Purchasing Used Equipment

Purchasing Used Equipment

New entrepreneurs during the business startup phase often overlook a very important and basic fundamental of asset management. That fundamental is to only purchase new equipment as a last resort.

Experienced business people know that purchasing new business furniture, fixtures and equipment (FF&E) takes an immediate and dramatic decline in value the moment you purchase it. It takes on a value known as “Fair Market Value” or “FMV” which is basically what someone else is willing to pay you for it now that it is used. The difference between new and fair market value is often substantial.

Another consideration to take into account is the value that is placed on business assets when a company is listed for sale. FF&E assets become scrutinized by a potential buyer and are usually deemed by their accounting counsel to have a lower value than even that of fair market value. Also, business values are also considered upon a multiple times of net cash flow to the owner. It makes sense that the less you spend on a piece of equipment that produces the same result, the more money you realize from the savings of purchasing used equipment and ultimately the better financial return from the sale of the business assets.

There are a lot of great deals available on gently used equipment. Do the research and analysis of net cost new versus buying it used. Also keep in mind, what you pay for it used is probably what you can immediately sell it for in the short term. In addition, research refurbished equipment that is available on the market with limited guarantees. We have seen significant savings with that type of used equipment too.

Saving Dollars and Cents Makes Sense!