour range it's going to need significantly more regular repairs (wiring harness, hoses, radiator, etc). So it seemed reasonable to me that a machine with 4000 hours on it could be considered to have half of its useful life left and therefore should cost about half of what a new machine cost. I WAS WRONG! Used machines with 4000 hours were listed for about 70% of new machines and appeared to be selling! Machines with low hours (less than 1000) were in many cases listed above MSRP! Yikes!
We also had another problem on our hands. If we bought a used machine and it needed repair we had no means to work on it. No flat space on the property, the only tools we had were what could fit in the camper, and limited time. After all, we needed to be spending our time getting the building up before winter.
While my gut told me that considering new was CRAZY, logically it was starting to make a lot of sense. And then I found out about the financing deals, extremely low interest rates meant that most manufacturers were offering 0% interest for 5 years! We were already on a tight budget and that financing deal would mean we could prioritize less of our immediate budget on the equipment and more on our property (at least in the short term).
After calling around to all the local dealers we were out of luck. No new equipment seemed to exist anywhere. Then by a stroke of luck we got word that a Kubota KX057 had just shown up on a lot in Oregon. We had about 30 minutes to decide if we were buying it before it went to the next person on the wait list. We pulled the trigger. The next few days were agonizing as we questioned whether or not we had made the right decision.
But when the equipment showed up on the property and we got to work, we knew we had made the right decision. We could focus on developing our property, not on fixing worn out old equipment. If we did have a problem the machine was under warranty and there was a dealer just 45 minutes away.
Over the next year and a half we got a lot done with that excavator. We started noticing that it really was a little small for how we were using it and we were putting fewer and fewer hours on it per month. We didn't feel like we were maximizing our investment like we had been previously. The decision was made to sell the excavator while there was still a shortage on new ones and therefore a huge demand on lightly used ones.
So yet again I was on the hunt for an excavator. We were no longer under our "winter is coming" time crunch. We have a comfortable place to live, tools, a workshop, a large gravel pad and the time and means to repair an old piece of equipment. Shopping used was a lot more viable for us this time. I was specifically looking for one in the 12-15 ton range. One popped up locally that was cheaper than anything else I had seen and according to the ad it was high hours but everything worked and it was ready to head to the job site. This turned out to be less than true. While it is "usable" it isn't right and the machine has lots of issues that I'll need to spend significant time sorting through over the next few months in order to get the machine in true working order. That's time, money, and energy spent working on equipment (which adds virtually no value to the equipment) not working on our projects and our property.
In hindsight part of me wished I had been more patient, and spent a little more money on something in better condition. However I have continued to keep an eye on the local market and there really hasn't been anything else worth looking at for sale. Good condition used equipment is still selling for near MSRP prices.
So what's the right decision? Should you buy new or used? It's a complicated question with a complicated answer. I recommend asking yourself how you want (and can afford) to spend your time, money, and energy.
Comments
John White
Declair you need it to maintain the road for access to your business. Then depreciate it out. Or do some job for your neighbors, get paid and depreciate it out. Now you have metal work along with dirt work business.
You're welcome!
thank you for the card
