Looking to Buy Pre-Owned Equipment?

By Pam Stask - August 1, 2007

When deciding to add on to your HDD equipment fleet, the option of purchasing used machines comes into play. Rather than buying a new piece of machinery, many contractors and businesses opt to purchase used - a choice that often proves to be cost-effective and practical to their needs.

However, buying used equipment takes a lot of special considerations.

What you need, where to buy from and the quality of the equipment all need to be thought out before diving into the mix. There are plenty of used machines out there, but finding the right one for the job - and your budget - is a task, but if done right, definitely worth it.

When purchasing used HDD equipment, the buyer should start out by determining what his/her needs and wants are, before starting their search. Bob Martin, general manager of HDD Broker, a used HDD equipment broker based in Victoria, British Columbia, Canada, has developed a list of special concerns and questions to consider before taking the plunge.

Martin urges buyers to decide what they need and can afford before they start shopping. Although buying used is less expensive, it is easy to fall into the trap of purchasing a machine that does not necessarily fit the needs of the buyer, he says.

After a buyer decides that buying used will work for his/her needs, picking the right seller is the next hurdle to jump. Typically, there are four options to purchase from: dealerships, brokers, private seller and auctions.

Dealerships are good to consider, because they are local and usually have facilities to perform onsite inspections and service, says Martin. Dealers are also generally flexible with payment options.

"Dealers are sometimes more open to more uncommon payment plans such as ‘pay on document' or letters of credit, which is an important thing for many international buyers," says Martin.

However, Martin cautions that dealerships may be limited in the brands of machines they are allowed to stock and their affiliation with particular manufacturers may prohibit the sales of other companies' machinery. Plus, dealers are usually restricted to certain territories they can sell in.

Brokers, Private Sellers and Auctions

Brokers are another option to think about. They are known to have a larger selection, because they have the ability to search worldwide for the equipment. The brokers also work as a third party, in order to ensure an agreeable deal between the buyer and seller. They communicate between the two, in hopes to strike a deal with both parties' interests in mind.

"Brokers have the advantage of not being affiliated with either the buyer or the seller, allowing them the freedom of impartiality throughout the process," explains Martin.

One disadvantage of purchasing through a broker is the fact that you have never seen the equipment in person. Since the broker facilitates the inspections, the buyer must rely on the broker's opinion and evaluations of the equipment.

The third option is purchasing from a private seller. This choice allows buyers to have direct contact with the owner of the machine, as well as acquire a history of the equipment, says Martin. Private sellers become advantageous when buyers want to know specific details about the equipment they are purchasing. The seller is likely to be the person who worked with the machine, so they have the knowledge to answer precise questions about it.

On the other hand, private sellers are hard to locate and generally have a limited selection of equipment, says Martin. Private sellers may also not be familiar with complicated financial transactions and offer limited payment options.

Auctions are yet another option for acquiring the equipment and quite possibly the most risky. Buyers do have the possibility of finding equipment for inexpensive prices, but the quantity of machines may be limited. Evaluating the equipment before the buy is perhaps the largest problem when purchasing at an auction.

"The biggest thing is that you really don't know what you're getting at the end of the transaction," cautions Martin. "The window of time available for inspecting the equipment prior to the auction is usually very small, and there is absolutely no history of the equipment available."

Martin also warns buyers to steer clear of impulse buys at auctions. Getting involved in an auction, may lead to purchases that did not quite fit the original budget plan.

"It is very easy to get caught up in a bidding war over a piece of equipment that you're interested in," says Martin. "Paying more than what you've budgeted for a rig is an easy thing to do, and once the gavel drops, the rig is yours, like it or not."

No matter where the buyer purchases the equipment from, they should be aware that pre-owned HDD equipment hardly ever comes under warranty. This is often considered the biggest downfall of buying used equipment.

"Warranty and used rarely occur in the same sentence, when speaking about HDD equipment," says Martin.

Dealerships may have after-sale service plans, but not guaranteed warranties. Auctions and private sellers usually do not offer any type of after-sale service or warranty.

Before Taking It Home

Now that a buyer has found a seller, the equipment must be evaluated intently. When deciding to purchase, there are many factors to consider before taking home a machine. The year of the model and its operating hours are the first things to observe, especially when looking at the equipment from a resale perspective, says Martin. The older the machine is, the more wear and tear it could have.

"You may have a 1995 model drill that has absolutely no flaws and drills as strong as the day it was made, but on paper that machine will still show up to potential buyers as a 12-year-old drill, with all of the negative connotations that that age implies," says Martin.

Another important aspect regarding retail is the make and model of the machine. It's a good idea to stick with popular, well-known manufacturers, if future resale is a concern.

"Steer clear of uncommon manufacturers," says Martin. "Vermeer and Ditch Witch equipment still dominate the used equipment demand."

Also, purchasing equipment that is manufactured by relatively unknown companies can make life difficult if the new buyer ever decides to resell the machine.

"There are often very good deals to be had on lesser-known makes of drills that perform just as well as their mainstream counterparts," says Martin. "You pay less for them, but get less when you sell again."

When evaluating a piece of equipment, there are several things to consider and red flag. Buyers should look at specific parts on the machine. Certain damage to these areas can cause repair concerns and financial problems for the purchaser after the buy. Concerns to look for differ between large and small machines.

Larger machines (more than 30,000 lbs of pullback) come with their own checklist. Martin says that the most common issues to look for are stress cracks in the frames. The cracks can cause major financial issues (and headaches) after the purchase.

"Repairing these cracks properly involves a lot of disassembly, which is a timely and labor-intensive process," Martin says.

The previous maintenance of the machine is also an important consideration. Martin suggests carefully inspecting the wear plates, sliders and bushings, as their appearance and conditions can be representative of the maintenance (or lack of) the machine has received over time. Martin warns buyers to take a detailed look at the machine's water pump. The pump can become an expensive hassle later on, if it was not previously taken care of.

Martin says that the hydraulic parts for larger machines are not as necessary to worry about, since they are moderately inexpensive.

The checklist for smaller machines (less than 30,000 lbs of pullback) is almost the exact opposite of the large machines. The engine and hydraulic pumps should be evaluated closely. Repairs on these parts are expensive and require much labor, explains Martin. The wear on the racks should also be monitored. Martin says that the repair on these are costly and usually an indicator of poor maintenance. To the contrast of larger machines, water pumps are not as big of a concern.

"Don't focus so much on things like the water pumps, as they are typically very cheap to repair or replace if necessary," says Martin.

The pull down chains and rod wear are not immediate causes for concern, since they are a low-cost repair.

Cash or Charge?

After picking out the perfect piece of used HDD equipment, paying for it becomes the next issue. Buyers can look to their local banks or financing companies, if they don't have the extra cash lying around. Martin suggests that buyers go to their personal banks first for financing options.

"We always tell any of our customers who need financing to approach their local bank first," says Martin. "Your bank will know you, how much you can afford, and will be able to finance you far faster than any third-party financing company will be able to do."

Martin also notes that local banks usually offer better interest rates than financing companies.

If financing through a bank is not the right step for the buyer, Martin suggests they look to a dealership for their in-house financing options. Since the dealerships know the equipment well, they have the ability to process that type of transaction efficiently.

Sales made through auctions and private sellers typically have limited financing options. Martin explains that most private sellers do not extend many payment alternatives and mostly only offer "cash up front" transactions.

Pam Stask is an editorial assistant for Trenchless Technology.

Published on Trenchless Technology.

This commentary is presented for informational purposes only. It is not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. Neither HDD Broker LLC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.

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