Heavy equipment buyers have a big choice in front of them — new or used? Both new and used equipment offer different benefits for all types of organizations and all kinds of equipment, from wheel loaders and telehandlers to scrapers and motor graders. The purchasing option that's best for your business will depend on a wide range of factors, such as your financial situation, risk tolerance and goals.
The type of equipment you acquire can have significant impacts on your business in the short term and for years to come, across operations, finances and reputation. That's why you should take time to fully assess the differences between the two options and how they'll affect your business. Both options are widely available, with strong markets for both used and new equipment. By 2025, the global construction equipment market is expected to rise to $175.5 billion, up from $140 billion in 2020.
When buying either type of equipment, working with a reputable dealer like Empire can make a substantial difference. Keep in mind that many of the disadvantages of buying used or new construction equipment can be mitigated with the help of a reputable, trustworthy dealer. Many of the advantages, such as warranties and availability, are well-supported through official sellers. At Empire we have a vast inventory of new and used equipment from Cat and other trusted brands to provide as much choice as possible.
Though new and used options can be a good choice for your company, it's ultimately your choice to make. We won't tell you which one is best, because it depends on your unique situation. However, we can give you the information needed to make a good choice for your company. With all of that in mind, let's dive into the discussion of new vs. used heavy equipment.
Pros of Buying New Equipment
Buying new equipment can seem like the most satisfying option — you get a shiny new machine that no one's used before and is fully supported by the manufacturer. Some of the pros of new heavy equipment include the following factors:
When you buy new equipment, you know no one else has worked with it. They haven't treated it poorly or abandoned proper maintenance practices. They haven't beaten it up and sold you something that won't work after a few months. New equipment comes with dependability and peace of mind. You can expect fewer maintenance problems in the near future, meaning fewer expensive repairs or costly periods of downtime. Operating expenses are also less of a burden, as the equipment should run beautifully.
2. Reputational Advantages
Buying new equipment puts out a good image. It looks sleek and professional and can build consumer confidence in your organization by showing that you use the latest and greatest tools. With new equipment, you can show your clients you're committed to quality.
With a new piece of equipment, you can typically expect a strong warranty that lasts at least a year after your purchase. Accordingly, you can have more peace of mind and know you won't be facing any unanticipated or expensive repairs any time soon. Warranties can vary significantly, so be sure to check the warranty offered by the manufacturer.
There are many different options available to those buying new construction trucks and equipment. With a wide variety of equipment coming out every year, there's no shortage of options for those looking for new models. Instead of buying the used equipment that's available, you often get the opportunity to configure your equipment to your needs. It's a more customized option, so if you need something outside of baseline offerings, like additional lighting systems, power train upgrades or technology upgrades, buying new may be a good choice.
New equipment gives you access to the latest and greatest offerings. Heavy equipment tech is evolving every year, and if you want to take advantage of these innovations, a new equipment purchase may be necessary. You can enjoy everything from efficiency improvements in engineering to smart technology like telematics and autonomous capabilities. You can track new dozers across a large work site or enjoy forestry equipment that makes the most of every drop of fuel put into it.
Proprietary technology systems like these can add efficiency, capacity and much more to your operation.
6. Tax Advantages
Both new and used equipment purchases can provide some nice tax benefits. The U.S. government offers some tax incentives designed to encourage businesses to invest in themselves through equipment purchases.
Many of these purchases qualify for the Section 179 deduction, which is an immediate expense deduction for depreciable business equipment purchases. You can take this deduction instead of capitalizing and depreciating the asset over time. It lowers tax liability for that year and covers the entire purchase price of the equipment. Section 179 covers a significant amount of money, too, with maximum deductions of $1,050,00 and purchase values up to $2,620,000
Cons of Buying New Equipment
While buying new equipment comes with some big benefits and the experience of having that beautiful new piece of equipment, there are also some cons of new heavy equipment purchases:
Cost is usually the biggest reason people hesitate to buy new equipment, as it's more expensive than used equipment. Aside from the clear difficulty this presents to many organizations, a big capital investment can create waves for any company's financial status. Financing the equipment may come with significant interest charges for which you'll need funding. Smaller organizations may have trouble funding new equipment purchases in the first place.
Cost includes more than just the purchase price. While buying new can be more costly at first, it could also result in lower repair costs in the future because the equipment should have fewer maintenance needs. You won't be spending as much to fix these issues or implement intense maintenance practices. Efficiency improvements in the engineering of new equipment can also improve fuel efficiency or offer operational improvements, so the cost of new equipment isn't always as straightforward as it may seem based on the purchase price.
When you buy a new car, you can expect it to lose between 20% and 30% of its value within the first year. The same principle applies to new heavy equipment. It depreciates quickly in the first few years and could also lead to alternative minimum tax penalties. The high capital investment alongside this sharp depreciation can create a significant burden to many companies.
Depreciation slows after that initial drop, so it eventually levels out and can still provide good value. But the difference between the purchase and resale price is much higher with new equipment. If your plan is to sell your equipment when you're done with it, carefully consider how depreciation factors into the overall picture.
3. Lead Times
While new equipment comes in many options, it often comes with long lead times. Manufacturing the equipment takes time, and the amount of new equipment produced can vary widely based on demand. Combined with the time it takes to get the equipment to your company, the lead times on new equipment can be significant.
You'll want to pay attention to these times and the need for the equipment. If you need something quick, it may be easier to obtain used equipment that's already sitting in a lot or choose from new equipment currently available.
