The Broker Advantage

By Bob Martin, General Manager - March 2006 - Originally written for Trenchless Australasia

When a company or individual makes the decision to purchase a piece of equipment, there are typically two routes that are explored. The first, and probably easiest, is to locate an equipment dealer and purchase the piece of equipment brand new. This has several advantages, not the least of which are reliability and warranty for the product. Unfortunately, new equipment also carries a hefty price tag, and not all companies can afford the luxury of purchasing their entire fleet of equipment brand new.

This is where the second option comes in, and that is buying the equipment from the used equipment marketplace. Used equipment offers many advantages, and price is one of the biggest. Late year, low-houred equipment can be found, including units which still have the balance of a factory offered warranty.

This leaves the question of where to buy such equipment. Historically, the same dealerships that offered new equipment would also offer used equipment for sale. This can be rather awkward, as the dealer has a vested interest in selling new equipment, and as such they are far less likely to offer an unbiased service.

There are also dealers specializing in used equipment only. These dealers can be somewhat better to deal with, but they are limited by the stock that they are able to maintain on hand. If a customer has a specific need and the dealer cannot fill it with their inventory, the customer may be forced to settle for something other than what they originally wanted or needed.

This leaves a third and somewhat unexplored option, the equipment broker. Some equipment dealers will still broker equipment to a certain extent, but in order to bring the full benefits of a brokerage company to bear, it needs to be free from the constraints of inventory, or ties to a manufacturer of any kind.

Just what is a broker? The dictionary definition of a broker is "one that acts as an agent for others, as in negotiating contracts, purchases, or sales in return for a fee or commission." In its most basic form, this is absolutely true. Modern brokers, however, offer much more to their customers. The needs of a buyer do not only revolve around the negotiation of a sales contract, but also include the sourcing of the equipment, financing, shipping, fund transfers, and much more.

What a dedicated brokerage company offers is an enormous selection of equipment from a marketplace that is not geographically limited, but rather includes the entire planet as a potential source. Without ties to any specific manufacturer, the broker can offer unbiased opinions and information based upon their own experience and customer feedback.

Ideally, the process begins with the customer informing the broker of their individual needs. The broker then evaluates those needs and begins developing a list of possible equipment packages that will fill them. The customer can stipulate conditions for the search for equipment, including price, year, hours, condition, or package contents.

From there, the broker draws upon extensive contacts to populate a list of possible equipment that will suit the customer's needs. The equipment can come from private sellers, dealerships, banks, auctions, or number of other sources.

Once an equipment package is selected, the broker can bring a full arsenal of evaluation tools to bear, including independent third-party inspections carried out by unbiased and experienced mechanics. Written and documented inspection reports can be furnished, along with photo documentation of the condition, and written estimates for any needed repairs.

It is then that the pricing negotiations take place, and the broker works with both parties to come to a mutually beneficial price. As in real estate, putting a broker's experience in the middle of the equation helps to remove the emotional aspect of the transaction, and it is typically easier and far faster to come to an agreement with the broker acting as the middleman.

If necessary, the broker is usually set up with many options for financing that can be offered to the buyer to free up cash flow or potentially put them into a more favourable tax situation.

Shipping costs can then be evaluated. Overland transport, air shipment, and ocean freight are all part of the broker's daily business. All documentation is handled by the broker, with the buyer responsible only for the furnishing of destination and consignee information.

The broker then invoices the seller, and handles the actual financial transaction itself. They are typically set up to accommodate many forms of payment, including credit card transactions, wire transfers, and international letters of credit. Again, it is the broker's job to make the arrangements, leaving both the buyer and the seller free from the need to worry about them.

Some may argue that there is no substitution for being able to lay hands on a piece of equipment in person, and for those that feel the need to do so, it is still possible to do so, even through a brokerage situation. For a professional broker, arranging personal inspection of a unit is typically a simple matter of making the calls and arranging the travel.

The easiest way to grasp what it is that a broker does is to understand that they are offering not a product, but a service. From the beginning, they will take care of absolutely everything, freeing up the customer to go about their daily business without the need to allocate time and money towards finding the equipment themselves. Utilizing a brokerage service may not have the immediate gratification of walking into a dealership and driving away with a machine, however the benefits of cost savings and selection far outweigh the drawback.

More than anything else, the most important thing to ensure when buying equipment is that the company selling the equipment is trusted by the client. If this criteria is met, the customer will have a smooth and successful used equipment buying experience.

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, Inc 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.