4. Less Resale Value
Although Cat equipment holds a strong resale value overall, new equipment does depreciate faster than used equipment. You get less money back from the purchase when you're done with it. Plus, your capital is tied up in the purchase until then. Overall, it can have a considerable impact on your return on investment, making it difficult to recoup as much of the price. Resale value is part of a complex financial picture and should be considered along with the benefits that new equipment can bring to the organization.
Pros of Buying Used Equipment
Used equipment can offer big savings and like-new performance, but it does come with some caveats. An important part of buying used is to work with trustworthy sellers. There are plenty of unreliable sellers out there, but dealers typically have much higher standards and a reputation to uphold, along with a highly skilled team of heavy equipment experts. If you work with a reputable seller, you can take advantage of the many pros of used heavy equipment:
As expected, used equipment is less expensive upfront. With a lower purchase price, used equipment can be a much more attractive option, especially to organizations without much free capital to spend on new resources, such as a growing company. Buying used can be much kinder to your bottom line in the short term, and you can redirect the savings toward other business purchases, like attachments, maintenance or efforts toward business growth.
Used equipment can offer lower initial costs alongside some other cost savings in this list. You can also save on insurance since the equipment has a lower price and can reduce your premiums. Keep in mind that used equipment may come with greater maintenance needs in the future, depending on its condition and care before purchase. These expenses could affect the overall cost of ownership for the equipment, so they'll need to be factored into your cost analysis.
2. Avoided Depreciation
Since someone else has taken the brunt of depreciation, you reap the benefits. Many times, you can find a piece of used equipment that's practically good as new while avoiding the steepest period of depreciation. Because used equipment has already had that depreciation hit, it's going to lose its value much more slowly while you own it. This helps to improve the total value used equipment offers.
3. Retained Value
Thanks to avoiding the biggest hit of depreciation, used equipment tends to retain its value exceptionally well. Proper maintenance goes a long way and can help you minimize value loss that comes from the age and use of the equipment. When you're ready to resell it, the total cost of owning the equipment is highly improved, since you get back a significant portion of what you spent
4. Selection and Availability
Both new and used equipment offer great selections but used equipment can span many manufacturing years and provide access to different models besides those currently offered in the year's lineup. You can find many used pieces of equipment from recent years that still sport modern tech if you want something with some bells and whistles. Alternatively, if you just want the basics or want to stick with an older and familiar piece of equipment, the used market is a great place for those choices.
You can also find equipment in a range of conditions. For those looking for a deal, the used market can offer one through less-than-perfect equipment conditions. A construction equipment purchaser who's more concerned about cost than appearance might prefer an asphalt paver with a few dings on it if it means saving a good chunk of cash. On the other end of the spectrum is meticulously maintained and high-performing equipment. Whatever it is you're looking for, a used selection can offer choices, while the new market only offers equipment in perfect shape.
Used equipment is also typically available right away, with new equipment having longer lead times before you get your hands on it. For those who need something quick to avoid downtime, used equipment can help you stay moving.
Cons of Buying Used Equipment
Buying used equipment can also be a little tricky. When deciding if you should buy used heavy equipment, keep in mind that it requires more nuance than buying new because a used piece of equipment has some history to it.
Maintenance and operation will play a big role in how well the equipment performs. A used dozer with few hours on it and proper maintenance is a safer choice than one with high use hours and no maintenance records. It's less likely to break down in the future and cause expensive downtime. Below are some of the cons of used heavy equipment:
1. Seller Research
Used equipment will require a little more work on the part of the buyer. You'll need to thoroughly research a used equipment seller and make sure they're telling you all the right information. Since there are no certifications or inspections required of used sellers, you won't necessarily know for sure how well the equipment was treated.
To mitigate the problems associated with untrustworthy sellers, you can go through a reliable dealer. At Empire, we conduct thorough inspections on all used equipment and provide those reports. We also have heavy equipment that is Cat Certified Used. These certified pieces of equipment are lightly used, fully inspected and serviced to a higher standard. They can offer much greater peace of mind and value.
Empire also lets you try out a piece of equipment before you buy to ensure it meets your expectations. Working with dealers provides access to important services, like warranties, trustworthy parts ordering and manufacturer-trained professionals.
When buying used, you may find most private sellers don't offer any type of warranty to support the product after it's purchased. Whether your used dozer breaks down in three days or three years, the equipment likely wouldn't be covered by the manufacturer, leaving you with extensive repair requirements that may cost you more than a new model would.
If you buy from a dealer, you can often still get warranties, whether they carry over from the original manufacturer's warranty or are offered through a certification program, like Cat Certified Used. Cat warranties are provided with every Cat Certified Used product.
3. Inspections Required
If you're considering used equipment, a thorough inspection is essential. Whether you're mechanically savvy or want to bring along a trained technician, you'll need to arrange for an inspection. This step can alert you to any misrepresentations of a piece of equipment, such as a compactor that's listed in excellent condition when it really has significant problems.
These kinds of technical issues would affect both the value of the equipment you're paying for and more serious problems of safety and efficiency. Equipment that slows down your progress isn't something you want in your fleet. Inspections are especially important when worker safety is a concern. No worker should use a piece of used heavy equipment before it has undergone a thorough inspection.
4. Less Updated Technology
If you're trying to upgrade your fleet with the latest technology and innovative feats of engineering, you're less likely to find it on the used market. You can find used equipment from recent years that still come with modern tech, but technology evolves rapidly, with each year bringing new engineering and technological advances. If you're aiming for the most advanced, high-tech fleet around, buying new may be the better choice.